It’s thumbs up for Pravin

"Our people need hope. Our people want government to lead. We will lead. Our people want action on jobs, growth and poverty. We cannot do the same old things and expect different results" - Finance Minister, Pravin Gordhan

Economists have applauded Finance Minister - Pravin Gordhan’s surprise-free maiden budget speech, describing it as a ‘market friendly’ budget. Tabling a R907 billion budget on Wednesday, Gordhan forecast economic growth of 2.3% in 2010, growing to 3.6 % by 2012 and a budget deficit in 2010/11 of 6.2 %, down from the projected 7.3 % for 2009/10. In his first Budget since assuming office, he quelled many pre-budget fears and not bending to the demands of Cosatu and the left wing of the tripartite alliance. Gordhan told MPs there would be no changes to the CPI inflation target of 3% - 6%, no interference with the SA Reserve Bank’s independence and he would not actively manage the value of the rand against foreign currencies. He said a wage subsidy paid as a tax concession was imminent to encourage companies to employ inexperienced people aged up to 24, but rejected Cosatu’s demand that the subsidy should go to workers rather than to employers. He also warned public servants they would have to moderate their wage claims over the next three years.

Gordhan's pie distribution
Gordhan's budget contained substantial increases in spending in certain sectors, such as:
• education R165-billion (up from the 2009/10 revised estimate of R148.8-billion);
• social protection R134.2-billion (R126.2-billion);
• housing R93.1-billion (R81.6-billion);
• health R104.6-billion (R97.9-billion); and,
• public order and safety R85.6-billion (R78.4-billion).

Spending to support economic recovery and improve service delivery included R12.2-billion for grants, R2.7-billion to provide literacy and numeracy workbooks in all 11 official languages for learners in grades R to nine; and, R1-billion to increase subsidies for higher education institutions. Other allocations included R15.1-billion for occupation-specific dispensations in education, health and correctional services; R2.2-billion for a revised salary structure in the SA National Defence Force; R8.4-billion to expand provision of antiretroviral therapy; R2.5-billion to increase ‘labour intensity’ in public works; R1.8-billion for clothing and textile production incentives; and, R1.8-billion for the automotive production development programme. The criminal justice sector would get R1-billion for efforts to reduce crime and corruption, and R2.8-billion was allocated for public transport, roads and rail infrastructure. Some R2.5-billion would go to municipal infrastructure to support universal access targets for water and sanitation, and R6.7-billion to municipalities to cover the increased cost of providing free basic electricity. Another R1-billion would help speed up housing provision. The 2010 Fifa World Cup is expected to contribute about 0.5 percent of GDP growth in 2010. To date, government has spent about R33-billion in preparation for the tournament.

What the economists had to say
Economists have praised Gordhan's budget, saying he confirmed the market principles of the economy and quelled many market fears. ‘I am ecstatic with the budget,’ said Economist, Clive Coetzee of the University of KZN. ‘We salute the huge wage subsidy providing a second tier of labour, which we have been calling for, for a long time. ‘He squashed debate on inflation targeting and confirmed the independence of the Reserve Bank.‘We are also pleased that he kept the flexible exchange rate.‘All in all, no surprises and a good budget,’ said Coetzee.

What the budget means for Zululanders
Tax breaks across the board
Lower income earners scored the biggest slice of the tax relief measures. Of the R6.5bn of tax relief provided for in this year’s Budget, 24,6% will be earmarked for taxpayers with an annual income below R150 000 and another 28.8% will be set aside for taxpayers earning between R150 001 and R250 000. Taxpayers earning between R250 000 and R500 000 will receive 26.2% of the tax breaks, and those with an annual taxable income bigger than R500 000 will receive 20.4%. The primary rebate was increased to R10 260 for all individuals, and the secondary rebate - applicable to taxpayers over 65 years old - was increased to R5 675 a year. The income tax threshold - below which individuals are not liable for personal income tax - was increased to R57 000 of taxable income per year for those below the age of 65 and to R88 528 to those over 65 years. There was further good news for savers with Gordhan increasing the annual tax-free interest income threshold from R21 000 to R22 300. For pensioners (taxpayers over 65 years) the interest income threshold was increased from R30 000 to R32 000.

Grants
Pensioners also had another reason to smile, as their grants will increase by R70 to R1 080. Recipients of child-support grants will be disappointed with the below-inflation increase of R10 to R250. However, more beneficiaries will enter the system with the extension - to be phased in over the next three years - of child-support grants to cover children up to 18 years of age. Foster-care grants will increase by R30 to R710, while the war veterans’ grant will be increased to R1 100.

Sin taxes
But smokers and drinkers once again took a big knock. A packet of 20 cigarettes will go up by R1.24, while a 750ml bottle of spirits will cost an extra R2.22. Wine lovers will pay an additional 12 cents for a 750ml bottle and a 340ml can of beer will cost an extra 6.5 cents. More bad news for consumers included a petrol tax increase of 25.5 cents a litre, implementation of a carbon emissions tax on new cars and tougher rules for company car allowances.

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