2016 SA Budget Speech Highlights

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Highlights of the South Africa's National Budget Speech 2016-17 delivered by Finance Minister Pravin Gordhan to Parliament on Wednesday, Cape Town. Highlights of the South Africa's National Budget Speech 2016-17 delivered by Finance Minister Pravin Gordhan to Parliament on Wednesday, Cape Town.

Finance Minister Pravin Gordhan, who was recently re-appointed by President Jacob Zuma, on Wednesday delivered the 2016 Budget Speech in Parliament Cape Town.

Minister Gordhan stressed the need to reaffirm government’s commitment to close the gap between spending and revenue, implementing a plan for stronger economic growth and cooperation between government and the business sector. That should keep the rating agencies that want to downgrade SA’s debt position to junk status temporarily at bay.

Personal income tax rates were not increased as was expected and as Nhlanhla Nene did last year, although about R18 billion more will be collected in 2016/17. This will mostly be through yet another big increase of 30 cents per litre in the fuel levy as well as increases in capital gains tax, property transfer tax and an increase of about 7% in the usual sin taxes (alcohol and tobacco).

A new tyre levy and a tax on sugar intake (only next year on sweetened beverages) will also be introduced.

The expenditure ceiling was also cut by R25 billion over the next three years to bring the budget deficit down to 2.4% of gross domestic product by 2018/19, and to stabilise debt as percentage of GDP around 45% of GDP.

The public sector wage bill will be cut, but provision for contingencies like drought relief and additional spending has been made and increases in expenditure on for example on higher education and small business development continue. Gordhan stressed that the government would not burden South Africans with “austerity measures”, and that social grants will also be raised.

The highlights of the 2016 budget are:

Budget framework

  • The budget deficit will fall from 3.2% in 2016/17 to 2.4% in 2018/19 (3.9% in 2015/16).
  • Debt stock as a percentage of GDP is expected to stabilise at 46.2% in 2017/18 (43.7% in 2017/18).
  • Government will lower the expenditure ceiling by R10 billion in 2017/18 and R15 billion in 2018/19 by reducing public sector compensation budgets.
  • An additional R18.1 billion of tax revenue will be raised in 2016/17, with R15 billion more in each of the subsequent two years.
  • Government has responded to new spending needs without compromising expenditure limits. An amount of R31.8 billion has been reprioritised over the medium-term expenditure framework period to support higher education, the New Development Bank and other priorities.

Spending programmes over the next three years

  • R457.5 billion on social grants.
  • R93.1 billion on transfers to universities, while the National Student Financial Aid Scheme receives R41.2 billion.
  • R707.4 billion on basic education, including R45.9 billion for subsidies to schools, R38.3 billion for infrastructure, and R14.9 billion for learner and teacher support materials.
  • R108.3 billion for public housing.
  • R102 billion on water resources and bulk infrastructure.
  • R171.3 billion on transfers of the local government equitable share to support the expansion of access of poor households to free basic services.
  • R30.3 billion to strengthen and improve the national non-toll road network.
  • R13.5 billion to Metrorail and Shosholoza Meyl to subsidise passenger trips and long-distance passengers.
  • R10.2 billion for manufacturing development incentives.
  • R4.5 billion for national health insurance pilot districts.

Tax proposals

  • An amount of R9.5 billion will be raised through increases in excise duties, the general fuel levy and environmental taxes.
  • Limited fiscal drag relief of R5.5 billion will be implemented for individuals, focusing on lower- and middle-income earners.
  • Adjustments to capital gains tax and transfer duty will raise R2 billion. The effective rate on capital gains tax for individuals will rise from 13.7% to 16.4%, and for companies from 18.6% to 22.4%. Transfer duty on property sales above R10 million will be raised from 11% tot 13% from March 1 2016 .
  • Government proposes to introduce a sugar tax on 1 April 2017 to help reduce excessive sugar intake.
  • A tyre levy will be implemented, effective October 1 2016.
  • The general fuel levy will be raised by 30c/litre to R2.85/l for petrol and R2.70/l for diesel, effective April 6 2016. The Road Accident Fund levy will stay the same on 154c/l as it will be replaced by the Road Accident Benefit Scheme.
  • Tax credits on medical scheme contributions are increased to maintain the current level of relief in real terms.
  • The plastic bag levy is increased from 6c to 8c per bag.
  • Personal income tax will bring in 37.5% of government revenue, company tax 16.9%, VAT 25.6% and fuel levies 5.5%.

Sin taxes hikes

  • Beer 11c/340ml;
  • Fortified wine 27c/750ml;
  • Ciders and alcoholic fruit beverages 11c/340ml;
  • Unfortified wine 18c/750ml; sparkling wine 59c/750ml;
  • Spirits 394c/750ml;
  • Cigarettes 82c/packet of 20;
  • Cigarette tobacco 94c/50g;
  • Pipe tobacco 27c/25g;
  • Cigars 432c/23g.

Macro-economic outlook

  • GDP growth is estimated 1.3% in 2015, 0.9%% in 2016, 1.7% in 2017 and 2.4% in 2018. This is considerably lower than last year’s estimates.
  • Export growth  is expected to grow by 9.5% in 2015, 3.0% in 2016 and 4.6% in 2017 while imports will grow an estimated 5.3% in 2015, 3.7% in 2017 and 4.5% in 2017.
  • Consumer inflation will fall to 4.6% in 2015, accelerate to 6.8% in 2016 and is then forecast to consolidate somewhat at 6.3% in 2017 and 5.9% in 2018.
  • Capital formation is forecast to grow by only 1.1% of GDP in 2015, 0.3% in 2016, 1.4% in 2017 and 2.7% in 2018.
  • Household comsumption is set to grow by 1.4% in 2015, 0.7% in 2016, 1.6% in 2017 and 2.2% in 2018.
  • The balance of payments will stay in deficit (-4.1% of GDP in 2015, -4.0% in 2016, -3.9% in 2017 and 2018).

Social Grant increases

  • State old age grant from R1,415 to R1,505 per month.
  • State old age grant for over 75s from R1,435 to R1,525.
  • War veterans grant from R1,435 to R 1,525.
  • Disability grant from R1,415 to R 1,505.
  • Foster care grant from R860 to R890.
  • Care dependency grant from R1,415 to R1,505.
  • Child support grant from R330 to R350.

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Pravin Gordhan  |  South Africa National Budget  |  South Africa National Budget 2016
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