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Finance Minister Malusi Gigaba delivering his 2018 Budget Speech, National Assembly, Cape Town. File Pic GCIS

Minister Gigaba delivers 2018 Budget amid tough climate

Finance Minister Malusi Gigaba’s Budget Speech has seen him make “difficult decisions” to address a revenue shortfall and to fund free higher education.An increase in value-added tax (VAT), fuel levy and a higher estate duty tax are just some of the things South Africans will be faced with this year.

On the other hand, Minister Gigaba announced some relief for the poor and the working class in the form of below inflation increase in personal income tax, while ensuring an above average increase in social grants.

As part of wide-ranging tax proposals, the Minister said the measures were being introduced, in the main, to generate an additional R36 billion in tax revenue for 2018/19.

The main tax proposals for the 2018 Budget are:

  • An increase in the value-added tax (VAT) rate from 14% to 15%, effective 1 April 2018;
  • A below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets;
  • An increase in the ad-valorem excise duty rate on luxury goods from 7% to 9%;
  • A higher estate duty tax rate of 25% for estates greater than R30 million in value;
  • A 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy, and
  • Increases in the alcohol and tobacco excise duties of between 6 and 10%.

Tabling the 2018 Budget Speech in the National Assembly on Wednesday, the Minister said increasing VAT was unavoidable, as there was a need to maintain the integrity of public finances.

“In developing these tax proposals, government reviewed the potential contributions from the three major tax instruments, which raise over 80% of our revenue – personal and corporate income tax and VAT.

“We have increased personal income tax significantly in recent years, particularly at the higher income bands, and our corporate tax is high by international standards.

“We have not adjusted VAT since 1993, and it is low compared to some of our peers. We therefore decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances,” he said.

What the tax proposals mean for 2018/ 19 financial year

In December, former President Jacob Zuma announced that from this year, government would implement fee-free higher education in a phased approach.

In its budget review document, National Treasury said the central adjustments to the fiscal framework in 2018/19 are meant to:

  • Raise an additional R36 billion in tax revenue through an increase in the VAT rate, limited personal income tax bracket adjustments and other measures;
  • Reduce the Medium Term Budget Policy Statement baseline expenditure by R26 billion;
  • Allocate R12.4 billion for fee-free higher education and training;
  • Set aside an additional R5 billion for the contingency reserve;
  • Provisionally allocate R6 billion for drought management and public infrastructure.

“The baseline spending reductions and tax measures feed through to the outer years of the framework, while allocations to higher education increase sharply,” National Treasury said.

Vulnerable households shielded from VAT increase

The Minister said, meanwhile, that vulnerable households were protected from an increase in VAT.

“Vulnerable households will also be compensated through an above average increase in social grants.

“Some relief will be provided for lower income individuals through an increase in the bottom three personal income tax brackets and the rebates,” Minister Gigaba said.

The Minister said in addition to VAT, National Treasury would increase excise duties on luxury goods and estate duty on wealthy individuals.

He said taken together, National Treasury believed that the proposals best protect the progressive nature of the country’s tax regime to minimise the impact on lower-income households. – SAnews.gov.za

Treasury to assist state-owned companies turn the corner

National Treasury will assist state-owned companies (SOCs) develop and implement robust turnaround strategies, Finance Minister Malusi Gigaba said on Wednesday.

Tabling the 2018 national Budget in the National Assembly on Wednesday, Minister Gigaba said government recognises that the business models of some SOCs are unsustainable and that their capital structures are too reliant on debt.

“To confront these issues, we will assist them to develop and implement robust turnaround plans. This needs to be part of a holistic reform programme which considers the role we want SOCs to play in our economic development,” he said.

Some of the companies will require restructuring with equity investment.

“In the coming year, government may be required to provide financial support to several SOCs which could be done through a combination of disposing of non-core assets, strategic equity partners, or direct capital injections,” he said.

Minister Gigaba stressed that state-owned companies are expected to fund their own operations.

A property audit conducted by the Department of Public Works showed that national government owns up to 195 000 properties, with an estimated value of over R40 billion.

“We will work with them on a programme to better utilise or dispose of these properties in the short to medium term,” he said, adding that government is finalising a framework on guarantees aimed at both reducing the exposure and improving the quality of the guarantee portfolio.

“We can and will ensure that all SOCs are run sustainably and contribute to our national development.”

In his State of the Nation Address last Friday, President Cyril Ramaphosa made a commitment to intervene decisively to stabilise and revitalise state-owned enterprises.

Work done to improve the status of SOCs include the appointment of boards and the costing of developmental mandates.

Over the past months government has appointed new boards to Eskom and South African Airways (SAA).

The 2018 Budget Review document stated that state-owned companies contributed R95.2 billion of the public sector’s total R249.9 billion infrastructure spending in 2016/17.

