Budget speech in a nutshell

Staff Reporter

A one percentage point rise in VAT, no real personal tax relief, higher sin taxes and a large fuel levy were among the measures announced by Finance Minister Malusi Gigaba in Parliament on Wednesday.

Gigaba delivered his first national Budget speech before the National Assembly this afternoon, calling Treasury’s opus “a tough, but hopeful budget”.

“Budget 2018 charts a path out of economic stagnation,” he said.

The Budget raises taxes in the hopes of collecting an extra R36 billion in revenue. It also slashes government spending by R85 million, cutting down the scope of several large infrastructure projects, including some relating to basic education and healthcare.

The Budget seeks to reignite stubbornly stagnant economic growth, and projects a slow but steady increase in GDP over the next three years. Gigaba announced a one percentage point hike in the VAT rate, to 15%. That means, with the exception of 19 zero-rated items, everything we buy will become that bit more expensive.

Increasing the VAT rate has been mooted for some years, but has been fiercely resisted by unions, and pro-poor activists.

However, government figures suggest that 80% of the effect of the hike in the VAT rate will be shouldered by higher income earners.

The hike in the rate will raise enough money to partially pay for fee-free tertiary education for lower-income students.

This is the first increase in the VAT rate since the tax was introduced in 1994. Gigaba told a pre-budget briefing that this will not be the first of many such hikes, saying instead that shortfalls will be made up through a variety of interventions, including the sale of some assets held in government’s property portfolio.

There is little by way of personal income tax relief in the Budget. The top four tax brackets remain unchanged, meaning higher income earners will be paying more of their salaries to government in real terms.

Treasury has also cut back on medical aid related tax breaks, with below inflation increases in medical tax credits. That means in real terms people with private medical aids will pay more for them.

The money government will save on those tax credits will go towards funding the National Health Insurance project, which will get underway this year.

SA business delegation arrives in Germany for the fruit Logistica trade fair

A South African delegation comprising of twenty-five businesspeople has arrived in Berlin, Germany for the Fruit Logistica Berlin Trade Fair that will be taking place from today until 9 February 2018. The trade fair covers every sector of the international fruit and vegetable supply chain from production, distribution and marketing, through to the point of sale, including global players as well as small and medium-sized suppliers from all around the world.

According to the Director of Export Promotion at the Department of Trade and Industry (the dti), Mr Luke Govender, the fair in Germany presents an enormous opportunity for the South African fresh produce companies in that it has a number of competitive advantages.

“South Africa’s exports to the European Union in general, and Germany in particular, are growing and the composition of these exports is becoming more diverse in alignment with the dti’s Market and Product Diversification Strategy. In fact, this is the first occasion, that South Africa at Fruit Logistica has introduced its vegetable product range as part of that diversification process,” says Govender.

Government rolls out digital migration in North West

Officials from the Department of Communications are visiting various municipality districts in the North West province to register and install government subsidised decoders to qualifying households.

“This move is aimed at accelerating the installation of decoders with a view to completing the installations to qualifying households in the North West province,” the Department of Communications said on Monday.

There are about 382 000 qualifying households in the province.

The department said registration and installation teams will adopt a phased approach that will see them going through all the district municipalities in the province.

The department is adopting a similar approach with installation in the Free State province, while the project in the Square Kilometre Array in the Northern Cape has been completed.

It has also enlisted the support of provincial and local governments to encourage qualifying residents to register for the government-subsidised decoders.

The Department of Communications is working together with the South African Post Office (Sapo) to reach communities and to distribute the subsidised television decoders to qualifying households.

To qualify for the government-subsidised decoders, households must have a total income of below R3200 per month.

The Department of Communications has been tasked to roll out a process of migrating all South African households to digital terrestrial television (DTT).

This process of migration is a government initiative and will allow users to experience the many benefits of digital television which include, among others, clearer pictures and sound as well as more channels to choose from. – SAnews.gov.za

Old Mutual staves off retrenchment, invests in SA

Economic Development Minister Ebrahim Patel says the decision by Old Mutual to hold off on retrenchments and the establishment of a R500 million fund to boost small businesses will spur investor confidence.

The Minister’s comments follow a decision by Old Mutual to make South Africa the primary base for all of its emerging market activities and as part of the decision, to commit to a range of public interest undertakings.

“The move ‘back home’ of one of our premier financial institutions will help to inject investor confidence in the economy and is a well-timed signal that we can grow the economy in the period ahead and unlock the country’s potential of job creation and economic inclusion,” said Minister Patel.

The public interest commitments by Old Mutual, made in terms of the Competition Act, include undertakings not to retrench any workers as a result of the transaction and to ensure that the company achieves best-of-class empowerment status within a prescribed time.

A move by the financial institution to establish a R500 million fund, following discussion with the Ministry, to drive the growth of small business and employment is a significant part of the company’s commitments.

“We look forward to the new jobs that will be created in the South African economy, particularly within small businesses, by the Development Fund,” said the Minister.

The transaction has the support of the Competition Commission in terms of the Competition Act and has been recommended to the Competition Tribunal for consideration and approval. It will thereafter be subject to shareholder approval.

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