Transcript Overview of 2003 Budget

Budget 2003
Development as freedom
An overview...
National Treasury
1
•
Overview of 2003 Budget
Economic and fiscal outlook:
–
–
–
–
–
SA economy resilient in face of global slowdown
Inflation coming down, target range by 2004
Expansionary fiscal stance continues
Personal income tax relief
Budge deficit of 2,4% of GDP
• This budget focuses on:
–
–
–
–
–
Fighting poverty and vulnerability
Continued focus on infrastructure
Broadening of social security net
Strengthening health and education
Expansion of municipal services
• 4,5% a year real non-interest expenditure growth
National Treasury
2
over MTEF
Macroeconomic outlook
• GDP growth in 2002 of 3% rising to 3,3% in
2003, and 4% by 2005
• Global economic picture uncertain
– War in Iraq and high oil prices
– Slowdown in OECD growth
• Domestic demand and investment spending
strong
• Declining household debt
• Formal sector employment turning around
• Healthy current account balance
• Declining inflation in 2003 and 2004
National Treasury
3
GDP growth and CPIX
10
CPIX inflation
per cent
8
6
2002 estimates
2003 estimates
4
GDP growth
2
0
1999
National Treasury
2000
2001
2002
2003
2004
2005
4
Investment
percent change y-o-y
16
Gross fixed capital formation
8
0
-8
-16
National Treasury
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
Mar-93
Mar-92
Mar-91
Mar-90
-24
5
National Treasury
Mar-02
Jun-01
Sep-00
Dec-99
Mar-99
Jun-98
Sep-97
Dec-96
Mar-96
Jun-95
Sep-94
Dec-93
Mar-93
Jun-92
Sep-91
Dec-90
Mar-90
Household debt to disposable
income
Per cent
62
60
58
56
54
52
50
6
Inflation coming down
• CPIX averaged 10% in 2002,
– down from its peak in November
• Downward pressure on food prices
– White maize futures down from over
R2 100 to R940 this week
• Unit labour cost growth still moderate
• CPIX set to fall into target range by 2004
National Treasury
7
Food CPIX
National Treasury
8
Balance of payments
• Small current account surplus projected for
2002
• Shift back to moderate deficit over MTEF
period, rising to about 1,6% by 2005
• Positive capital inflows in 2002 of R21,4 bn
• Trade performance driving healthy balance of
payments
National Treasury
9
Financial and current account
per cent of GDP
6
Current acco unt
Financial acco unt
4
2
0
-2
-4
National Treasury
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
-6
10
Positive data on employment
• Labour Force Survey indicates
turnaround in formal employment
• Growth evident in mining, services
• Unemployment is still our biggest
challenge
• Initiatives aimed at raising employment
– Community-based labour works programmes
– Learnerships and skills development
– SMME development
National Treasury
11
Employment … turning
12
per cent change
Remuneration per worker
10
Productivity
8
6
4
2
0
-2
-4
Employment
National Treasury
12
Jun-02
Dec-01
Jun-01
Dec-00
Jun-00
Dec-99
Jun-99
Dec-98
Jun-98
Dec-97
Jun-97
Dec-96
Jun-96
Dec-95
Jun-95
Dec-94
Jun-94
-6
-4
National Treasury
Transport and
communications
Construction
Financial
Electricity
Trade, catering,
accommodation
Community and
personal service
Manufacturing
Mining
Total
per cent
Employment … turning
5
4
3
2
1
0
-1
-2
-3
13
Macroeconomic forecasts
2002
2003
Estimate
2004
Forecast
2005
Real growth
Household consumption
3,1%
2,9%
3,3%
3,7%
Capital formation
6,3%
5,8%
6,4%
6,9%
Exports
-2,0%
3,0%
6,3%
6,7%
3,0%
10,0%
3,3%
7,7%
3,7%
4,8%
4,0%
5,2%
0,1%
-0,5%
-1,1%
-1,6%
Gross domestic product
Consumer price inflation (CPIX)
Balance of Payments current
account (% of GDP)
National Treasury
14
Fiscal policy
• Deficit widened to 2,4% next year
• Real growth in non-interest spending of
4,5% a year over MTEF period