The review noted that the combined assets of state-owned companies continue to exceed liabilities, despite a decline in combined net asset value from R361.8 billion in 2015/16 to R356.3 billion in 2016/17.

Meanwhile, profitability measured by return on equity, fell from 0.8% in 2015/16 to 0.3% in 2016/17.

In terms of infrastructure, SOCs spent R95.2 billion on infrastructure in 2016/17 while capital spending by state-owned companies is projected to total R368.2 billion over the next three years, compared with R432.8 billion over the previous MTEF period.

According to the Review, Eskom and Transnet account for R298.8 billion or 81% of this spending.

This as Eskom is making steady progress on its capital expenditure programme having commissioned two units at the Medupi power station, one at Kusile and all units at Ingula.

Most of Transnet’s capital spending involves expanding its rail and pipeline capacity by 33% and 97% respectively.

Development Finance Institutions (DFIs)

The review noted that Development Finance Institutions (DFIs) support transformation by channelling savings into productive investments in industry, infrastructure, agriculture and housing.

DFIs are generally healthy with the largest three institutions – the Development Bank of Southern Africa (DBSA), the IDC and the Land Bank – holding assets totalling R258.9 billion at the end of 2016/17. Their loan books totalled R140.5 billion.

During 2016/17, these three institutions borrowed R67.5 billion, largely in line with their planned borrowing of R65.3 billion.

The DBSA reported a net profit of R2.8 billion in 2016/17 while the Land Bank disbursed R100 million for black farmers to buy land at subsidised rates. – SAnews.gov.za

R57 billion set aside for free higher education

Government will spend R57 billion on free higher education over the next three years, Finance Minister Malusi Gigaba said on Wednesday.

Tabling the 2018 Budget in Parliament, Minister Gigaba said there was a reallocation in the spending framework.

“The largest reallocation of resources towards government’s priorities was on higher education and training, amounting to additional funding of R57 billion over the medium term.

As a result, this is the fastest-growing spending category, with an annual average growth of 13.7%,” said the Minister.

The announcement comes as former President Jacob Zuma in December 2017 announced the introduction of free higher education for the poor.

On Wednesday, Minister Gigaba said government is proud to implement steps that will lead to guaranteed access to higher education and training for all South Africans who qualify based on merit, not class position.

Government will phase in fee-free higher education and training to students from poor and working-class families.

This means that all new first-year students with a family income below R350 000 per annum at universities and TVET colleges in the 2018 academic year will be funded for the full cost of study. This then will be rolled out in subsequent years until all years of study are covered.

Meanwhile, returning National Student Financial Aid Scheme (NSFAS) students at university will have their loans for 2018 onwards converted to a bursary.

“This is an important step forward in breaking the cycle of poverty and confronting youth unemployment, as labour statistics show that unemployment is lowest for tertiary graduates.

Higher and further education and training is being made accessible to the children of workers and the poor,” said the Minister.

Delivering his first State of the Nation Address (SONA) last Friday, President Cyril Ramaphosa said Minister Gigaba would give further details of free higher education in terms of its financing.

President Ramaphosa said the investment in higher education is expected to contribute to greater economic growth, the reduction of poverty and inequality while also enhancing earnings and increasing the competitiveness of the economy.

NSFAS bursary

According to the Budget Review, an additional allocation to the NSFAS will cover the full cost of study for undergraduate university and technical vocational education and training (TVET) college students from families with annual household incomes below R350 000.

This includes tuition fees, prescribed study material, meals, and a certain level of accommodation and/or travel allowances.

However in 2018, the bursary will apply only to students in their first year of study. More than 340 000 students at universities and over 420 000 full-time equivalent students at TVET colleges will be funded through this new bursary scheme in the 2018 academic year.

In 2019, the arrangement will expand to cover first- and second-year students.

Meanwhile, returning NSFAS students from families with household incomes below R122 000 per year in their second, third or fourth year of university study in the 2018 academic year will also be supported.

These students will have their loans converted into bursaries under the same conditions as when they first received the financial support. This excludes TVET college students supported by NSFAS, who have always received bursaries, not loans.

NSFAS will also receive an additional R105 million over the MTEF period to cater for the additional administration costs of the expanded bursary scheme.

University subsidies

Subsidies to universities will increase by R11.3 billion over the MTEF period. This amount covers an 8% increase in tuition fees for students from families with household incomes of between R350 000 and R600 000 a year.

“Qualifying students will pay the tuition fee set in 2015, because government has absorbed the increases for the 2016, 2017 and 2018 academic years. The subsidy amount includes a general increase to cover university operating costs,” according to the Budget Review.

Higher subsidies for TVET colleges will cover 80% of the cost of providing programmes by 2022/23, from the current level of 54% of total programme cost.

Baseline funding of R4.4 billion for TVET infrastructure over the medium term will support refurbishment of existing campuses, and the purchase of workshop equipment and maintenance.

