Budget 2014: Budget in a nutshell

rp_2013_7thumbimg104_Jul_2013_195711729-ll-300x201.jpgCape Town - Finance Minister Pravin Gordhan has tabled his fifth and probably last National Budget in Parliament, strongly emphasising acceleration of economic growth to the National Development Plan’s goal of economic growth of between 5% and 6% as he kept spending under control and still surprisingly had room for some personal tax relief (especially for lower income earners).

It is  a conservative budget with no big surprise. It will probably please most people with the coming elections in May in mind. The highlights are:

Budget framework:

– Budget deficit (consolidated budget) of 4% of GDP expected for 2013/14 and 2014/15 (R153.1bn), narrowing to 2.8% in 2016/17 (medium term budget projections). The figures for the main budget (before extra-ordinary items) are higher.

- Debt stock as percentage of GDP will stabilise at 44.3% % of GDP in 2016/17 (estimate 39.7% in 2013/14). Debt service costs will rise by 13.5% in 2014/15 to R114.9bn and R139bn in 2016/17.

– Spending is kept under control expenditure ceilings will not be breached over the next three year period. Real growth in non-interest spending will average 1.9% over next three years.

– Total revenue wil increase from R1 010bn in 2013/14 to R1 099bn (29% of GDP) in 2014/15 and total expenditure from R1 159bn to R1 252bn (33% of GDP). The GDP in 2014/15 is estimated at R3 789bn.

– National and provincial government government spending on travel catering, consultants and other administrative payments declines as a share of spending.

– Expenditure ceilings commits government to spending limits of R1 030bn in 2014/15, R1 110bn in 2015/16 and R1 180bn in 2016/17.

– Employment and social security will rise the steepest over the three years – with 13.1% from R57.3bn in the coming financial year to R69.3bn in 2016/17. The biggest item on the budget, Education and related functions will rise 6.8%  over the three years to R293.3bn.

– Social protection wil rise by 7.7% over the three years to R168.8bn. The old age grant and disability grant will rise from R1 265 to R1350 (R1 285 tot R1370 for over 75’s), the foster care grant from R800 tot R830, the child support grant from R295 tot R315, the care dependent grant from R1265 to R1350 and the war veterans grant from R1 285 to R1 370.

Specific spending programs over the next three years:

– R410bn on social grants over next three years

– R15.2bn on the economic competitiveness and support package

– R8.5bn on Community Work Programme

– R98.7bn on settlement of land restitution claims

– R7bn for subsistence an smallholder farmers

– R78bn on university subsidies and R19.4bn for the National Student Financial Aid Scheme

– R34.3bn on school infrastructure

– R22.9bn to upgrade commuter rail services

– R143.8bn to support municipal infrastructure

– R42bn on the HIV and AIDS conditional grant

Tax proposals:

– Personal income tax relief of R9.3bn, most for lower income group

- Adjustments to tax tables relating to retirement lump-sum payments

- Measures to encourage small enterprise development

- Clarity on valuation of company cars for fringe-benefit tax purposes

- Reforms to tax treatment of the risk business of long term insurers

- Measures to address acid mine drainage

- Adjustment of the proposed carbon tax and its alignment with desired emission reduction     outcomes

- Excise duties on alcoholic beverages and cigarettes will increase by between 6.2% and 12%. There is no rise on traditional African Beer or beer powder.

- The general fuel levy  and the Road Accident Fund levy will increase by 12c per litre and 8c per litre respectively by 2 April 2014. This will push up the general fuel levy on petrol to R2.25 per litre and R2.10 per litre of diesel.

- Personal income tax will represent 33.8% of total tax, company tax 20%, fuel levies 4.8%, VAT 26.9%, customs and excise duties 8.2% and other 6.3%.

Macro-economic outlook:

- GDP growth is estimated on 1.8% in 2013 , 2.7% in 2014, 3.2% in 2015 and 3.5% in 2016.

- Export growth  is expected to accelerate rather sharply from 4.8% to 7% in 2016, while imports will stay  around 7% with a dip in 2014 and 2015 tot 5.3% and 6.1% respectively.

- Consumer Inflation will stay just under 6% with only 2014 at 6.2%

- Capital formation is also optimistically forecast to grow by from 3.2% of GDP in 2013 to 6% in 2016.

- Household consumption is set to grow by 2.7% in 2013 to 3.4% in 2016.

- The balance of payments will stay in deficit (6.1% of GDP in 2013, 5.5% in 2016).