2. Budget Presentation: “ L eftward L iaisons” Presented by: Dawie Roodt 4 March 2008

3. A clear leftward shift can be seen in political leadership…

5. ..But in the mean time the old guard still rules…

6. “…These are substantial steps towards our medium term economic goals – growth of 6 per cent a year or more, an unemployment rate of below 14 per cent by 2014, and an aggregate poverty rate half that recorded in 2004. Our commitment is not just an aspiration towards these targets, we intend to measure progress, step by step, in sharing the democratic dividend among all of our people….” - Finance Minister, Trevor Manuel. Medium Term Budget Policy Statement Speech 2007

7. In This Presentation: 1.Economic Overview 2.Fiscal Background 3.2007/08 Revenue 4.2007/08 Expenditure 5.Social Expenditure Analysis 6.Funding 6.Budget 2008/09 - Highlights

8. Economic Overview: The Grazing Ground

9. 200620072008 M3 (end of year)23.1%23.7%19.8% PSCE (adj. end of year)27.6%22.2%16.6% CPIX (average)4.6%6.5%8.1% Prime (end of year)12.5%14.5% Current Account: Nom-R111.0bn-R138.2bn-R145.1bn Current Account: GDP-6.4%-7.0%-6.5% R/$ (end of year)7.046.848.40 GDP (full year)5.4%5.1%3.5% Economic Overview

10. The Good, the Bad & the Ugly The Good –  Economy still likely to grow The Bad –  Credit demand remains strong  End of Inflation targets? The Ugly -  Eskom  Toothless SARB

11. Inflation Inflation bracket Source: StatsSA and own calculations CPIX Ave: 5.9%

12. Interest rates Toothless SARB Source: SARB and own calculations

13. A Quick Eish ’ kom Calculation Vision: " Together building the powerbase for sustainable growth and development." R60bn ‘investment’…?

14. Load Shedding: The 3 Hour Effect Average GDP per day: GDP, 2007 (current): R1,973.4bn Workdays: 240 GDP per day: R8.3bn Average GDP per sector: Allocate equal weights to GDP sectors: (3 out of 24) –Loss per day: R1.1bn (13.3%) Average GDP loss per sector: Allocate weights to GDP sectors: –Finance, real estate and business services (3 out of 8) –Mining and quarrying (3 out of 24),etc. –Loss per day: R1.9bn (22.8%)

15. Potential Job Losses Case Study: +/- 400 000 employees in Mining Sector Mining production at 90% electricity – Lose 15% - 20% 1% loss in production = 1% reduction in workforce Thus, potential reduction in mining workforce: 60 000 – 80 000 jobs lost Source: Thousands face job chop at GFI, 31 Jan 2008, Fin24

16. GDP Loss: Base-Case Scenario Revised Growth Estimate: 4.6% to 3.0% Loss in real terms: R19.76bn Potential Tax Revenue loss: R5.9bn

17. Extra Load Shed on Consumers

18. ‘Alternative Energy’ Cost - Generator FacilityGenerator Size (KVA) Capital Cost p KVA Total Capital Cost (excl. installation) House10 KVAR1250 – R5000 R12 500 – R50 000 Small/Medium Business 60 – 80 KVA R1400 – R3000 R84 000 – R240 000 Supermarket/ Butchery 130 – 140 KVA R1300 – R2500 R169 000 – R350 000 Source: Efficient Research

19. Electricity Levy (2c per KWh) Efficient Lighting Roll-Out Programme –Compact fluorescent light fittings (CFL’s) Solar Water Heating Programme –Government subsidise 20% – 30% –Cost R7 000 – R20 000 (R25 000) per geyser Fuel Switching –Liquefied Petroleum Gas used in cooking ‘Demand Side Management’ maybe not such a bright idea…

20. Fiscal Policy: Background

21. Background Gold Deficit Surplus

22. FISCAL 2007/08 …

23. Revenue: Fiscal 2007/08

24. Contribution to Fiscus

25. Is Tax Crowding Out Savings..? Source: SARB Quarterly Bulletin, December 07 & MTBPS Oct 07; Efficient Research Crowding Out ?

