South Africa: National Budget 2011/2012 Kevin Lings Economist 23 February 2010

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SA GDP growth (government estimate) %

% Fixed Investment Growth (government estimate)

% of GDP Current account (government estimate)

% Inflation (CPI) (government estimate) CPI forecast

Index out of 100 Open Budget Index 2010

SA government’s budget 2011/2012 – main indicators. Consolidated budget 2010/ /2012% change R billion Revenue % Expenditure % Budget deficit Deficit as % of GDP-5.3%

% Fiscal years Government expenditure & revenue as % of GDP Expenditure as % of GDP Revenue as % of GDP Huge increase in expenditure

% Fiscal years, main budget SA budget deficit as % of GDP

%Fiscal years SA budget deficit as % of GDP (consolidated budget)

Fiscal balance as % of GDP %

Breakdown of tax revenue (20011/12)

Government budget revenue overruns Rbn

SA budget revenue overrun in 2010/2011: R16.6bn Rbn

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Budget revenue increases 2011/2012

Main tax proposals 2011/2012 Additions Rm Subtractions Rm Personal income tax Personal income tax adjustment Adjustment in monetary thresholds Business tax Dividend cession scheme Taxes on property Adjustment in transfer duties Indirect taxes Increase in fuel levy Increase in excise duties Increase in electricity levy LOSS ON TAX PROPOSALS

Personal tax relief in previous tax years ● Tax relief for individuals: ● 1998/1999R4.0bn ● 1999/2000R5.0bn ● 2000/2001R10.0bn ● 2001/2002R8.0bn ● 2002/2003R15.0bn ● 2003/2004R13.0bn ● 2004/2005R4.0bn ● 2005/2006R6.8bn ● 2006/2007R13.5bn ● 2007/2008R8.4bn ● 2008/2009R7.2bn ● 2009/2010R13.0bn ● 2010/2011R6.5bn ● 2011/2012R8.1bn

Taxable income (rands). Tax relief of R8.1 billion in 2011/2012 Tax reduction for individuals <65

Breakdown of Fuel Levy – R2.61 per litre

Other tax issues: ● New tax bracket/threshold for people aged 75 years and older ● New tax on gambling (15% on winnings over R15 000) ● Threshold for interest income raised only fractionally (R to R for under 65, and R to R for 65 and over) ● International air passenger departure tax increased (R150 to R190 per passenger) ● Discussion on a possible carbon tax

Rbn Customs union payments by SA Government

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Breakdown of expenditure (including interest)

% Budget Expenditure increases in 2011/12 Consolidated national and provincial expenditure

Defence Police, courts, prisons Education Health Social security Economic services /91 Key expenditure items % of total 05/ / / /09 09/ / /

● Number of people obtaining a social grant ● April ● April ● April ● April ● April ● April ● April ● April ● April ● April ● April ● April ● April Social grant beneficiary numbers

Billions Grown by an average 17.3% p.a. for past 3 year Government salary payments: up 61.5% in past 3 years Budgeted to rise by only 7.9% in 2011/12?

Millions Create 5 million jobs in 10 years South Africa’s employment problem

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Fiscal measures to improve employment: ● Youth employment subsidy: R5 billion over 3 years. Tax credit administered by SARS. Expected to create new jobs ● Learnership tax incentive extended for 5 years, but will be reviewed (was due to expire in Sep Have not been widely used) ● Training layoff scheme has utilised R21.3 million in training allowances and supported workers ● Expanded public works programme budgeted at R73 billion over next 3 years ● Jobs fund: R9 billion. Available to both private and public sector. Expected to employ to over the ‘medium term’

Public sector infrastructural spending Rbn R808.6bn

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National deficit/surplus Extraordinary receipts Extraordinary payments Net borrowing requirement Domestic short-term loans Domestic long-term loans (net) Foreign loans (net) Change in cash balance Total financing Budget 2010/ / Outcome Financing the National Budget

Government net domestic long-term bonds issued RbnFiscal years

Rbn Fiscal years Government net foreign funding

Public sector borrowing requirement RbnFiscal years

% Government domestic debt as % of GDP

% Government total loan debt as % of GDP

% Fiscal years Debt servicing as % of total spending

Budget should be guide to govt's intentions Budget deficit contained Spending - efficiency Revenue - no ad hoc measures - efficiency of collection Positive impact on the economy - Growth - Inflation Exchange control relaxation Encouraging private sector investment Unemployment and Job creation Law & Order, Crime and Violence Poverty relief Encourage savings Encourage small business Innovation Negative PositiveAims Yes No Yes No Yes No Yes No Yes? No Evaluate the budget

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Thank You