Meanwhile, policy decisions concerning issues such as historic debt, adjustment of the family income threshold, interventions to decrease dropout rates and the construction of student housing will be taken in due course. These decisions could raise the cost of the programme significantly, it noted.

The 2018 Budget has allocated R351.1 billion for learning and culture. – SAnews.gov.za

Higher growth projected for SA economy

With an improved economic outlook, South Africa’s Gross Domestic Product (GDP) is projected to come in at 1% in 2018, up from the 0.7% projected last year, Finance Minister Malusi Gigaba said on Wednesday.

“The 2017 GDP growth projection has been revised upward to 1%, which is higher than the 0.7% expected at the time of MTBPS [Medium Term Budget Policy Statement] last year. We are anticipating growth of 1.5% in 2018, rising to 2.1% in 2020,” said the Minister as he tabled the 2018 Budget in the National Assembly.

According to the Budget Review, the improved outlook flows from strong growth in agriculture, higher commodity prices and an incipient recovery in investor sentiment.

Tabling the R1.67 trillion budget, Minister Gigaba said while the forecast has improved, there are policy interventions that need to be made.

“While this is a good start, there are immediate policy interventions that we need to make to ensure that we create the right environment for investment, growth and employment.

“While global risk factors remain elevated, the world economy continues to provide a supportive platform for South Africa to expand trade and investment,” said the Minister, noting that world economic growth is at its highest level since 2014 and continues to gather pace.

Tabling his maiden Budget Speech, Minister Gigaba — who was appointed to the Portfolio following a March 2017 Cabinet reshuffle — admitted that 2017 had been a difficult one for the South African economy.

“It would be remiss of me not to acknowledge that last year was particularly difficult for our economy. The year was characterised by slow economic growth, recession, ratings downgrades, and heightened concerns regarding the governance and sustainability of key state-owned companies.”

“Despite this, the country’s economic growth outlook has improved over the past few months because of strong growth in the primary sector of the economy – particularly agriculture – as well as a welcome recovery in investor sentiment and business confidence. Over the medium term, the growth outlook is higher than projected in last year’s MTBPS,” said the Minister.

He said the cyclical recovery is matched by a renewed sense of optimism that the government can and will do its work effectively.

“This presents an opportunity for us to do the things required to reignite growth and chart a course towards meeting the objectives of the National Development Plan and fulfilling our constitutional obligations,” he said.

While the growth forecast has improved relative to the 2017 MTBPS, there are major risks to the outlook.

Treasury said a sustained GDP recovery depends on extending the current upturn in business confidence and that continued policy and political uncertainty, and further deterioration in the finances of State-owned companies remain the largest risks to the economic outlook.

Other risks identified include a further downgrade of South Africa’s local currency debt, resulting in the country’s exclusion from the Citi World Government Bond Index. This would result in higher risk premiums and trigger some capital outflows, leading to an increase in borrowing costs, exchange rate depreciation and further deterioration in economic activity.

Inflation

Meanwhile, Treasury projects inflation to come in at 5.3% in 2018.

This as headline inflation declined to 5.3% in 2017 from 6.3% in 2016. Lower inflation is due to lower food and non-alcoholic beverage prices.

“For 2018, headline inflation is projected at 5.3%, which includes 0.6 percentage points added by tax proposals.”

Electricity inflation, which fell from 9.2% in 2016 to 4.7% in 2017, is expected to stabilise at about 3.7% in 2018, following the regulator’s approval of a 5.2% Eskom tariff increase.

Treasury said the main risks to the inflation outlook remain a weaker-than-expected exchange rate, higher global oil prices and higher average wage growth. – SAnews.gov.za

Deficit projected to narrow to 3,5%

Finance Minister Malusi Gigaba says government expects the budget deficit to narrow to 3.5% over the next three years.

The Minister said this when he tabled the 2018 Budget at the National Assembly on Wednesday.

“The consolidated deficit is projected to narrow from 4.3% of GDP in 2017/18 to 3.5% in 2020/21.

“The main budget primary deficit closes over the [the next three years], helping to stabilise the gross debt-to-GDP ratio at 56.2% of GDP in 2022/23, and declining thereafter.”

The Minister said the fiscal proposals will cause economic discomfort, but they are necessary to protect the integrity of the public finances.

“Acting now to strengthen the fiscal position will improve the outlook for the economy and increase space for future investment growth.

“It is the right thing to do. We dare not borrow irresponsibly, leaving it to future generations to repay,” he said.

The Minister said government’s fiscal interventions also demand greater efficiency in the use of funds across the public sector.

He said government recognised the need to shift spending away from consumption towards higher investment.

“Over the past decade, the public sector has invested R2.2 trillion in economic and social infrastructure. Yet weaknesses in project preparation, execution and delivery have resulted in lengthy delays and cost overruns,” he said.

The Minister said to improve this, government has established a Budget Facility for Infrastructure, to standardize and improve the management of public infrastructure projects.