26. Is Tax Crowding Out Savings..? Crowding Out ? Source: SARB Quarterly Bulletin, December 07 & MTBPS Oct 07; Efficient Research

27. Registered Income Tax Payers IndividualsCompaniesTrustsTotal Registered Taxpayers 5.0 million1.7 million300 0007 million Source: Fin24, Sep 2007

28. Tax Comparison: Companies Source: worldwide-tax.com South Africa Bulgaria Egypt Average: 26.6% Median: 29.0% Ireland USA South Africa + STC (’06) South Africa + STC (’07)

29. Tax Comparison: Individuals Source: worldwide-tax.com South Africa Russia Denmark Average: 35.4% Median: 36.0% USA Ireland

30. Tax Comparison: VAT Source: worldwide-tax.com Average: 16.7% Median: 18.0%

31. Results... Tax Burden shifted to companies Crowding out of Individual and Company savings Few income tax payers Internationally: –Income tax rates high –VAT tax rate low

32. 2007/08 in Review: Revenue R bnBudget ’07Budget ‘08ExpectedDiff. (%) Income Tax312.2332.1330.0-2.1 (-0.6%) Individual155.3168.5166.9-1.6 (-0.9%) Company138.5141.4142.61.2 (0.8%) STC16.020.218.3-1.9 (-9.4%) Other2.32.0 0.0 (0.0%) VAT155.1147.0150.03.0 (2.0%) Excise Duty17.818.017.9-0.1 (-0.6%) Fuel Levy23.924.024.30.3 (1.3%) Other54.059.055.6-3.4 (-5.8%) Total544.6557.9557.3-0.6 (-0.1%)

33. Reasons collection changes Individual tax  Employment and Wage increases (inflation) Company tax  Consumption driven  High commodity prices STC  High profits  Foreign demands VAT  Larger VAT refunds

34. Lower VAT Collection Reasons Why: Larger VAT refunds –Higher non-wage input costs –Higher levels of fixed investment –Inventory accumulation caused by moderation in household consumption expenditure Household Consumption Expenditure Trends (2007 Quarter Three): Durable goods: Lower vehicle sales (consumer confidence, industry strike) Semi-durable goods: Lower sales of clothing and footwear Non-durable goods: Lower sales of food, beverages and tobacco Services: Slower growth in financial services sector, consumer spending on banking services Sources: MTBPS October 2007, SARB Quarterly Bulletin December 2007

35. Final Consumption Expenditure by Households Source: SARB and Efficient Research forecast

36. Expenditure: Fiscal 2007/08

37. Total Expenditure Trend Over Time Source: SARB and Efficient Research Forecast

38. Spending Priorities Social Spending

39. 2007/08 in Review: Expenditure R bnBudget ’07Budget’08ExpectedDiff. (%) Voted Amounts299.2*308.1305.2-2.9 (-0.9%) Central Gov.40.842.040.6-1.4 (-3.3%) Fin. & Admin.21.721.421.1-0.3 (-1.4%) Social Services102.7104.8104.4-0.4 (-0.4%) Justice & Protect.79.980.580.90.4 (0.5%) Eco. & Infrastruc.54.059.459.50.1 (0.2%) State Debt Cost52.952.852.7-0.1 (0.2%) Transfer Provinces171.3172.8 0.0 (0.0%) Other7.58.37.8-0.5 (-6.0%) Total533.8542.1539.1-3.0 (-0.6%) * Includes: Contingency Reserve (R3.0bn)

40. Social Expenditure Analysis: Money Well Spent?

41. Health

42. Public Expenditure on Health Comparison (2003-04) Source: Human Development Report, 2006 (undp.org) South Africa (‘04&’06) Myanmar Iceland Average: 3.5 Median: 3.0 Cuba Malawi South Africa (’07)

