2. South African State Finances Presented by: Dawie Roodt 15 July 2006

3. Dawie Roodt Chairman and Chief Economist Efficient Group 81 Dely Road Hazelwood 0081 Tel: (012) 460-9580 Cell: 082 456 0204 Email: dawie@efgroup.co.za

4. Some Fiscal Background…

5. Economic Overview 2006 EfficientBudget Prime (full year)12.0% M3 (end of year)22.3% PSCE (adj. end of year)19.1% CPIX (average)4.4%4.5% Current Account: GDP- 5.1%-4.3% R/$ (end of year)7.106.27 GDP (full year)4.1%4.9%

6. State Finances

9. Political Overview President Challenges: »Poverty »Underdevelopment »Marginalization – emphasis on authorities

10. Political Overview ASGISA  Sectors identified: - Business Process Outsourcing - Tourism - Chemicals - Bio-fuels - Metals and metallurgy - Wood, pulp and paper - Agriculture - Creative industries - Clothing and textiles  Particular attention : - Scarce skills - Supply side drivers - Authorities

11. 2005/06 in Review…

12. Contribution to Fiscus

13. Spending Priorities

14. Expansion vs. Contraction Deficit: –Changes in deficit – Contr. –Level – Contr. Debt –Changes in Debt – Contr. –Level – Contr. Mix of expenditure and revenue – Very Exp.

15. Effective Tax Rates

16. Minor Revenue Sources, R bn Tax on retirement2.4 STC13.9 Transfer Duties6.2 Other Property Taxes2.6 Other Taxes on Goods0.9 Other Taxes on Int. Transactions0.4 Stamp Duties1.0 Non-Tax Revenue8.6 Other (Nine small fry)7.5 Total43.5

17. Redistribution Rand In : Rand Out Ratio2005/06 32 22218.40 74 0003.54 115 0001.45 155 0000.73 195 0000.49 270 0000.29 1 000 0000.05

18. Fiscal Redistribution 2005/06

19. Spending Priorities 2006/07 Should be stopped!

20. Expenditure Items: The Good, the Bad, and the Dangerous GoodBadDangerous  World Cup – R3bn  Police – R5.4bn  Municipal infra. – R9.3bn  Municipal Grant –RSC – R24bn  National road/rail – R3.5bn  Gautrain –R7.1bn  Social sector employment program – R4bn  RAF – extra R2.7bn  Denel R2bn  Child support grants & Disability grants - Too many dependants

21. Capital Expenditure