“To support higher levels of capital investment and maintenance, the state needs to contain the public-service wage bill.

“Government is working to ensure that the current wage negotiations process results in a fair and sustainable agreement.

“This process will require careful consideration from all stakeholders.”

Expenditure ceiling revised down

The Minister said the expenditure ceiling has been revised down marginally from what was presented in October.

He said, however, that the small revisions are underpinned by large reductions and re-allocations.

He said that over the next three years, government’s spending framework includes:

  • Expenditure reductions approved by Cabinet amounting to R85 billion;
  • An allocation of R57 billion for fee-free higher education and training;
  • Additions to the contingency reserve amounting to R10 billion.

“In addition, all national and provincial departments were required to reduce their spending on administration. The reductions exclude compensation of employees, which is already subject to a ceiling,” the National Treasury said.

The National Treasury said that after taking account of the various adjustments to the framework, the expenditure ceiling has been revised down marginally over the medium term.

“In 2017/18, however, the expenditure ceiling is likely to be breached by R2.9 billion as a result of the recapitalisation of South African Airways (SAA) and the South African Post Office.

“These appropriations total R13.7 billion, partially offset by the use of the contingency reserve and projected underspending.” – SAnews.gov.za

Optimism returns to SA economy

While many challenges still remain, there is a sense of optimism about the South African economy going into the future, Finance Minister Malusi Gigaba said on Wednesday.

“We stand before you with a profound sense of optimism, purpose and resolve,” said Minister Gigaba as he tabled his maiden Budget Speech in the National Assembly.

The Minister’s comments echoed National Treasury’s 2018 Budget Review document, which stated that following a difficult year for the economy and the fiscus, a sense of optimism has taken hold in the opening months of 2018.

Since the tabling of the Medium Term Budget Policy Statement (MTBPS) in October 2017, the South African economy has grown faster than the projected rate, despite a short recession seen in early 2017.

Government is beginning to address the problems that have eroded domestic confidence, such as corruption and poor governance at several State-owned companies. In addition, the promise of improved political and policy certainty has spurred investment and stabilised the rand.

“Despite these positive signs, significant risks remain to economic and fiscal projections. Government is working to boost economic growth, promote more rapid investment to create employment, and stabilise the precarious finances of State-owned companies,” noted the Budget Review document.

The 2018 Budget, which was tabled under the administration of newly appointed President Cyril Ramaphosa, accelerates government’s efforts to narrow the budget deficit and stabilise debt, laying the foundation for faster growth in the years ahead.

“After several years during which economic growth undershot our projections, we now see the improved growth projections for 2018 and subsequent years as a floor, rather than a ceiling. We are convinced that as business and consumer confidence return, and as government follows through on its commitments to enable growth with prudent, fast and decisive action, we can exceed our growth projections,” said the Minister.

Through the budget, the country can achieve faster growth which is needed dramatically to reduce unemployment, poverty and inequality, and relieve pressure on the fiscal framework.

“This is a tough, but hopeful budget,” said the Minister.

The Budget, tabled by Minster Gigaba sets out several proposals, including adjusting expenditure and raising value-added tax (VAT) by a percentage point to 15%. According to Treasury, at the current 14%, VAT is lower than the global and African average.

At the time of the 2017 MTBPS, gross national debt was projected to breach 60% of gross domestic product (GDP) in 2021/22, and continue rising thereafter. This projection reflected major revenue shortfalls, anaemic economic growth and a limited policy response.

“In the 2018 Budget, the combination of higher GDP growth, a narrower deficit, a stronger currency and lower borrowing rates results in an improved debt-to-GDP outlook, with debt stabilising at 56.2% of GDP in 2022/23,” noted the Budget Review.

While the outlook has improved, Treasury has cautioned that the complexity of the economic and fiscal environment should not be underestimated, adding that economic growth is tepid with unemployment still at high levels. Recently, data from Statistics South Africa showed that unemployment had dropped by one percentage point in the fourth quarter of 2017 falling to 26.7%.

“After a short recession in early 2017, the economy is starting to recover, but the improvement is not yet broad or deep. The global recovery has helped, with higher commodity prices and stronger growth among South Africa’s trading partners,” said the review. – SAnews.gov.za

Incentives to support local businesses

Government will continue to support local companies to grow through a range of incentive packages, Finance Minister Malusi Gigaba said on Wednesday.

“Government continues to support South African companies to grow and to become more competitive through incentives in the form of grants, loans and tax allowances,” said the Minister.

Tabling his maiden Budget in the National Assembly, Minister Gigaba said R18.8 billion has been allocated for industrialisation incentives over the medium term of which an additional allocation of R3.3 billion is allocated for the Economic Competitiveness and Support Package to support growth and job creation in support of the Industrial Policy Action Plan.