43. Private Expenditure on Health Comparison 2004 Source: Human Development Report, 2006 (undp.org) Solomon Islands Average: 2.5 United States South Africa

44. Core Health Care Indicators Health Care IndicatorNumber (2004)Density per 1,000 SA vs. (Sample average) Physicians34,8290.77 (1.45) Nurses184,4594.08 (3.45) Dentists5,9950.13 (0.32) Pharmacists12,5210.28 (0.35) Community health workers 14,3060.32 (0.98) Health management and support workers 22,8590.51 (1.84) Source: World Health Statistics 2007, WHO (www.who.int)

45. Public Health Expenditure (2003) vs. Physicians 2004) Source: Human Development Report, 2006 (undp.org)

46. Education

47. To Stay or Not to Stay...?? Source: Documented Migration Publication, StatsSA

48. To Stay or Not to Stay...?? UKAustraliaCanadaSouth Africa Average Destination of Emigrants (%) 33%15%3% Eco Indicators Real Eco Growth (GDP, Q3) 2.4%4.3%2.9%4.7% Inflation (CPI, avg. 2008)2.1%3.2%1.9%7.2% Currency p US$£0.51$1.14CAN$1.02R7.10 Marginal Tax Rate40%48.5%29%40% Socio Indicators Life Expectancy at birth79.080.980.343.0 Adult Literacy rate (>15yr,%) 99.0 82.4 UN HDI Rank16 th – 0.8534 th – 0.9613 rd - 0.962121 th – 0.674 Murders p capita, rank (100 000) 46 th – 1.443 th – 1.544 th – 1.492 nd – 49.6 Sources: Economic Indicators, Economist. UN HDI 2007/2008, 7 th UN Survey of Crime Trends 1998 – 2000

49. Importing Skills – A realistic solution..? US (1 st ) UK (7 th ) Australia (6 th ) Canada (3 rd ) India (17 th ) China (26 th ) South Africa (30 th ) Source: “Mapping Global Talent” - Heidrick&Struggles and The Economist Intelligence Unit, 2007

50. Education Comparison Expenditure on Education as % GDP, 20065.4% (4.7%)* Teachers per capita (1000), 2005 - Primary 4.5 (5.1)* Teachers per capita (1000), 2005 - Secondary 3.2 (5.4)* *Weighted Average (190 countries) Source: World Development Indicators Database, Human Development Report, 2006 (undp.org)

51. The Reading Literacy of Fourth Grade Students Source: US Department of Education, PIRLS 2006 HighIntermediateLowNone Russian Federation(565) United States (540) Macedonia (442) South Africa (302) Morocco (323) Qatar (353)

52. Breakdown: Population Education Source: Community Survey 2007, StatsSA Canada – 50.6% Ireland – 47.9% Japan – 47.7% U.S. – 39.0% Mexico – 18.1% Poland – 15.3% Hungary – 14.75%

53. SC HG Maths & Science Passes Source: Department of Education, Education Statistics in SA at a glance, SC Examination Results, 2006

54. Enrollment for SC HG Maths and Science as % of SC enrolment Source: Department of Education, Education Statistics in SA at a glance, SC Examination Results, 2006 13.3% 9 %

55. Government Targets for SC HG Maths passes vs. Actual passes  Achieved  Targets Sources: Department of Education, Statistics in SA at a glance, 1999 – 2005; Senior Certificate Examination Results, 2006.