• Debt service costs decline from 4,2% in
2002/03 to 3,8% by 2005/06
• Debt projected to drop to 36,8% by 2005/06
• Buoyant tax revenue provides for Personal
Income Tax relief of R13,3 billion
• Capital spending by general government
strongly up
National Treasury
15
Key indicators of fiscal policy
Deficit (right axis)
Total expenditure (left axis)
Non-interest expenditure (left axis)
Total revenue (left axis)
14%
30%
12%
25%
10%
20%
8%
15%
6%
10%
4%
5%
2%
0%
0%
1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03
National Treasury
16
per cent GDP
per cent GDP
35%
National budget framework
R billion
National Revenue
Revenue
Expenditure
Main budget deficit
% of GDP
Total expenditure
2002/03
2003/04
2004/05
2005/06
275.7
291.8
16.1
1.4%
291.8
304.5
334.0
29.5
2.4%
334.0
331.0
363.3
32.4
2.4%
363.3
361.2
395.6
34.4
2.3%
395.6
47.3
51.0
53.1
55.1
–
3.0
4.0
8.0
Total allocations
244.6
280.0
306.3
332.5
% increase
13.6%
14.5%
9.4%
8.6%
Less:
Debt service costs
Contingency reserve
National Treasury
17
Government debt 1980–2006
600
60
Foreign debt
Domestic debt
Total gross loan debt as % of GDP (right axis)
50
400
40
300
30
200
20
100
10
0
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
National Treasury
18
percentage
R billion
500
Borrowing Requirement 2003/04
Borrowing requirement
R million
Budget deficit
29 506
Extraordinary receipts
-6 341
Extraordinary payments
Net borrowing requirement
7 000
30 165
Financing
Net domestic short term loans
6 000
Net domestic long term loans
9 297
Net foreign loans
Change in cash and other balances
Total financing
National Treasury
11 768
3 100
30 165
19
Summary of tax proposals
• Personal income tax relief of R13,3 billion
– Threshold rises to R30 000
•
•
•
•
•
•
Interest exemption raised to R10 000
Retirement Fund Tax reduced from 25% to 18%
Tax allowances for investment in inner city areas
Several business stimulus measures
Transfer duties reduced further
Excise duties on vehicles reduced and eliminated
on computers
• Inflation-related adjustment to excises on alcohol
and tobacco products
National Treasury
20
Personal Income Tax Relief
• Below age 65: threshold from R27 000 to
R30 000
• Above 65: Threshold raised from R42 640 to
R47 222
• Maintain progressivity & relief across entire
income spectrum
• Distribution of tax relief
– 56% to income groups earning less than R150 000
– 23% to those earning between R150k and R250k
– 21% goes to those earning over R250k
National Treasury
21
Taxation of retirement savings
• Currently under review - reform scheduled for
2004
• Interim measure - reduction in rate of
Retirement Fund Tax from 25% to 18%
• Estimated cost of R1,85 billion
National Treasury
22
Tax-driven support for growth
 Accelerated depreciation allowances for Urban
Development Zones
 Accelerated depreciation regime for
manufacturing assets becomes permanent
 Tax relief for reinvestment of business assets
 Accelerated write-off for research & development
 Double deduction for first R20 000 of start-up
expenses
 Turnover limit for SMMEs qualifying for 15% rate
increased to R5 million
National Treasury
23
Tax treatment arising from amnesty
• An exchange control amnesty is provided
for, aiming to allow people to repatriate
money illegitimately taken out of the
country and to expand the tax base
• In return for amnesty for violations
occurring before 28 Feb 2002, a one time
5% charge on asset repatriated & at 10%
charge for assets held offshore
National Treasury
24
Indirect Taxes
• Excises duties:
– Alcoholic beverages: 10 – 11%
– Tobacco taxes raised by an average 11%
• Air passenger departure tax revised upwards
• General fuel levy up by average of 4,3 cents
