FINANCE Minister Pravin Gordhan recommitted the government to a massive infrastructure programme yesterday in a “Robin Hood” budget that surprised most analysts.
Pushing annual spending above R1-trillion for the first time, he still managed to cut the deficit forecast to 4.6% of GDP in the new financial year; find R9.5-billion to give back to taxpayers; and billions more for schools, universities and hospitals.
Gordhan said South Africa could not rely on a European economic recovery to drive domestic growth and would have to fuel its own economy with continued infrastructure investment.
Urging the private sector to “stop the finger-pointing”, he said investors should put the hundreds of millions in unused cash to work.
He conceded that mixed messages from the government might have deterred investors, but asked for a joint public and private commitment to grow the economy.
“We have to do more with less,” he said.
“We now need to introduce a new dynamism among all South Africans … an extraordinary national effort from all role-players.”
Gordhan did not announce new job creation initiatives, but said those under way would continue and talks would carry on about the youth wage subsidy proposed last year.
He announced the usual round of tax increases on cigarettes and alcohol, added 28 cents a litre to the price of petrol through increased fuel and road accident levies and increased the price of electricity by one cent per kWh as a penalty for the use of non-renewable fuels.
Tax changes focused on easing the burden on low-income earners with a little more taken from the rich.
He dropped plans to tax gambling winnings over R25000 and added a 1% tax on the incomes of casinos and the lottery instead.
Tax concessions to compensate for the effect of inflation went largely to people earning under R600000 a year and an increase in capital gains will target multimillion-rand home sales while exempting profits of under R2-million.
Savers who invest in unit trusts have a new 15% dividend tax from April, but will get some of that back from the abolition of the 10% secondary tax on companies.
But the bulk of Gordhan’s proposals affected the government’s build programme and ways to make it more honest and efficient.
Forty-three major infrastructure projects will cost R3.2-trillion with R845-billion scheduled to be spent in the next three years.
Budget documents listed a total of 3204 projects that are being considered, planned, put to tender or worked on.
They include a dam on the Mzimvubu River, the extension of a railway line to Nguca to transport manganese and the Mthombo project to build a R200-billion refinery outside Nelson Mandela Bay. However, most of the projects have still to be signed off and funded.
Gordhan said development had been held back by the inability of national, provincial and municipal departments to spend their capital budgets. Only 68% of last year’s allocation was actually spent.
But he did increase the dedicated grant to provinces for school infrastructure from R700-million in the current year, which ends in March, to R2.3-billion next year and a total of R13-billion over the next three years.
Much of this will go to eliminating mud schools in rural provinces.
Among other announcements were:
ýR1-billion over the next three years for the first phase of the National Health Insurance scheme, backed by R28-billion in capital investment in health.
·ýR1-billion to extend the internet backbone into every corner of the country;
·ýA new “Cities Support Programme” to improve infrastructure and public transport in the eight metros;
ýAn accelerated crackdown on tax evaders following the successful prosecution of 230 people;
ýAn additional R850-million for university buildings, including residences; and
ýAn additional R968-million over the next three years for extended anti-retroviral treatment for people with the HIV virus; R450-million to upgrade 30 nursing colleges; and R426-million for five teaching hospitals.
DA finance spokesman Tim Harris said: “Let’s give the minister credit because he managed to bring the budget deficit down.”
But he added that the numbers were “not good enough” because Gordhan had not done enough to stimulate economic growth.
Harris said Gordhan was alluding to amounts he wanted to spend after 2015, when there was a substantial deficit on infrastructure right now.
“We want to see bolder numbers,” he said.
SACP spokesman Malesela Maleka said: “We welcome the fact that overall this is not a budget of despair and contraction, but rather a continued commitment to significant economic and developmental spending.
“In particular, we welcome the strong budgetary support for the massive infrastructure … programme announced in the president’s state of the nation address.”
Business Unity South Africa (Busa) called the budget “credible, broadly balanced and confidence building”.
Busa welcomed the infrastructure allocation and the announcement of 43 major infrastructure projects.
“This initiative should not only aid in building modern infrastructure, but will also reduce poverty, create decent work and expand employment opportunities.”
Neren Rau of the South African Chamber of Commerce and Industry said business would be worried about the increased taxes on big business.
“We are a bit concerned about the impact that would have during a time when liquidity is fairly tight.”
Mike Schussler of economists.co.za said: “This was a very good budget in tough times. The budget deficit is a lot less than I thought, but I am still a bit concerned that we will see a huge increase in government debt. But overall, Minister Gordhan has done a good job.”
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