56. Pass Rates for SC, SC HG Maths & Science Source: Department of Education, Education Statistics in SA at a glance, SC Examination Results, 2006 53% HG Maths Passes – 4.8% 43% HG Science Passes – 5.7%

57. Senior Certificate Mathematics Results (2006) 11% 81% 71% 16% Source: Department of Education, Education Statistics in SA at a glance, SC Examination Results, 2006

58. Time Spent by Teachers on Different Activities Source: “Educator workload in SA”, Pretoria: Human Sciences Research Council, 2006 85% – Optimal Time Allocation

59. Alternative Solutions…? SETA: –5 Seta’s researched in 3 Sectors –Key Findings: Only 2% of employees benefited Seta's themselves define ‘scarce’ skills with their capacity to address the priorities Demands to provide foundational education vs. occupational skills ‘Second Education’ instead of skills development Source: “The Skills Revolution”, Centre for Development and Enterprise Oct 2007 “..Our Seta's held over R3.7bn in cash reserves…” - MTBPS, 07

60. Social Security and Welfare

61. Changes to Social Grants Grant Type (R)2003200620072008% Change 2003-2008 Old Age Grant70082087094034.3% Disability Grant70082087094034.2% War Veterans Grant71883889096033.7% Foster Care Grant50059062065030.0% Care Dependency Grant (disabled) 70082087094034.3% Child Support160190200 (14) 210 – 1April08; 220 – 1 Oct 08 37.5% Grant in Aid (full-time attendance) 15019020021040.0% Source: 2008 Budget

62. Social Grants Beneficiary Numbers Grant Type (‘000) 2003200620072008 (projected) % Change 2003-2008 Old Age Grant2,0222,1442,1952,22510% Disability Grant9531,3191,4221,40947.8% War Veterans Grant4322-50.0% Foster Care Grant138313400446223.2% Care Dependency Grant (disabled) 58949811089.7% Child Support2,6307,0457,8638,208212.1% Total5,80810,91811,99112,402106.5% Source: 2008 Budget

63. Correlation? Household Expenditure vs Social Grants Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research 1% Increase in Social Grants = 0.60% increase in Household Expenditure R-squared = 0.995 (small sample)

64. Correlation? Excise Duties vs. Social Grants 1% Increase in Social Grants = 0.49% increase in Excise Duties R-squared = 0.966 (small sample) Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research

65. Negative Correlation? Social Grants vs. Savings Source: 2007 Budget, SARB Quarterly Bulletin; Efficient Research

66. Summary  Social grant beneficiaries doubled between 2003 to 2008  Child support recipients tripled between 2003 to 2008  Child Support grant age doubled from 7 (1998) to 15 (2008)  Constant sharp rise as percentage of economy (%GDP)  2007: 11,9m recipients (26.0% of SA population) Important social responsibility; however rising by alarming rate…!

67. Redistribution Estimation: R1 in = R? out Rand In : Rand Out Ratio 199720032007 Family 1* (R20k)R4.29R13.94 (225%)R15.62 (12%) Family 2 (R43k)R1.36R2.10 (54%)R3.22 (53%) Family 3 (R100k)R0.30R0.61 (100%)R0.87 (43%) Family 4 (R300k)R0.80R0.14 (87%)R0.21 (44%) Family 5 (R500k)R0.04R0.08 (81%)R0.11 (37%) Family 6 (R1mil)R0.02R0.03 (77%)R0.04 (24%) *Average family consists of 4 people, aggregates taken per capita Source: Efficient Research

68. Aiming For Equality Source: Efficient Research

69. Aiming For Equality Source: Efficient Research +224.0% - 39.0%

70. Aiming For Equality 19.9%closer Source: Efficient Research 27.5% closer

71. From those who give….more will be taken

72. Thus.. Higher taxes leads to lower savings Increase in Social Expenditure leads to Stronger Demand (inflation, Current Account, etc)

73. Accountability Spilling the Milk…?

74. Qualified Audit Opinions: Department2005-062004-052003-042002-032001-022000-01 Independent Complaints Directorate ✓ Land Affairs ✓✓ Transport ✓✓ Labour ✓✓✓ Justice ✓✓✓✓ Parliament ✓✓✓ Health ✓✓✓✓ Defense (R3.3bn 2008-2011) ✓✓✓✓ Correctional Services (R2.9bn 2008-2011) ✓✓✓✓✓ Water Affairs & Forestry ✓✓✓✓✓ Home Affairs ✓✓✓✓✓✓ General Report of the Auditor General on Audit Outcomes for the Financial Year 2005-06