for petrol and 4 cents for diesel. RAF levy up
by 3 cents a litre
• Inflation adjustment of ad valorem excise duty
formula for motor vehicles reduces excise
charge & car prices costing R243 million
• Ad valorem excise duty on computers repealed
at cost of R572 million
National Treasury
25
Medium term expenditure framework
Budget gives priority to:
– Reducing poverty and vulnerability
– Extending the social security net
– Reinforcing the fight against HIV/Aids
– Providing free basic services
– Increasing infrastructure spending
– Accelerating land restitution
– Higher education and skills development
– Strengthening the fight against crime
– NEPAD and peace support operations
National Treasury
26
Division of revenue
• Total additions to baseline of R105,4 billion
• 2003 Budget shifts resources towards
provinces and local governments
• Adjustments include provision for higher
inflation
• 6,1% annual average real growth in transfers
to provinces
• 12,2% growth in local government transfers
National Treasury
27
Division of additional amounts
Additional allocations in the 2003 MTEF
R billion
2002/03 2003/04
2004/05
2005/06
Total
Inflation related adjustm ents
National departments
1.1
2.3
2.8
3.1
8.2
Provinces
2.2
5.5
6.5
7.0
19.1
Equitable share
2.0
5.2
6.1
6.6
18.0
Conditional grants
0.2
0.3
0.4
0.4
1.1
Local government
0.1
0.2
0.2
0.2
0.6
Subtotal
3.4
8.0
9.5
10.3
27.8
–
–
–
–
–
National departments
2.3
4.9
6.8
8.9
20.6
Provinces
2.3
10.6
16.6
23.1
50.3
Equitable share
2.0
8.7
12.1
15.6
36.4
Conditional grants
0.3
1.9
4.5
7.4
13.9
Local government
0.1
1.6
2.2
2.9
6.7
Subtotal
4.8
17.1
25.6
34.9
77.6
–
–
–
–
–
National departments
3.4
7.2
9.6
11.9
28.8
Provinces
4.5
16.1
23.1
30.1
69.3
0.2
1.8
2.4
3.1
8.2
25.1
35.1
45.1
Policy adjustm ents
Total additional allocations
Local government
National Treasury
Total
28
7.3
105.4
Main policy additions
R billion
Extension of the CSG and school nutrition programme
2003/04
2004/05
2005/06
1.3
3.7
6.8
11.8
9.0
12.7
16.3
38.0
1.6
2.2
2.7
6.5
0.6
0.7
1.4
2.7
Higher education and skills development
0.8
1.1
1.4
3.4
Land restitution and land reform
0.6
0.6
0.7
1.9
Administrative systems and services to citizens
0.3
1.0
0.9
2.2
Research and technology development
0.2
0.3
0.5
1.0
Support for NEPAD and international commitments
0.3
0.4
0.5
1.3
Other adjustments
2.4
2.7
3.6
8.7
17.1
25.6
34.9
Enhancement of provincial education, health, welfare and
other functions
Basic household services, municipal infrastructure and
community employment
Fighting crime and streamlining of justice process
National
Treasury
Total
policy
adjustments
Total
29
77.6
Recent Budget Reforms
Measurable objectives for each programme
– section 27.4 of PFMA
– quantifiable results within MTEF period
– Shifts focus to outputs and their impact
• ENE introduces reporting on recent outputs
• New expenditure table on infrastructure
reporting
National Treasury
30
Addressing Poverty and
vulnerability
•
Improving social services
– Child Support Grant extended up to a child’s 14th birthday
– Improving quality of provincial health and education services
– Reinforcement of enhanced response to HIV/Aids
•
Infrastructure investment3
– Extension of free basic services and municipal infrastructure
– Emphasis on broadening access to water and electric3ity
services
•
Investment in skills
–
–
–
–
National Treasury
Increased learnerships in private and public sector
Renewal of further education system
Replenishment of National Student Financial Aid Scheme
Employment creation through community development
projects
31
Reinforcing security and
crime prevention
•
Increased efficiencies in courts administration
