Transcript Fiscal Framework - Amazon Web Services

2004 Medium Term Budget Policy
Statement Hearing
Portfolio Committee: Finance
02/11/2004
Cllr M Mvoko
Format of Presentation
This presentation is structured as follows:
Introduction
Macroeconomic developments
Fiscal framework & Tax considerations
Medium term expenditure framework
Financing Provincial Government Budgets
Financing Municipal Budgets
Conclusion
Introduction
• 2004 MTBPS provides a useful platform for a
stabilization of fiscal policy in the light of an
assessment of efficacy of existing policy.
• Provides an overview on how the economy will
perform & expectation of financial performance in
accelerating service delivery.
• Presents opportune to reflect government strategies
to assist the poor & provide security for households
• But most important, it presents a fairly optimistic
picture of the economy for the next three years.
Macroeconomic
Developments
Evaluating economic performance
• The MTBPS presented favourable inflation
situation targeted between 3-6% which implies
Conditions conducive to poverty reduction via
capital investment & services and income
providing programmes
Increased consumer demand due to reasonable
or low increases in administered prices of goods
& services
Macroeconomic
Developments(cont)
• The higher economic growth rates projected at
2.9% in 2004, 3.9% in 2005, 3.7% in 2006 &
4.2% in 2007 means
Increased job creation in the private sector
Consolidate current strength of domestic
spending
Future budgets that can give undivided priority to
low-and middle income households, enhancing
their living standards
Macroeconomic
Developments(cont)
Policy priorities
• The policy aimed at reducing the regulatory
burden on businesses investing in skills and
education, land reform and agricultural
development, improved municipal development
planning and administration and a
comprehensive response to HIV and Aids is a
positive innovation for South African
communities.
Macroeconomic
Developments(cont)
• It is positive that the budget policy aims to
provide considerable direct income support to
poor people and contribution to investment in
housing, local services, human development and
creating environment conducive to development.
• Creating global expansion and international
competitiveness of South African companies via
abolishment of exchange control limits on new
outward foreign direct investments.
Macroeconomic
Developments(cont)
• There is emphasis on softening pressure
exporters and import-competing firms are
experiencing and support smaller business and
the poor against economic risks via government’s
exchange rate policy that aims to reduce the rand
volatility.
• SALGA also welcomes the policy that
encourages domestic savings as this will reduce
the economy’s exposure to foreign capital flows
as well as providing security for vulnerable
household.
Macroeconomic
Developments(cont)
• Furthermore, SALGA view it as positive that
there is emphasis on implementation of
appropriate microeconomic reforms, including
streamlining of regulatory arrangements and
effective sectoral development strategies.
• However there are still concerns that despite
measures to stimulate faster economic growth
and more labour absorption in the first economy
demand for unskilled labour may have limited
positive spin off.
Fiscal Frameworks & Tax
Considerations
Fiscal Framework
• To support the positive expansionary shift in
fiscal policy MTBPS presented the budget deficit
that will increase to 3.5% of GDP in 2005/06 due
to planned increase in total spending on:
Providing better salary for educators and police
personnel
Supporting social assistance to the poor
Investment in economic infrastructure, housing
& municipal services
Fiscal Frameworks & Tax
Considerations(cont.)
• Increase in transfers for social infrastructure over
the next three years emphasises the government’s
commitment to finding measures that will assist
the unemployed with employment opportunities
through labour intensive construction methods via
the Expanded Public Works Programme.
• There has been an emphasis on the need for
implementation of appropriate microeconomic
Fiscal Frameworks & Tax
Considerations(cont.)
Tax considerations
• Although tax relief will not be a prominent
feature of the 2005 budget, this MTBPS still
advances positive tax policy issues:
Simplifying income tax system and reducing
compliance burden on small businesses
Tax relief for investments from countries within
the common monetary area
Fiscal Frameworks & Tax
Considerations(cont.)
Encouragement of broad-based employee equity
participation
Consideration of reforms of the treatment of
medical scheme membership and health
insurance
Clarification of tax treatment of government
grants
Amendments to facilitate hosting the 2010
Soccer World Cup
Medium Term Expenditure
Frameworks
Financing Provincial
Government Budget
• Provincial governments are the prime agents of
income and capability poverty reduction and as
such share to this sphere will increase by 4% and
remains stable at about 58% as we move to the year
of the next MTEF.
• SALGA appreciates that the primary cost-driver of
provincial spending are centered around addressing
poverty & improving income level of low and
medium earners:
Social assistance funds soon to be transferred to
national agency
Financing Provincial
Government Budget (Cont.)
Increased spending on education including
improvement of educators remuneration
Raise on health spending include improvement of
professional staff remuneration and comprehensive
HIV and Aids prevention and treatment
programmes
Expanded Public Works Programme &
Comprehensive Agriculture Support Programme
Financing Provincial
Government Budget (Cont.)
• The review of provincial equitable share formula to
update weights of components and other economic
development and poverty related policy taking into
account FFC recommendations is another positive
aspect when going to 2005 MTEF.
Financing Municipal
Budgets
• Although additional R2.8 billion will be allocated
to local government it should be recognized that
municipal budgets still constitute of about 90% of
own revenue and as such many municipalities are
still finding it difficult to meet their
developmental mandate.
• SALGA supports the review of local government
equitable share allocation formula in order to
develop simple formula that balances demand for
basic services and into account revenue raising
capacity.
Financing Municipal
Budgets (Cont.)
• Completion of the process of reviewing the local
government fiscal framework which focus on the
reform of regional services council levies, the
introduction of new property rating and the
assessment of impact of the restructuring of the
electricity distribution industry on municipal
finances is crucial.
Conclusion
• SALGA supports MTBPS, but would like to put
forward the following issues relating to budget:
Financial sustainability of municipalities is
imperative & is the responsibility of all spheres of
government.
Some municipalities have not yet fully established
themselves as constitutional governments by
complying with constitutional laws.
Care must be taken to achieve economies without
compromising service delivery & national policy
Conclusion (Cont.)
• Furthermore SALGA anticipate that MTBPS and
the next three years to reflect with more emphasis
on further measures to create more jobs for
unskilled labour.