75. Spending by Departments DepartmentBudget 2006/07 R mil Audited R mil Under (-) / Over (+) % of Budget ICD666511.5% Land Affairs4,8523,726-1,126-23.2% Transport12,87013,3604903.8% Labour1,5131,454-59-3.9% Justice6,2706,005-265-4.2% Parliament782755-27-3.5% Health11,27011,338680.6% Defence23,83023,818-12-0.1% Correctional Serv.10,6319,251-1,380-13.0% WAF4,4774,306-171-3.8% Home Affairs2,8002,547-253-9.0% Source: 2007 MTBPS and Efficient Research calculations

76. Additional Facts All departments qualified in 2004-05 also received a qualified audit opinion in 2005-06 78% of all issues are in respect of only five departments, namely: Correctional Services (21 issues ) Home Affairs (13 issues) Defence (10 issues) Independent Complaints Directorate (8 issues) Water Affairs and Forestry (7 issues) Only four departments received clean audit reports – 12% –Public Enterprise –Public Services Commission –Presidency –Trade and Industry

77. Spilling the Beans… Corruption: National Anti-Corruption Hotline Number ReceivedFeedbackPercentage Feedback 112535932% Financial Disclosure: Senior Management Service Members Number of membersNumber of forms outstanding % Received 3619159456% National Departments Source: 2007 State of the Public Service Report, PSC

78. Vacancies in National Departments Average Vacancy (National and Provincial): Senior Management Vacancies: 35% 200620052004 24.3%23.4%25.1% Source: Skills Revolution Report, CDE Oct 2007

79. Unqualified Reports for Public Entities 76% Public Entities Unqualified Primary Areas of Public Entity Qualifications: Income and Receivables – 26% Asset Management – 25% Non-Personnel Expenditure - 14% Source: General Report of the Auditor General on Audit Outcomes for the Financial Year 2005-06

80. But what do(es) the people(s) say…?

81. Public Sentiment: State Service Delivery Delivery Area20062007Change Transparency and Accountability 67%39%-28% Reducing the Crime Rate54%33%-21% Narrowing the Income Gap65%45%-20% Fighting Corruption63%43%-20% Retaining Skilled People48%28%-20% Educational Needs78%65%-13% Improving Basic Health Services 73%64%-10% Reducing Unemployment40%32%-8% Welfare Payments85%80%-5% Source: SA Reconciliation Barometer Survey Report Nov 2007, IJR

82. Public Confidence in Institutions Institution20062007Change National Government73%63%-10% Political Parties48%37%-10% Provincial Government66%57%-9% Presidency77%68%-9% Parliament69%62%-8% Local Government50%43%-7% Legal Systems61%55%-6% Big Companies65%60%-6% Constitutional Court66%61%-5% Religious Institutions70%69%-1% Source: SA Reconciliation Barometer Survey Report Nov 2007, IJR

83. Thus… Huge increase in Social Expenditure (social grants) International Comparison : Spend more Compare worse Financial management in a MESS! People are losing confidence in government

84. Funding

85. 2007/08: Funding R bnBudget ’07Budget ’08ExpectedDiff. Extraordinary1.21.81.1-0.7 TB’s5.75.85.6-0.2 Bonds-9.0-4.0-9.9-5.9 Foreign Loans-2.6-3.5-4.2-0.7 Use of balances-5.7-15.2-8.36.9 Total Funding-10.7-15.1-15.8-0.7

86. State’s Cash Coffer Source: SARB

87. Budget Sustainability Source: Fiscal Policy, 2007 MTBPS Main Budget and Structural Budget Balances, 2000/01 – 2010/11

88. Summing Up: Fiscal 2007/08

89. Summary 2007/08 R bnBudget ’07Budget ‘08ExpectedDifference Revenue544.6557.9557.3-0.6 Expenditure533.9542.1539.0-3.1 (Deficit)/Surplus10.715.818.32.5 % of GDP0.6%1.0%0.8%

