WATCH LIVE: 2021 budget speech
LIVE BLOG: R6.3 billion to extend R350 grant to April 2021
Almost one year after the first coronavirus case was recorded in South Africa, followed by a hard lockdown which destabilised the economy, Minister Tito Mboweni delivers the 2021 Budget Speech.
I can announce that annuitisation for provident funds takes effect from 1 March 2021, and provident fund members will continue to enjoy a tax deduction on their contributions. In addition, the National Treasury will this week publish draft amendments to Regulation 28 for public comment. The proposed amendments to Regulation 28 seek to make it easier for retirement funds to increase investment in infrastructure.
SARS, SARB and the Financial Intelligence Centre (FIC) are working jointly on combating criminal and illicit cross-border activities through an inter-agency working group. This group has completed 117 investigations, and found R2.7 billion for our fiscus. Customs and excise operations are reducing the illicit movement of goods across borders, assisted by specialised cargo scanners, resulting in 3 393 seizures valued at R1.5 billion for the fiscal year to January 2021.
The Department of Justice and Constitutional Development is allocated R1.8 billion to improve business processes. This allocation will support our brave law enforcement agents in the fight against crime and corruption. We are bringing the long arm of the law into the digital age through the Justice Modernisation Programme.
Many of the tips I received spoke of the importance of zero-based budgeting. National Treasury is finalising the framework to implement zero-based budgeting across government. This will be done through spending reviews which have been used internationally to achieve spending efficiencies. These reviews are already underway and will shape this framework.
President Mbeki reminded us that there are moments in time when we must define what we want to be.
“Together with the best in the world, we too are prone to pettiness, petulance, selfishness and short-sightedness. But it seems to have happened that we looked at ourselves and said the time had come that we make a super-human effort to be other than human, to respond to the call to create for ourselves a glorious future, to remind ourselves of the Latin saying:
Gloria est consequenda - Glory must be sought after!”
Though we face many difficulties, we must not lose sight of our place in the world, as well as our potential and responsibilities. Twenty-five years ago, on 8 May 1996, the occasion of the adoption of the South African Constitution, former President Thabo Mbeki delivered his seminal “I am an African” address at this podium.
In order to improve access to African markets, our six busiest border posts will be upgraded and expanded. These will be significant infrastructure interventions using the PPP model. Starting with Beitbridge, which was built in 1929 and last upgraded in 1995, these One-Stop-Border-Posts will harmonise the crossing of border by people and goods, eliminating the dreadful scenes we witnessed recently.
National Treasury also continues to work with industry bodies to promote South Africa as a financial hub for Africa. From 1 March 2021, companies with a primary listing offshore, including dual-listings, will be aligned to current foreign direct investment rules, which the Reserve Bank will oversee.
Provinces will receive R3.5 billion from the Department of Social Development to improve access to early childhood development services.
R6.3 billion is allocated to extend the special Covid-19 social relief of distress grant until the end of April 2021. In addition, R678.3 million is earmarked for provincial departments of social development and basic education to continue rolling out free sanitary products for learners from low-income households.
We must encourage collaboration and partnerships between municipal councils, labour, communities and the private sector around the principles of shared risk and shared reward. There needs to be a transition to smart local government and innovation for local development. At the same time, well-functioning municipalities require that residents pay for services rendered.
The local government equitable share is set to increase to 9.7% of the Division of Revenue in 2023/24. We are aware that financial governance remains a challenge for many municipalities. Therefore, the Municipal Systems Improvement Grant is extended for the rollout of the District Development Model.
The provincial equitable share will be augmented by R8 billion for provincial health departments in 2021/22 to deal with Covid-19. Of the R10.3 billion for vaccines, R2.4 billion is allocated to provincial departments of health to administer the Covid-19 vaccine programme. Government will also put in place a no-fault compensation fund to cover claims in the unlikely event of any severe vaccine injuries, allocations to which will be announced in due course.
