Parliamentary Caucus

PARLIAMENTARY
BULLETIN

18 March 1997

BUDGET AIMS TO BUILD A BETTER LIFE FOR ALL

Finance Minister Trevor Manuel`s 1997 Budget aims to build a better
life for all in South Africa, by furthering economic and social transformation,
balancing the need to address immediate priorities and the longer-term
objectives of durable peace, democracy and rising standards of living.
It mirrors the choices between accelerated service delivery, the promotion
of economic growth, job creation and the containment of inflation.

Economic Background to the Budget

• the economy grew by 3.1 per cent in 1996 - the fourth consecutive year
  of growth
• average real incomes per person are 4.5 per cent higher than in 1993
• consumer price inflation in 1996 was 7.4 per cent - the lowest since
  1972
• deficit on the current account of the balance of payments fell from
  2.1 per cent of GDP to 1.6 per cent in 1996.

Key Features of the Budget

Poverty Relief

• R300m for community-based poverty relief programmes, targeted especially
  at rural areas and women
• R1 billion extra for social security
• an increase in state pensions from R430 to R470 per month.

Education

• 12 per cent increase in general subsidy formula allocations
• R200m for the National Student Financial Aid Scheme (plus R100m from
  donors)
• adult education funding doubled, from R6.5m to R13.1m.

Housing

• doubling of housing allocation, to R4 billion
• 190,000 subsidised houses will be built this year.

Land

• R418m for land restitution, redistribution and tenure.

RDP Projects

R4.4 billion is allocated for the carry-through costs of RDP projects,
including:

• R680m for free health care
• R500m for the primary school nutrition programme
• R500m for the community water supply and sanitation programme
• R350m for bulk infrastructure for housiong
• R300m for land redistribution
• R245m for urban renewal
• R200m for the Maputo corridor and other spacial development initiatives
• R100m for peace initiatives in KwaZulu Natal.

Industry Initiatives

• increase in funding for industrial development and research and technology
  from R454m to R604.6m
• new Competitiveness Fund and sectoral partnership facility to enable
  firms and organisations to draw on consultant advice in advancing competitiveness
• new Short term Export Finance Guarantee Scheme for small and medium-sized
  firms.

Safety and Security

• R406m for National Crime Prevention Strategy
• 15 per cent increase in funding for Police, Justice and Correctional
  Services.

Exchange Controls

The Budget includes a major relaxation of exchange controls, including:

• abolition of most controls on current account transactions
• increase in annual travel allowances to R80,000 per adult and R25,000
  per child
• individuals to be allowed to remit capital abroad, with extended limits
  for the purchase of fixed property in SADC countries
• individuals to be allowed to maintain foreign currency denominated
  deposit accounts and to retain foreign income earnings in foreign currency
  accounts
• corporations wishing to establish new ventures to be permitted to transfer
  up to R30m, or R50m in the case of SADC countries, as a proportion of their
  investment
• increase in limits for completion of forms A and E for purchase and
  sale of foreign currency from R2,000 to R40,000.

Income Tax

• primary rebate increased from R2,660 to R3,215
• one tax bracket created for all on taxable incomes up to R30,000
• marginal tax rate applying to taxpayers with taxable earnings between
  R40,000 and R45,000 reduced from 41 to 32 per cent
• the SITE limit on earnings up to which people do not have to submit
  tax returns is raised from R50,000 to R60,000.

These measures mean that:

• R2.8 billion has been put back into the pockets of families who need
  it
• people earning R20,000 will save R255 in tax per year
• people earning R60,000 will save R805 in tax per year
• thousands of taxpayers will no longer have to submit tax returns.

Beating Tax Avoidance

• the Government is stepping up action against non-payers and tax avoiders
• only registered taxpayers who sign a declaration that their tax affairs
  are in order will be able to tender for government contracts and to access
  supply-side financial assistance opportunities
• only individuals or corporates who provide tax numbers and sign a declaration
  of good standing will be allowed to avail themselves of foreign currency
• the opportunities for the tax structuring of salary packages through
  the abuse of fringe benefits are to be reduced, through increases in taxes
  on company cars, travel allowances, company housing and holiday accommodation.

Government Debt

• the Government will achieve its target of reducing the budget deficit
  from 5.1 per cent of GDP in 1996/97 to 4.0 per cent of GDP in 1997/98
• the cost of paying back government loans will be reduced from R17.5
  billion in 1996/97 to R12.1 billion in 1997/98
• the Government`s gross borrowing requirement to make up the Budget
  deficit will be reduced from R41.02 billion in 1996/97 to R36.85 billion
  in 1997/98.

Index