90. Budget 2008 How Much can the Cash Cow be Drained..?

91. 2008 Budget Highlights: Finance:  2007/08 fiscal year surplus of 1% of GDP  2008/09 surplus budgeted for is 0.8% of GDP Individuals:  PIT brackets adjustment  Primary rebate up to R8, 280  Interest on dividends to R19k (R27 for 65+)  Capital gains tax exemption to R16k

92. 2008 Budget Highlights: Companies:  Corporate tax lowered to 28%  Turnover-based tax package for SMEs <R1m  Compulsory VAT registration from R1m  STC to be replaced by dividend tax in 2009 (10%)  Tax incentives for investments in SMEs by venture capital  R5bn subsidies to support Industrial Policy Other:  R60bn allocated for Eskom’s capital financing  Electricity levy introduced - 2c per kilowatt hour  Exchange control abolished on institutional investors  Companies, trusts, partnerships and banks allowed to participate in the rand futures market on the JSE without restriction

93. Changes to Taxes The Milk Machine…

94. New Personal Income Tax Table 2007/082008/09 Taxable Inc (R)Rates of TaxTaxable Inc (R)Rates of Tax 0 – 112 50018%0 – 122 00018% 112 501 – 180 000R20 250 + 25%122 000 – 195 000R21 960 + 25% 180 001 – 250 000R37 125 + 30%195 001 – 270 000R40 210 + 30% 250 001 – 350 000R58 125 + 35%270 001 – 380 000R62 710 + 35% 350 001 – 450 000R93 125 + 38%380 001 – 490 000R101 210 + 38% 450 001 –R131 125 + 40%490 001 -R143 010 + 40% Rebates Primary7 740Primary8280 Tax Threshold Below 6543 000Below 6546 000 Source: 2008 Budget

95. Effect of Adjustment Income2007/08 Tax2008/09 TaxDifference R100kR10 260R9 720R540 (5.3%) R150kR21 885R20 680R1 205 (5.5%) R200kR35 385R33 430R1 955 (5.5%) R300kR67 885R64 930R2 955 (4.4%) R400kR104 385R100 530R3 855 (3.7%) R500kR143 385R138 730R4 655 (3.2%) Source: 2008 Budget

96. Income Tax: Companies TypeTax RatePossible changes Companies29%Down 1% - 28% Small Business Corporations (SMEs) R0 – R43 000 (46 000)0%Bracket adjustment (threshold to R46k) R43 001 – R300 00010%Bracket adjustment (unchanged) R300 001 & above29%Large Bracket adjustment? (28%) Employment Companies34%Lower – (33%) STC to Dividend base10% (1 Oct 07)More clarity on dividend tax (unchanged @ 10%) Source: 2008 Budget and Efficient Research

97. State of the Nation Education: “Kha Ri Gude”  Mass literacy campaign  300 000 people, 4.7 million 2012 – R3bn Schools  1 000 new schools to be build – R100m  3 000 + new jobs created Job Creation: Military  Program for Military Skills - Up new enrollments from 4 000 to 10 000  R700m already committed EPWP  More than R1 bn for new programmes Land Reform  Funds allocated to Agricultural Credit Scheme (Mafisa)  Greater support for new farmers Social Grants  Equalising age for old age pension – men to 60 yrs, 500 000, R5.7bn (26% of pop.) In line with Apex priorities…

98. But What About ? R300bn Capital Expenditure (R60bn, R20bn 2008/09) Credit ratings Future Privatisation Electricity levy – 2c per kw hour

99. Other: Individuals  Individual offshore – R500k + R2m  Transfer duties - threshold higher (R500k) (R500k)  Estate duty – 20% flat rate on all property of residents and SA property of non-residents  Donations tax Of property, donated exempt R200k (R100k) (unchanged – R100k)  Further adjustments on deductions for medical aid contributions First dependant R550 (R530) (R570) Additional dependant R350 (R320) (R345)  Sin taxes to be upped (as usual) – Beer 5c, Cigarettes 66c  Fuel levy – up 5 cent – 6c (2 April 08)  RAF – up 5 cent (5c)  Electricity levy – 2c per kilowatt hour

