A reform of South Africa’s tax system is high on the agenda. This comes in the wake of Finance Minister Nhlanhla Nene’s recent Medium Term Budget Policy statement that changes are set to be made to tax policy in the 2015 Budget. The government is proposing a fiscal package that reduces the expenditure ceiling and raises tax revenues by at least R44 billion over the next three years.
Cape Town – Eugene du Plessis, head of tax at Grant Thornton in Johannesburg said overall he is impressed with the way Finance Minister Nhlanhla Nene handled his first budget presentation. “He was well spoken, his points were clear and the delivery was good.” Du Plessis applauded Nene for his attention to focus on cost cutting within government and hopes to see some notable improvements in the future as hard evidence to back up his statement.
By Craig Dodds (IOL) Cape Town – Before Wednesday, Finance Minister Nhlanhla Nene was something of an unknown quantity. He may have been a familiar face at the Treasury, having served as deputy minister under Trevor Manuel (briefly) and Pravin Gordhan and had certainly served his time as an understudy. But deputy ministers, if they know what’s good for them, rarely say anything their principal wouldn’t have said, making it hard to gauge their own thinking.
Parliament – Economists saluted Finance Minister Nhlanhla Nene for containing state spending and debt in his first medium-term budget on Wednesday, but opposition parties faulted him for not doing more to stem waste. Wits economist Kenneth Creamer said that with growth lagging at 1.4 percent of GDP, fiscal stimulus risked becoming counter-productive by pushing up national debt to unacceptable levels. “Nene appears to have a clear grasp of this problem, and he has signalled a clear intention to change the fiscal policy stance from stimulus to consolidation.
Honourable Speaker Mister President Deputy President Cabinet Colleagues and Deputy Ministers Governor and Governor-Designate of the Reserve Bank MECs of Finance
The government has kept its word on protecting the poor and vulnerable amid a tight fiscal space that has forced Nhlanhla Nene to cut expenditure in certain areas of the government. Nene said that, despite the need to reduce government spending, he was mindful of the importance of keeping the social services net open to accommodate the poor. In the Medium-Term Budget Policy Statement, Nene said that the government would allocate just under R500 billion in the social protection cluster during the medium term. “Social grants, which are expected to reach 17.3 million people by 2017/18, will account for nearly 85 percent of this spending,” said the statement.
Author: Wiseman Khuzwayo (IOL) Finance Minister Nhlanhla Nene yesterday announced measures to try to rein in spending, stabilise government revenue and narrow the budget deficit. Presenting his first Medium-Term Budget Policy Statement since his appointment in May, Nene said South Africa faced the challenge of having to do more with less, adding that this was a difficult time as growth in many countries had slowed and the economic outlook was uncertain. By announcing a bid to restrain spending, Nene aimed to send a strong message to the capital markets and the credit ratings agencies which have put South Africa under a microscope amid deterioration in the country’s fiscal position as tax revenue slows, debt levels rise and as growth continues to be elusive.
Author: Peter Attard Montalto, Emerging Markets economist, Nomura “South Africa has gone for austerity (-ish) and tax hikes to achieve the same projected consolidation path after a sharp downward revision in the growth outlook. This conservative fiscal stance can only be achieved politically given the argument that the Treasury has won around increasing space for grants to the poor and more left-wing microeconomic policies at the expense of tighter fiscal policy overall. “However, the Medium Term Budget Policy Statement (MTBPS) puts the likelihood of short-term downgrades from the agencies in more doubt, though in the medium run Moody’s (and others) will lower the rating. Eskom support lacks much of the required additional details, though the fabled debt-equity conversion has been raised along with equity asset sales, as expected.
By Wiseman Khuzwayo and Bloomberg Economists were bemused by an assertion by Finance Minister Nhlanhla Nene that South Africa needed to broaden its tax base in order to curb the budget deficit, as reported by Bloomberg yesterday. They said the tax base had shrunk due to weak economic growth. Nene is to deliver his first medium-term budget policy statement as finance minister next Wednesday. In it, he is expected to revise the fiscal deficit, inflation, gross domestic product (GDP) and net debt projections. The fiscal deficit projection given for 2014/15 is now expected to be closer to 5 percent of GDP.