The Minister said government is spending a significant amount on small business support in the medium term as part of efforts to foster and support entrepreneurs.

Of the incentives budget, R4.9 billion is allocated for industrial infrastructure projects over the medium term for special economic zones, government-owned industrial and critical infrastructure projects to promote industrial development and increase investment and exports of value-added commodities.

Minister Gigaba urged all urban development stakeholders to work imaginatively to transform township economies.

“Let us think beyond car washes and spaza shops, important as they are, and find ways to foster productive, high value economic activity in townships owned and managed by township residents. We need to see factories, workshops, tech hubs and locally-owned retail operations being established in our townships,” said the Minister.

Incentives to support black producers

To strengthen global market access for South African agricultural products,the Department of Agriculture, Forestry and Fisheries (DAFF) received an additional allocation of R40 million over the MTEF to upgrade infrastructure and equipment for analytical services laboratories.

This will provide assurance to global trading partners that South African agricultural products meet internationally recognised standards for human safety, thereby facilitating the country’s ability to export unhindered.

In line with the outcomes of Operation Phakisa on Agriculture, Rural Development and Land reform, the DAFF aims to create and support 450 sustainable and profitable black commercial producers participating in prioritised value chains over a five-year period.

“An estimated R581.7 million is expected to be reprioritised for the black producer commercialisation programme. By creating opportunities for black agricultural producers, we are radically transforming the agricultural sector of our economy,” said the Minister.

Land claims

Minister Gigaba said that over the medium term, the Department of Rural Development and Land reform, intends to accelerate the settlement of restitution claims with plans to finalise 2 851 claims at a budgeted amount of R10.8 billion.

“Accelerating land reform has become urgent and the Department of Rural Development and Land reform has set aside R4.2 billion for the acquisition of about 291 000 hectares of strategically located land.”

State Capture Inquiry

Turning his attention to the Judicial Commission of Inquiry into State Capture, the Minister said the Commission is ready to commence with its work.

He added that the Budget allocation for the Commission will be considered during the 2018 Adjustment Budget once its costing is finalised.

As part of efforts to ensure that poor South Africans can access the courts, the Department of Justice and Constitutional Development has reprioritised an amount of R121 million. The amount is allocated to the Office of the Chief Justice, the National Prosecuting Authority and Legal Aid South Africa to begin operations at the Mpumalanga High Court, which is scheduled to open this year.

Upgrades of the National Identification System

Meanwhile, the 2017 Adjustments Budget included a shift of R264 million from the South African Police Service (SAPS) to the Department of Home Affairs to upgrade the National Identification System.

According to the Budget Review, Medium-term funding of R243 million is set aside for this purpose.

The upgrade will allow police and other agencies to conduct advanced biometric fingerprint identification searches.

Over the medium term, the South African Police Service has reprioritised R158.5 million for the Independent Police Investigative Directorate to increase staffing and finalise the review of its founding legislation in line with the 2016 Constitutional Court judgement.

The allocation will also be used to address weaknesses in internal controls and the case management system.

The 2018/19 budget has allocated R200.8 billion for peace and security. – SAnews.gov.za

R6 billion allocated towards drought relief

Finance Minister Malusi Gigaba says R6 billion has been allocated towards drought relief and to augment public infrastructure investment.

The announcement comes as efforts are underway to declare three provinces, particularly Cape Town in the Western Province, as national disaster areas.

On Tuesday, the City of Cape Town announced that Day Zero – a day when taps will be closed – has been moved to July.

Tabling his Budget Speech on Wednesday, the Minister said severe drought conditions are affecting large parts of the country.

He said this was placing extreme strain on the supply of water to nearly 4 million people in the City of Cape Town.

“A provisional allocation of R6 billion has been set aside in 2018/19 for several purposes, including drought relief and to augment public infrastructure investment.

“Government is concerned by the potential job losses in vulnerable farming communities as a result of the drought.

“We are therefore exploring the option of partially mitigating losses by temporarily increasing intake in the Working for Water programme,” he said.

The Minister said the allocation for drought response funds for water infrastructure projects and EPWP will be made in the Adjustment Budget.

“To provide short term assistance, this budget includes disaster relief grants for provinces and municipalities worth R473 million in 2018/19.

“Other conditional grants can also be reprioritized to respond to disasters if necessary,” he said.

Meanwhile, the Minister said some smaller towns in the Northern Cape, Eastern Cape, including Nelson Mandela Bay and Western Cape are also facing water shortages.

He said South Africa rates among the highest levels of per capita daily domestic water consumption levels in the world, but also some of the highest levels of inequality in reliable access to water.

He said the national government will continue to work with municipalities to respond effectively to the water crisis.

“Government stands ready to provide financial assistance where necessary.

“South Africa is a water-scarce country, and our climate is changing in ways that make rainfall patterns far less predictable than in the past.

