Budget: SA 'stays the course'
Shaun Benton
20 February 2008Finance Minister Trevor Manuel has dismissed the prophets of doom, saying the South African economy would weather the current global economic downturn. "The economy is strong ... we are staying the course," Manuel told journalists shortly before delivering his 2008/09 Budget speech in Parliament in Cape Town on Wednesday.
While the National Treasury has shaved 0.5% off the country's projected gross domestic product (GDP) growth for the coming financial year, placing it at 4%, Manuel said the South Africa economy remained "resilient" to external pressures, backed by steady growth in net foreign reserves, which reached US$32-billion by the end of January.
Other developing countries, including China and India, were also slightly downgrading their growth forecasts, the minister said, adding that a "rebalancing" of the economy did not mean that medium-term economic goals could not be met.
The Finance Minister defended another "sunny" Budget for South Africa this year, saying that five years of economic growth would stand the economy in good stead, and adding that "we are very confident about where we are taking things", namely, towards wider participation in the economy.
The 2008/09 Budget thus brings another surplus, lowered taxes and increased spending as the government moves to address growth constraints such as lack of skills and infrastructure.
GDP growth forecasts
The 2008 Budget Review points to 4% GDP growth in 2008/09, rising to about 4.6% by 2010, backed by fact that gross fixed capital formation - or fixed investment - reached 21% of GDP in 2007/08 and that the pace of this investment was expected to remain "robust".
South Africa's Budget surplus is held over from last year, remaining at 1%, with this budget balance as a percentage of GDP projected to fall to 0.6% in 2009/10 and rise slightly to 0.7% by 2010/11.
R10.5bn in tax
relief
Tax relief of R10.5-billion was proposed for the 2008/09 financial year, with R7.7-billion in income tax relief for individuals forming the bulk of this. At the same time, corporates get a reduction too: the headline corporate tax rate is reduced by one percentage point, bringing it to 28%.
Small businesses get a massive boost, with the compulsory VAT registration threshold raised from R300 000 to R1-million, while R5-billion in tax subsidies over the next three years will support South Africa's "emerging industrial policy".
Increased spending all round
Meanwhile, there are virtually all-round additions to spending over the next three years: an additional R12.5-billion goes to social grants, with the extension of the child support grant to children up to their 15th birthday as of next year.
This amount also caters to the promise made by President Thabo Mbeki in his State of the Nation address earlier this month to lower the age of eligibility for old age pensions for men to 60.
Also in the Budget is an additional R8.2-billion for public transport, roads and railway infrastructure, and an additional R2-billion for 2010 Fifa World Cup stadiums and related infrastructure.
An additional R2.5-billion goes to industrial development and small, medium and micro enterprises, while an additional R1.4-billion is set aside for higher education, research and knowledge development. An additional R2.6-billion goes to agriculture and land reform.
Source: BuaNews
