PARLIAMENT, February 22 (ANA) – Finance Minister Pravin Gordhan kept projections for the country’s growth rate for 2017 at the 1.3 percent he forecast in October last year, but warned this would not make a meaningful impact on unemployment, poverty and inequality.
He attributed the higher growth rate, up from 0.5 percent in 2016, to commodity prices recovering, the recovery of the exchange rate following “rapid depreciation” last year, drought conditions subsiding, a decrease in production stoppages due to industrial action and an improvement in electricity supply. The growth target for 2018 was 2 percent, increasing to just 2.2 percent in 2019.
The minister said the message from the budget was that the country was “again at a crossroads”.
“Tough choices have to be made to achieve the development outcomes we seek,” said Gordhan.
The outcomes the country sought included overcoming transformation challenges.
“We have a plan for a more inclusive, shared economy. Its implementation requires greater urgency and effective collaboration among all social stakeholders,” said Gordhan.
“Change is difficult, and often contested. In these tough times we draw strength from the resilience and the diverse capabilities of our people, our business sector, our unions and our social formations.”
The budget deficit was forecast to be around 3.1 percent in 2017/18, “in line with our fiscal consolidation commitment”, said Gordhan.
While government spending was expected to reach R1.56 trillion in 2017/18, revenue would cover only R1.41 trillion of this, meaning government would borrow the remaining R149 billion.
The revenue shortfall of R22.8 billion forecast in October last year, was revised upward to R30.4 billion, “the largest tax revenue shortfall relative to budgeted estimates” since the global recession hit the local economy in 2009.
Gordhan said government knew exactly what needed to be done to get itself out of the “present low growth trap”, repeating the idiom: “If lions work as a team they will bring down even a buffalo.”
The minister proposed specific interventions to boost investment. They include finalising laws related to mining development and land redistribution, implementing the switchover from analogue to digital television “which will release spectrum for broadband services”, continuing on the path towards renewable energy options, production-friendly industrial relations, strengthening regional trade links and safeguarding the country’s investment-grade credit rating.
Funding to support economic growth would be allocated in the 2017 budget, to include a R3.9 billion for small, medium and micro enterprises and co-operatives, R4.2 billion for industrial infrastructure in the special economic zones and industrial parks, R1.9 billion for broadband implementation, R3.9 billion for the Council for Scientific and Industrial Research, an extra R494 million for boosting the tourism sector, an additional R266 million to the aquaculture sector, and spending on agriculture, rural development and land reform totalling almost R30 billion.
Gordhan said more radical transformation measures were needed to sustain growth.
“The litmus test of our programmes must be what they do to create jobs, eliminate poverty and narrow the inequality gap,” he said.
“Transformation must be mass-based, benefiting the most disadvantaged South Africans through the creation of new assets, capabilities and opportunities to build livelihoods.”
Gordhan said government needed to confront cartel behaviour to ensure new entrants had access to markets.
Tax proposals to raise an additional R28 billion are proposed in the 2017 budget. Those earning above R1.5 million would see a new top personal income tax rate of 45 percent, with government hoping to raise around R16 billion here.
The dividend withholding tax rate would be increased from 15 percent to 20 percent, while only limited relief would be provided for bracket creep.
The general fuel levy would rise by 30 cents a litre and the Road Accident Fund levy by nine cents a litre, both coming into effect on April 1, as well as increases in the prices of alcohol and cigarettes.
– African News Agency (ANA)
