Issue 100 | 27 February 2014
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Finance Minister Pravin Gordhan has announced a massive expenditure plan that will be anchored by the National Development Plan (NDP).
Tabling the 2014 Budget in Parliament on 26 February, Minister Gordhan announced that government’s spending would be R1,25 trillion for the 2014/15 financial year.

He said consolidated non-interest spending would increase to R1,3 trillion by 2016/17 – an increase of about 2% per year over the next three years.

Education will get the lion’s share of the pie, with an estimated allocation of R254 billion, followed by health (R146 billion), while R144 billion will go towards social protection.

Some R143 billion will go towards housing and community amenities, while R57 billion will be spent on employment and social security programmes.

When tabling the Medium Term Budget Policy Statement in October, dubbed the mini-budget, Minister Gordhan warned that abusing public finances and resources was harming governance, and implemented austerity measures for top executives relating to expenditure, travel and accommodation.

Minister Gordhan also cautioned against abuse, saying the successful implementation of all government plans relied on sound discipline, hard work, cooperation and sustained improvements in productivity – both in the public and private sectors.

“Our present circumstances oblige us to live and spend modestly and keep a careful balance between social expenditure and support for growth.

“And so in framing the 2014 budget, Mr Speaker, we have reprioritised expenditure within the overall ceiling set in the October Medium Term Budget Policy Statement. The budget deficit will steadily decline over the period ahead.

“Mr President, the next administration will inherit sound public finances, a platform for implementation of the NDP and a framework for collaboration with all stakeholders in driving social and economic transformation forward,” he said.

Government aims to create six million work opportunities by 2019.

About R10,3 billion will go towards manufacturing development incentives, while R15,2 billion will be set aside for economic competitiveness and support packages for businesses. A further R3,6 billion has been allocated for job creation at special economic zones.

Government will continue to invest in infrastructure to improve people’s lives, and will spend R11 billion in 2014 for new rolling stocks and for upgrading the signalling infrastructure.

To bolster the fight against HIV and AIDS, R1 billion will be allocated to the pandemic’s Conditional Grant in 2016/17 to sustain the roll-out of antiretroviral treatment. A total of 2,5 million people are currently under treatment, and 500 000 new patients are expected to join the programme each year.

As the country awaits the full implementation of the National Health Insurance system, R19,3 billion will be spent on refurbishing clinics and hospitals, while R1,2 billion will be set aside for contracts of general practitioners.

To bolster housing, six metros have been targeted for a new grant of R300 million per year to build their capacity to plan for integrated human settlements.

To this end, government has set aside R899,2 million in 2014/15 for provinces to upgrade sanitation infrastructure.

Over the next two years, R1,9 billion will be spent on eradicating the bucket system and R15,4 billion is for regional bulk infrastructure over the next three years. – Source:
Budget framework
  • Budget deficit (consolidated budget) of 4% of gross domestic product (GDP) expected for 2013/14 and 2014/15 (R153.1billion), narrowing to 2,8% in 2016/17 (medium term budget projections). The figures for the main budget (before extra-ordinary items) are higher.

  • Debt stock as percentage of GDP will stabilise at 44,3% of GDP in 2016/17 (estimate 39,7% in 2013/14). Debt service costs will rise by 13,5% in 2014/15 to R114,9 billion and R139 billion in 2016/17.

  • Total revenue will increase from R1 010 billion in 2013/14 to R1 099 billion (29% of GDP) in 2014/15 and total expenditure from R1 159 billion to R1 252 billion (33% of GDP). The GDP in 2014/15 is estimated at R3 789 billion.

  • National and provincial government spending on travel catering, consultants and other administrative payments declines as a share of spending.

  • Expenditure ceilings commits government to spending limits of R1 030 billion in 2014/15, R1 110 billion in 2015/16 and R1 180 billion in 2016/17.

  • Employment and social security will rise the steepest over the three years – with 13,1% from R57,3 billion in the coming financial year to R69,3 billion in 2016/17. The biggest item on the budget, Education and related functions will rise 6,8% over the three years to R293,3 billion.

  • Social protection will rise by 7,7% over the three years to R168,8 billion. The Old-Age Grant and Disability Grant will rise from R1 265 to R1 350 (R1 285 tot R1 370 for over 75s), the Foster Care Grant from R800 to R830, the Child Support Grant from R295 to R315, the Care Dependency Grant from R1 265 to R1 350 and the War Veterans Grant from R1 285 to R1 370.

Specific spending programmes over the next three years:

  • R410 billion on social grants over next three years.

  • R15,2 billion on the economic competitiveness and support package.

  • R8,5 billion on the Community Work Programme.

  • R98,7 billion on settlement of land restitution claims.

  • R7 billion for subsistence and smallholder farmers.

  • R78 billion on university subsidies and R19,4 billion for the National Student Financial Aid Scheme.

  • R34,3 billion on school infrastructure.

  • R22,9 billion to upgrade commuter rail services.

  • R143,8 billion to support municipal infrastructure.

  • R42 billion on the HIV and AIDS Conditional Grant.

Tax proposals:

  • Personal income tax relief of R9,3 billion, most for the lower income group.

  • Adjustments to tax tables relating to retirement lump-sum payments.

  • Measures to encourage small enterprise development.

  • Clarity on valuation of company cars for fringe-benefit tax purposes.

  • Reforms to tax treatment of the risk business of long-term insurers.

  • Measures to address acid mine drainage.

  • Adjustment of the proposed carbon tax and its alignment with desired emission reduction outcomes.

  • Excise duties on alcoholic beverages and cigarettes will increase by between 6,2% and 12%. There is no rise on traditional African Beer or beer powder.

  • The general fuel levy and the Road Accident Fund levy will increase by 12c per litre and 8c per litre respectively by 2 April 2014. This will push up the general fuel levy on petrol to R2.25 per litre and R2.10 per litre of diesel.

  • Personal income tax will represent 33,8% of total tax, company tax 20%, fuel levies 4,8%, VAT 26,9%, customs and excise duties 8,2% and other 6,3%.

Macro-economic outlook:

  • GDP growth is estimated on 1,8% in 2013, 2,7% in 2014, 3,2% in 2015 and 3,5% in 2016.

  • Export growth is expected to accelerate rather sharply from 4,8% to 7% in 2016, while imports will stay around 7% with a dip in 2014 and 2015 to 5,3% and 6,1% respectively.

  • Capital formation is also optimistically forecast to grow from 3,2% of GDP in 2013 to 6% in 2016.

  • Household consumption is set to grow by 2,7% in 2013 to 3,4% in 2016.

  • The balance of payments will stay in deficit (6,1% of GDP in 2013, 5,5% in 2016). – Source:
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