– Budget supports improved case management
– Automated Fingerprint Identification System
introduced
•
Strengthening Sector Policing strategy
– Five thousand more police in outer year
– Modernisation of vehicle fleet
•
Correctional Services
– Focus on rehabilitation
– Four new prisons - building to commence in 2003
•
Modernisation of intelligence services
– New Intelligence Academy
– Modernisation of communications technology
National Treasury
32
Promoting NEPAD and
multilateral cooperation
• Support for NEPAD and African Union
– Establishment of NEPAD secretariat
– Regional development through African Renaissance
Fund
• Peace support operations in Africa
– Continued support for operations in DRC and Burundi
• Foreign missions in Africa to be increased
– Phased establishment of 16 new missions
• Promotion of regional integration through SACU
agreement
National Treasury
33
Spending by function
2002/03
2003/04
Revised
estim ate
R billion
Budget
estim ate
R billion
Average
grow th
2002/03–
2005/06
%
Education
62.8
69.1
8.0
Health
34.9
39.1
9.3
Welfare and social security
42.0
48.7
14.5
Housing & other social services
13.7
16.7
13.1
Police, prisons & courts
32.6
36.0
9.3
Defence & intelligence
20.8
22.5
6.7
Economic services
General administration
36.2
20.1
43.6
21.7
11.1
263.0
297.4
10.2
47.3
51.0
5.2
–
3.0
–
310.2
348.3
10.2
Non-interest allocations
Interest on debt
Unallocated
Total expenditure
National Treasury
10.4
34
Provincial priorities for 2003
• Social Development
– Further expansion of the social security net (CSG)
– Real increases in values of social security grants
• Education
– Increasing spending on non-personnel non-capital,
especially LSM, ECD, classroom backlogs
• Health
–
–
–
–
–
Attracting personnel with scarce skills
Further bolstering HIV/Aids programmes
Refurbishing health infrastructure
Increasing spending on INP
Stepping up spending on medicines and other
critical supplies taking
• Step-up support for other functions, esp.roads
National Treasury
35
Transfers to provinces
• National transfer to provinces:
– Equitable share rises from R123 bn in 2002/03,
to R142 bn in 2003/04 and to R168 bn in
2005/06
– Conditional grants which are R13 bn in 2002/03,
R17 bn in 2003/04 and R24 bn in 2005/06
• Increase in conditional grants largely due to
introduction of child support extension grant which
rises from R1,1bn in 2003/04 to R6,4bn in
2005/06
– Transfers to provinces grow by 6,1% a year in
real terms
National Treasury
36
Summary of transfers &
Provincial revenue
R million
Transfer from national
Equitable share
Conditional grants
Own revenue
Total
Percentage growth
Transfers from national
Equitable share
Conditional grants
Own revenue
Total
National Treasury
132 420
119 452
12 967
4 103
136 523
estimate
136 919
123 457
13 462
5 458
142 377
158 995
142 386
16 609
5 683
164 678
175 468
155 313
20 155
5 971
181 438
191 590
167 556
24 033
6 278
197 868
–
–
–
–
–
–
–
–
–
–
16.1%
15.3%
23.4%
4.1%
15.7%
10.4%
9.1%
21.3%
5.1%
10.2%
9.2%
7.9%
19.2%
5.1%
9.1%
37
Local government priorities
• Extending provision of free basic services
– R4,1bn extra over the MTEF (incl. R1,4bn for
electricity)
• Investing in municipal infrastructure
– R1,8 billion more, including R1bn for labourbased programmes
• infrastructure grants to be consolidated in future
• Reinforcing financial management reforms
– R300m set aside for this purpose
National Treasury
38
Transfers to local government
R million
2002/03
2003/04
2004/05
2005/06
Equitable share & related
4,887
7,180
7,936
8,633
Infrastructure grants
3,416
4,144
4,588
4,996
Capacity building & restructuring
Total
498
8,801
677
12,001
724
13,249
995
14,624
National Treasury
39