“We need to conserve water.” – SAnews.gov.za

NHI gets extra R4,2 billion

The National Health Insurance (NHI) has been allocated an additional R4.2 billion which will be funded through an amendment to the medical tax credit, Finance Minister Malusi Gigaba said on Wednesday.

“Over the medium term, the NHI is allocated an additional R4.2 billion, funded through an amendment to the medical expenses tax subsidy. Overall, government will be spending R205 billion on health in 2018/19 growing to R240 billion by 2020/21,” said the Minister.

Minister Gigaba tabled his maiden national Budget in Parliament on Wednesday.

The implementation of the NHI is a policy priority that will result in additional allocations of R700 million, R1.4 billion and R2.1 billion over the next three years.

The personal services component of the national health insurance grant includes an initial set of priority services, such as contracting with general practitioners, widening referrals for school optometry and audiology services, and community mental health.

The non-personal services component of the NHI is allocated R2.3 billion over the medium term. The 2018 Budget Review said this amount will expand the Chronic Disease Medicine Distribution Programme to enable 3 million patients to collect chronic medicines at their collection point of choice instead of at a clinic.

Health budget

Meanwhile, government is working to increase the life expectancy of citizens to at least 70 years by 2030 through interventions such as the continued expansion of antiretroviral therapy and implementation of the NHI.

The health budget, which accounts for 13.9% of total spending, will grow at an average annual rate of 7.8 % over the medium term.

The 2018 Budget has allocated a total R205.4 billion to the health sector. Of this amount, R125.9 billion will be for tertiary hospital services and R66.4 billion will support HIV and AIDS prevention and treatment.

ARV programme

According to the Budget, R1 billion is added to the comprehensive HIV, AIDS and TB grant in 2020/21.

Changes to this grant also allow for standardising and monitoring the performance of the Community Health Worker Programme, which delivers home-based care to those suffering from HIV and AIDS or tuberculosis.

A total of R4.4 billion has been reprioritised within the grant over the next three years to support the programme.

Currently, government’s antiretroviral treatment programme reaches 3.9 million people and since September 2016, government has been implementing a universal test-and-treat policy, offering all HIV-positive patientsantiretroviral treatment regardless of CD4 count.

In 2018/19, government will establish the South African Health Products Regulatory Authority be established as a public entity. The authority will be responsible for regulating the registration, licensing, manufacturing and importing of active pharmaceutical ingredients, medicines and medical devices.

It will also regulate clinical trials in line with national policy.

“The new authority will receive R396.9 million in transfers, and will generate revenue by collecting fees from the pharmaceutical and health products industry,” said the Review.

Over the Medium Term Expenditure Framework (MTEF) period, the health facility revitalisation grant and indirect health facility revitalisation grant, which fund infrastructure programmes, have been cut by a total of R820 million. These reductions will be absorbed through reprioritisation and delaying infrastructure projects.

Sugar tax awareness campaign

Government has allocated R368 million over the MTEF period to begin a public awareness campaign to complement the health promotion levy on sugary beverages and to establish a health technology assessment unit.

The unit will analyse the cost effectiveness of various health interventions.

Last year, the South African Revenue Service (SARS) announced that it would be collecting the levy.

Basic Education

Minister Gigaba said basic education remains a key focus in the Budget.

Over the medium term, R3.8 billion has been allocated to the School Infrastructure Backlogs Grant to replace 82 inappropriate and unsafe schools, and provide water to 325 schools and sanitation to 286 schools.

The Education Infrastructure Grant is also allocated R31.7 billion over the medium term to build new schools, upgrade and maintain existing infrastructure, and provide school furniture.

Meals will be provided at 19 800 schools for about 9 million learners each school day through the National School Nutrition Programme Grant, which is allocated R21.7 billion over the medium term.

Additionally, 39 000 Funza Lushaka bursaries will also be disbursed via the National Student Financial Aid Scheme, at a cost of R 3.7 billion for prospective teachers in priority subject areas such as mathematics and science. – SAnews.gov.za

Steps being taken to curb illicit financial flows

Finance Minister Malusi Gigaba said the National Treasury, in close cooperation with the Reserve Bank, the Financial Intelligence Centre and the South African Revenue Service, is taking several steps to detect, disrupt and deter illicit financial flows.

The Minister said this when he tabled the 2018 Budget Speech in the National Assembly on Wednesday.

Dealing with illicit financial flows has become a priority for government following concerns that those who are hell-bent on avoiding paying tax, an action which erodes the country’s tax base, have for a long time opted to shift profits to tax havens.

“These measures include increasing capacity, coordinating a national risk assessment and improving information sharing between various agencies.

“In line with G20 recommendations, policy measures to deal with transfer pricing and base erosion by multinational companies are been implemented and continue to be tightened,” he said.

The Minister said that having a sustainable tax base was important to ensuring that government has enough revenue to meet its spending needs.

“Companies can structure affairs to reduce their tax base in South Africa and shift their profits to low-tax countries.