100. Other: Businesses  STC replaced by dividend tax (‘2 nd Phase’) – rate of 10% in 2009  Pension funds will be exempt from dividend tax

101. VAT changes for SMEs SMME’s <R1mill: “Presumptive turnover tax” as alternative to income tax and VAT Farmers submitting tax returns every 6 months - raised to R1.5bn Businesses submitting tax returns every 4 months - raised to R1.5bn VAT registration threshold: R1mil (R300k)

102. Presumptive Turnover Tax (SMEs) TurnoverRate 0 – R100 0000% R100 001 – R300 0002% on each R1 above R100k R300 001 – R500 000R4 000 + 4% R500 001 – R750 000R12 000 + 5.5% R750 001 – R1mR25 750 + 7.5%

103. Additional Company Tax Proposals “Closely held passive companies” taxed at 40% (28%) - Definition to be clarified Retirement funds exempt from new dividend tax replacement for STC on companies

104. Environmental Structures  R2bn set aside for efficient use of electricity, generation from renewable sources, installation of electricity-saving devices and co-generation projects  Tax relief given to private conservation by private land users  Urban Development Zone incentive extended to 2014.

105. Exchange Control Scrapped on institutional investors System of prudential regulation (SARB) Foreign exposure limit (interim measures) Pension Funds & Long-term Insurer’s underwritten policies – 20% of retail assets Collective investment schemes, investment managers and investment business of long term insurers – 30% of retail assets Rand futures market on JSE – companies, trusts, partnerships and banks participate without restriction Further work will be done on lowering bank’s exchange control restrictions

106. Taxes: A Wish List Tax CategoryWish PIT (Mid/high income)Lower Company taxLower ✓ STCLower/Scrap VATHigher Transfer dutyAbolish Customs DutiesLower/Scrap Small comp. VAT returnsLower frequency/Higher threshold ✓ Flat tax rate22%

107. Expenditure The Milky Way…

108. Expenditure Trends  2009 – Election Year!  Social Spending Sssspree  More for Education and Health (R33.2bn)  Service delivery to get more and more (and do less and less) (R6.5bn)  Capital spending  World Cup (R2bn)  Housing (R6bn)  Let’s hope; safety and security - World Cup Higher revenue helps spending higher – danger!!

109. Changes to Social Grants Grant Type (R)20072008Expected Old Age Grant (age – 63 men, 61-2009/10, 60-2010/11)* 870940950 Disability Grant870940950 War Veterans Grant890960950 Foster Care Grant620650 Care Dependency Grant870940950 Child Support (age – 15)200 (14) 210 – 1 Apr 08; 220 – 1 Oct 08 220 (age?) Grant in Aid (full-time attendance) 200210220 Source: 2008 Budget and Efficient Research Forecast *Old Age Grant R4.7bn (500 000 x R940)

110. Social Security and Retirement Reform MORE ON… State Old Age Pension (SOAP) –introduced for all citizens upon reaching a certain age Government Sponsored Retirement Fund: –Mandatory National Retirement fund –Industries with own funds can opt out of the GSRF –Fund will be a Defined Benefit –Earning Ceiling for contributors: R75 000 p/a –Contribution rate: 10-12% of pre-tax earnings –Wage subsidy paid to employers for employees earning below the tax threshold.

111. Summary 2008/09 Budget ’08EfficientDifference Revenue625.4615.4-10.0 Expenditure611.1605.9-5.2 Deficit/Surplus14.39.5-4.0 % of GDP0.8%0.4%

112. The William Webb Ellis is still in SA (*Soon to be joined by FIFA World Cup trophy) Some Good News…

113. www.efgroup.co.za