The 2021/22 Division of Revenue stands as follows: 48.7 per cent of nationally raised funds are allocated to national government, 41.9 per cent to provinces and 9.4 per cent to local government. This is after providing for debt-service costs, the contingency reserve and provisional allocations.
a. a 340ml can of beer or cider will cost an extra 14c
b. a 750ml bottle of wine will cost an extra 26c
c. a 750ml bottle of sparkling wine an extra 86c
d. a bottle of 750 ml spirits, including whisky, gin or vodka, will increase by R5.50
e. a packet of 20 cigarettes will be an extra R1.39c
f. 25 grams of piped tobacco will cost an extra 47c
g. And a 23 gram cigar will be R7.71 more expensive
The personal income tax brackets will be increased by 5 per cent, which is more than inflation. This will provide R2.2 billion in tax relief. Most of that relief will reduce the tax burden on the lower and middle-income households. This means that if you are earning above the new tax-free threshold of R87 300, you will have at least an extra R756 in your pocket after 1 March 2021.
In this Budget we make the following tax policy proposals.
1. The corporate income tax rate will be lowered to 27 per cent for companies with years of assessment commencing on or after 1 April 2022. This will be done alongside a broadening of the corporate income tax base by limiting interest deductions and assessed losses. We will give consideration to further rate decreases to make our tax system more attractive. We will do this in a revenue-neutral manner. We also intend to leverage the insights of the Davis Tax Committee as we undertake this reform.
The Department of Tourism has reprioritised R540 million over the medium term to establish the Tourism Equity Fund (TEF) as one of the measures to support the tourism sector recovery. The fund will acquire equity stakes in existing tourism enterprises, support expansion of operations and development of new operations.
A total MTEF allocation of R7 billion is made to the Land Bank. This allocation will help to resolve the bank’s current default and re-establish the development and transformation mandate. This amount will not affect the expenditure ceiling but will be offset through an expenditure reprioritisation process. Any support to state-owned companies and public entities will have to be done through budget reprioritisation as outlined in the 2020 MTBPS.
Government plans to finalise 1409 restitution claims at a cost of R9.3 billion over the next three years to achieve redress and equitable access to land. The Department of Agriculture, Land Reform and Rural Development has also set aside R896.7 million for post-settlement support. This will include the recruitment of approximately 10 000 experienced extension officers.
We have cumulatively made R83.2 billion available for the public employment programmes since the 2020 Special Adjustments Budget. We are now augmenting this by R11 billion for the Presidential Youth Employment Initiative, taking the total funding for employment creation to nearly R100 billion. This is in response to the job creation targets for young people. outlined by the President.
We face many challenges as a developing country. We are confronting these head-on. Our country has a network of highways and byways which are the envy of many. The mighty N1 from Cape Town to Beitbridge, the scenic R71 that meanders through the misty mountains of Makgoebaskloof and delivers us to the Kruger National Park, and the expansive N4 that stretches from Botswana across our country into Mozambique.
Much of this progress was outlined in the State of the Nation Address (SONA). I want to thank my Cabinet colleagues for their support of Operation Vulindlela and assure members that Deputy Minister Dr David Masondo and the team from the Presidency and National Treasury remain hard at work with the relevant departments to ensure that implementation of the remaining reforms is appropriately funded and accelerated.
Honourable members, getting our fiscal house in order is the biggest contribution we can make to support our Economic Reconstruction and Recovery Plan. Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute. We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.
These acts of human solidarity and sacrifice reflect a patriotic spirit that inspires us. Often, we speak about how we must leave this earth better than we found it for future generations. Today I want to leave you hopeful and outline how we will leave this economy in better shape for those who come after us.
Madam Speaker last year we outlined a strategy to becoming a winning country.
Since then, we have mourned the passing of nearly 50 000 of our fellow South Africans as a result of the Covid-19 pandemic. The damage caused by Covid-19 runs deep and we share in the collective pain of many South Africans who have lost their jobs.
Economists will be looking to the finance minister for evidence of fiscal consolidation when he delivers his national Budget speech on Wednesday.
FNB chief economist, Mamello Matikinca-Ngwenya, said that she'd be looking out for granular details on plans to turn the economy around.
"I think what is quite critical, what people want to know, is the whole story around reform and growing the economy and what the plans are because ultimately if we want to reduce our debt and we want our primary balance to turn positive, there's a number of things that we have to do to grow the economy that would be quite critical."
Matikinca-Ngwenya said that tax revenue figures were likely to be better than expected and that would give the minister some room to manoevre.