“This threatens the sustainability of our tax base and is a challenge that most governments are struggling with.

“The implementation of country-by-country reporting will enable SARS to ensure that companies pay their fair share of tax in SA,” he said.

He said government was also investigating options to further curb the practice of excessive interest deductions by companies in order to reduce their tax liability.

The realisation of taxes from the off-shore wealth of taxpayers, as highlighted in the Panama and more recently the Paradise Papers, was evidenced in the over 2000 applications for disclosure by South African taxpayers under last year’s Special Voluntary Disclosure Programme (SVDP).

It is anticipated that by the end of March 2018 over R3 billion will have been collected in respect of the SVDP that have been processed, with work on remaining applications continuing into the new fiscal year.

Measures to approve material cross-border transactions involving state-owned entities will be put in place. – SAnews.gov.za

Smokers, drinkers to feel the pinch

Finance Minister Malusi Gigaba has announced an increase on excise duties that will leave smokers and drinkers with a hangover.

Tabling his 2018 Budget Speech at the National Assembly on Wednesday, Minister Gigaba said alcohol and tobacco excise duties will increase between 6 and 10%.

For malt beer, the current excise duty rate stands at R86.39 per litre of absolute alcohol, or 146.9 cents per average 340ml can. This will go up by R95.03 per litre or 161.56 cents per 340ml can.

Unfortified wine will go up from R3.61 per litre to R3.91 per litre, while fortified wine will increase to R6.54 per litre from R6.17 per litre.

Ciders and alcoholic fruit beverages will go up by 10 percent to R95.03 per litre of absolute alcohol, while spirits will go up by 8.5 percent to R190.08 per litre of absolute alcohol.

For the smokers, excise on all tobacco products has been hiked by 8.5%.

Cigarettes will go up from R14.30 to R15.52 per box of 20 cigarettes, while cigarette tobacco will increase from R16.07 to R17.44 per 50 grams.

Pipe tobacco will go up from R4.56 to R4.94 per 25 grams while cigars go up to R82.31 per 23 grams compared to the current rate of R75.86 per 23 grams.

“The National Treasury and the Department of Health will explore additional measures to reduce consumption of tobacco products, including a minimum price and stronger enforcement,” the National Treasury said.

Meanwhile, the National Treasury said that the health promotion levy, which taxes sugar beverages, will be implemented from 1 April 2018.

“A policy brief on the use of taxes to encourage healthy choices will be published shortly,” the National Treasury said. – SAnews.gov.za

Pay suppliers on time or be charged

National Treasury will issue a directive to all government departments and public institutions instructing them to pay suppliers within 30 days, Finance Minister Malusi Gigaba said on Wednesday.

“Next week, the Director General of National Treasury [Dondo Mogojane] will issue a directive to all government departments and public institutions, instructing them to pay suppliers on time, or be charged with financial misconduct,” said the Minister.

Tabling his maiden Budget Speech in the National Assembly, Minister Gigaba said the payment of suppliers on time is regulated by the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA).

“This must be monitored by accounting officers and National Treasury will strengthen oversight mechanisms in this regard. We will work with colleagues in all spheres of government to improve performance of public entities on this critical issue,” said the Minister.

Value for money and efficiency in spending remain critical in the drive to ensure the effective management of public resources, he said.

This as Treasury is currently rolling out the strategic procurement framework that provides for a differentiated approach of procurement based on the characteristics of each commodity.

Meanwhile, over the course of the current financial cycle, government has engaged the Auditor General as part of amending the Public Audit Act.

“This was occasioned by the worrying trend we see in rising unauthorised, irregular, fruitless and wasteful expenditure. We will finalise the process this year, to address these issues effectively,” said the Minister. – SAnews.gov.za

Rye, low GI bread to be removed for VAT exempted goods

Households who consume finer items of the food basket like rye and low GI bread will from 1 April need to dig deeper into their pockets.

National Treasury has proposed that the VAT Act be amended to exclude low GI and rye bread, which is usually consumed by wealthier individuals, to be removed from VAT exempted goods.

South Africa’s VAT system includes 19 basic food items that are zero-rated. These include dried beans, samp, maize meal and rice. This system remains in place.

“Recently, for example, there has been uncertainty around zero-rating brown bread.

“The 19 zero-rated food items are only meant to cover basic food items. As of 1 April 2018, government proposes to amend the VAT Act (1991) to reflect the original policy intent – that only brown bread and whole wheat brown bread will be zero-rated.

“Products such as rye or low GI bread, which in South Africa are much more expensive and tend to be consumed by richer households, will not be zero-rated,” National Treasury said.

Luxury comes at a price

Meanwhile, Finance Minister Malusi Gigaba said that in addition to VAT, new proposals will see an increase on duties for luxury goods.

“In addition to VAT, we are increasing excise duties on luxury goods and estate duty on wealthy individuals,” he said when tabling his Budget Speech on Wednesday.

