Gordhan allocates massive funding – but man in street will feel it
Battling a sluggish economy, low investor confidence and growing interest on debt, Finance Minister Pravin Gordhan still managed to pull a rabbit out of the hat by giving more money towards higher education – a massive R17.6-billion over the next three years.
The money, added to the R16-billion announced in February, will especially benefit poor households, including families earning less than R600 000 a year.
However, Gordhan’s announcement in his medium-term budget speech yesterday is bad news for the man in the street, with significant tax hikes on the cards next year.
Mazars SA tax consultant Tertius Troost said: “One can speculate that the Treasury will explore options such as additional measures to tax the super-wealthy and possibly an increase in the VAT rate.”
Grant Thornton tax head Eugene du Plessis said South Africans should brace themselves for likely increases in personal tax.
“There will probably be an estimated 1% increase in personal taxes again in February,” he said. “It seems that an increase in VAT is also probable.”
Cosatu warned that any VAT increase would cripple the poor and have a negative impact on the economy.
“The government should not increase income tax for the working and middle classes again,” Cosatu parliamentary coordinator Matthew Parks said.
“Workers are already battling to make ends meet.
The government should rather increase taxes upon the wealthy, luxury goods and non-essential imports.”
KPMG said while measures to collect the added tax were not detailed, they would likely also include tax on sugar- sweetened beverages.
Nelson Mandela Bay budget and treasury political head councillor Retief Odendaal said the municipality would have to be mindful of the added burden on the taxpayer when it drew up its next budget.
Unhappy #FeesMustFall leaders, who say the government’s efforts to intervene in the education crisis are not enough, vowed yesterday to continue with their protests and the protracted university shutdown until it heeded their call for free education.
NMMU #FeesMustFall spokesman Azola Dayile said: “We have reiterated a million times that we will not entertain increaseases. ”
Rhodes University #FeesMustFall member Sima Heleni said the announcement of more money for education was a slap in the face and would not see students return to class.
“We have specific demands that need to be met and even if [Higher Education Minister] Blade [Nzimande] and the university come up with some sort of plan, we also need to sit down and debate that,” Heleni said.
Classes have been disrupted at universities for about a month. Yesterday, thousands of students marched to parliament and clashed with police outside as Gordhan spoke inside.
Balancing a tight-rope in what was arguably his toughest, most anticipated budget speech, Gordhan said while the economy was in difficulty, it was not declining.
Economic growth was revised down from the projected 0.9% to 0.5%.
Gordhan was confident that despite the pressures – which include his court appearance next week – a downgrade could be avoided if everyone acted in the “best interests of the country”.
South Africa was spending more on servicing its debt, MPs heard.
Gordhan told parliament: “If you have suggestions on how to reduce taxes, please pass them along. “We do not want students to lose the 2016 academic year.
“We want the violence to stop.” At an earlier media conference, Gordhan said his medium-term budget had carefully taken into account the realities and constraints facing the country.
That required the right choices being made and a need to “work like hell” to build consensus, create investor confidence and encourage political stability.
While growth was down this year, it could be expected to grow to 1.7% or “even better” next year. Deputy Finance Minister Mcebisi Jonas said “better managing our politics” was necessary.
“Any slight sign of political noise is likely to have an impact on growth,” Jonas said.
Gordhan added R10 to social grants, urged the government to pay legitimate suppliers on time and launched a new municipal government budget data portal.
He revealed that state-owned enterprises had a combined budget deficit of R3.2- billion for 2016-17.
ANC Bay caucus leader councillor Bicks Ndoni said Gordhan had managed to give hope to South Africans during a difficult time for the country.
Letemba Singapi said on behalf of the National African Federated Chamber of Commerce and Industry that Gordhan hadmanaged to pull off a good balancing act.
Singapi said the government had to look into ways of creating more opportunities for small businesses.
Nelson Mandela Bay Business Chamber president Ian Nicholls said the chamber would have liked more detail on the R17- billion investment into the oceans economy. – Additional reporting by Siyamtanda Capa and Athena OReilly