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More opinions on SA Medium Term Budget Policy Statement 2013

More opinions on SA Medium Term Budget Policy Statement 2013

Updated: Comments from Cape Chamber of Commerce and Industry, as well as Grant Thorton.

The Cape Chamber of Commerce and Industry 

THE medium term budget was welcomed by the Cape Chamber of Commerce and Industry but it warned that the Minister of Finance, Mr Pravin Gordhan, had dealt with symptoms rather than the underlying problems, which are preventing economic growth.

“The tax concessions to encourage companies to employ more young people are little more than a sticking plaster on a big wound,” said Mr Fred Jacobs, President of the Chamber. “The real solution is to give the economy the freedom to grow by loosening the shackles of our restrictive labour legislation.”

The clampdown on perks was welcome but it was also long overdue and it dealt only with the most conspicuous of wasteful spending. Nevertheless it sent a strong message to ministers and the public service.

“It will also create problems for the government because Ministers and senior officials will resent losing their credit cards and other perks. It remains to be seen how effectively these measures will be implemented, especially after the election.”

Mr Jacobs said the real problem was the public service wage bill, which had increased from R211bn in 2008 to R409bn and this now amounted to 39% of government expenditure if interest payments were excluded. “We have a large and well paid army of administrators but they are reliant on consultants and the problem of qualified audits persists. Are we receiving fair value from the public service,” he asked.

The second big problem was policy uncertainty. “Far too much power has been given to ministers to make arbitrary regulations on everything from mining to cigarette smoking. Foreign investors require the certainty that comes from stable, logical legislation and not ministerial decisions that can change suddenly with huge unintended consequences.

“Until we deal with the fundamental problem in the economy we will not get the investment and the growth we need to create the jobs for a new generation of South Africans,” Mr Jacobs said. 

Comments and snippets from Grant Thornton on SA Medium Term Budget Policy Statement 2013

Overall

AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg says:

“The specific mention that the Minister made this afternoon of the particular measures to deal with wasteful expenditure in Government is very encouraging.  Focus of the MTBPS was very much on the cost side and more holistic measures like the National Development Plan.”

AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg says:

“The context of this medium term budget is clearly a pre-election one and focuses on addressing the common question which is ‘what is corruption and where is money being wasted?’  This is a very politically targeted budget with initiatives announced that will resonate with the larger voting public. There wasn’t any mention of increasing revenue and there was no indication by the Minister of pending tax rate hikes for next February 2014.  In last year’s medium term Budget there was a hint at SA needing to get ready for increases but nothing significant came through since then.”

Louis van Manen, Tax Partner, Grant Thornton Johannesburg says:

“This medium term budget featured a good balance between addressing revenue and expenditure.  If the implementation of the proposed cost saving measures do come into effect following announcements made today, then this balance is encouraging.”

On the NHI

AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg says:

“There were no indicators or updates on the National Health Insurance this afternoon which was a big issue for a number of years but the project and further announcements seem to have fallen by the wayside. It appears as if the NHI has been overtaken by the NDP agenda.  The Minister spoke today about the need to increase funding for education but nothing specifically relative to health as such.  My concern is that we need to start raising additional revenue by 2015 and we know that there’s a big elephant in the room but there is still no indication as to when this is happening.  When will the costs associated with this come in? Is this still a priority? Is government really serious about rolling this out? How are we going to pay for it?”

On Foreign Direct Investment concerns

Louis van Manen, Tax Partner, Grant Thornton Johannesburg says:

“While the Minister did touch on foreign investment I’m disappointed about the lack of clarity which is very much needed in order to enforce investor confidence.  Some decisive comment about the mining sector and labour would have been useful. We have this huge void between the reality and this wonderful Utopia of labour and industry working together to build a strong, stable economy.  It’s concerning that there was no clarity here specifically because of the current ‘investor unfriendliness’ that SA presents to the rest of the world.”

AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg says:

“The Finance Minister’s mention this afternoon of work in progress for the new promotion and protection of investment bill and a policy framework to protect and encourage foreign investment, is very encouraging because Exchange Control is still a huge inhibiting factor for FDI coming into SA.”

On Budget deficit and Public Spending increases

Louis van Manen, Tax Partner, Grant Thornton Johannesburg says:

“The Minister’s announcements today regarding the curbing of Government expenditure is at least a good step in the right direction in terms of slowing the increase in the deficit in coming years.”

AJ Jansen van Nieuwenhuizen, Tax Partner, Grant Thornton Johannesburg says:

“In general the Budget Speeches during February always raise concern about increases in public spending mostly due to the Public Wage Bill.  Today, the Finance Minister has made specific comments around the fact that future increases in the Public Wages will be inflation linked going forward. Although there will be an increase in overall spending, curbing of the Public Wage bill with specific and particular references made this afternoon, is promising.”

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