In its budget review document, Treasury said a less complex means of applying higher taxes to luxury goods is to increase ad valorem excise duties.

“Government proposes to increase these rates, which are already applied to some goods that are consumed mainly by wealthier households, such as cosmetics, electronics and golf balls.

“The associated revenue-raising potential is not significant but it is aligned with the progressive structure of the tax system.”

National Treasury said effective from 1 April 2018, the maximum ad valorem excise duty for motor vehicles will be increased from 25% to 30%.

This basically means that manufacturers who produce a vehicle with a minimum value of R850 000 at production will be liable for excise duties of 30%.

According to National Treasury, the cost is most likely to be passed, in part, to the consumer.

“The classification of cellular telephones will be updated to include ‘smart phones’ to ensure they attract ad valorem excise duties.

In addition, the ad valorem excise duty rates, now at 5% and 7%, will be increased to 7% and 9%, ensuring that households spending more on luxury goods contribute proportionately more to revenue.

“Government will also consult on a proposal to replace the flat rate for cellphones with a progressive rate structure based on the value of the phone,” National Treasury said. – SAnews.gov.za

Funds allocated for Census 2021

Government has made additional allocations to Statistics South Africa (Stats SA) to finance the 2021 Census.

“Additional allocations of R37.1 million in 2018/19, R145.3 million in 2019/20 and R855 million in 2020/21 have been made to Statistics South Africa for the 2021 Census,” said the 2018 Budget Review document.

This as Finance Minister Malusi Gigaba tabled the 2018 Budget in the National Assembly on Wednesday.

Census 2021, which will be undertaken by Stats SA, will make use of an internet-based platform.

The census will require the purchase of about 165 000 specialised tablets linked to cloud-based servers, with communications on secure mobile infrastructure, at a cost of about R750 million.

The technology is expected to improve data quality and collection rates, and to allow for real-time monitoring and supervision.

“Quicker results will support timely, evidence based policymaking. Statistics South Africa estimates that the new technology and methods for the Census will cost R3.4 billion,” said the Review.

Further to this, about 150 000 fieldworkers will be employed.

2019 Elections

Meanwhile, Minister Gigaba said preparations for the 2019 elections are on schedule.

“The challenges relating to the address harvesting and to record proper addresses of eligible voters as prescribed by the Constitutional Court are being resolved and will be concluded in the first quarter of the 2019 financial year,” he said.

In June 2016, the Constitutional Court handed down an order stating that the Electoral Commission must have a record of addresses for all registered voters. The Constitutional Court gave the Electoral Commission until June 2018 to update the voters’ roll with all available addresses.

The Electoral Commission will on the weekend of 10 and 11 March 2018 open its voting stations for all eligible voters to update their details.

The voting stations will be opened to assist new voters to register to vote, allow already registered voters who have moved since they registered to reregister in their correct voting district and allow registered voters whose address details are not on the voters roll to provide their information. – SAnews.gov.za

Social compact to strengthen economic recovery

Government will build a social compact with business and labour to strengthen the recovery of South Africa’s economy.

In the 2018 Budget Review, released following Finance Minister Malusi Gigaba’s tabling of the national Budget, National Treasury said progress has been made in government’s 14 Confidence Boosting measures that were announced by the Minister in July 2017.

“Over the period ahead, government will build a social compact in partnership with business and labour to strengthen the economic recovery. This will include intensifying collaboration with the private sector through platforms such as the CEO Initiative,” said the Review.

The measures – announced by Minister Gigaba at a media briefing at the Johannesburg Stock Exchange – are intended as short-term interventions to complement the structural reform agenda set out in the country’s National Development Plan (NDP).

Among progress made since July 2017 is the appointment of a new board and acting Chief Executive Officer at power utility Eskom. In addition, the Minister of Energy David Mahlobo has instructed Eskom to conclude all power-purchase agreements with independent power producers (IPPs).

Earlier this month, Public Enterprises Minister Lynne Brown announced her approval of Eskom’s application to purchase additional renewable energy from IPPs.

The Budget Facility on Infrastructure received 64 large infrastructure project submissions. Of these, 38 projects that met submission requirements were assessed.

Since July, government granted South African Airways (SAA) R10 billion to settle its short-term debt obligations. A new board, chief executive officer and restructuring officer have been appointed to the national carrier and a turnaround strategy is being implemented.

Cabinet has approved a private-sector participation framework for state-owned companies.

As part of progress made, the Insurance Act, signed into law in November 2017, strengthens the insurance market through higher prudential standards, makes the industry more accessible to new entrants and aligns the sector with international standards.

Meanwhile, work has been completed on a fund to benefit small and medium enterprises, with a particular focus on start-ups. The Competition Commission’s market inquiry to investigate data prices will be complete by end-August 2018. – SAnews.gov.za

 

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