- State to spend R827bn on infrastructure
- Bigger health budget to roll out NHI
- More money for school infrastructure
- Gateway to Africa reforms extended to Brics nations
- R360m in tax relief for small businesses
- Treasury probes contracts worth R8.4 billion
- Rise in alcohol, cigarette prices
- Employment tax incentive proposed by Treasury
- Cash boost for poor municipalities
- Old age grant test to be scrapped
- Long-awaited carbon tax to come into effect in 2015
- Gordhan announces proposals on retirement reform
Amid continuing global economic uncertainty, South Africa continues to experience growth and has weathered the storm with a stable fiscus, the Minister of Finance Pravin Gordhan said on Thursday.
Presenting a R1.06 trillion 2013 National Budget in the National Assembly, Gordhan said despite the still troubled world economic outlook, the world economy had shown signs of improvements.
He said South Africa’s economy has continued to grow, but at a slower rate than projected in last year’s Budget.
Gross Domestic Product (GDP) growth reached 2.5% last year and the country is expected to grow at 2.7% this year, rising to 3.8% in 2015.
Inflation will remain moderate with consumer prices projected to increase by an average of 5.5% a year over the next three years.
The budget deficit will fall from 5.2% of GDP in 2012/13 to 4.6% in 2013/14 and 3.1% in 2015/16.
Gordhan attributed the large budget deficit – amounting to a revenue shortfall of over R16 billion – to the economic turbulence the country experienced in the second half of last year.
Trade performance remained low – with exports growing at just 1.1% in real terms last year – against an increase of 7.2% in imports – pushing the deficit of the balance in payments to 6.2% or R190 billion.
He said the disruption of activity in the mining sector and the drop in mining exports because of lower demand had partly contributed to the widening of South Africa’s balance of payments.
Over half of all government spending, or R682 billion, will go to education, health, housing and social grants.
Local government will get an extra R5.2 billion in the 2012/13 financial year as part of the local government equitable share to help smaller municipalities to fund development needs.
The Passenger Rail Association of South Africa (Prasa) will get R3.2 billion to fund rail signaling, while the SA National Roads Agency Limited (Sanral) will get an additional R1.4 billion to fund road construction and maintenance.
Additional amounts will also be made available to fund dams and water pipelines, with an extra R2.6 billion allocated to fund regional bulk water infrastructure, R1.9 billion to top up the municipal water infrastructure grant and R1.5 billion to complete the De Hoop Dam.
The Square Kilometre Array (SKA) project will get a further R1.1 billion, while science and technology infrastructure will get an additional R600 million.
An additional R1.8 billion will be spent on increasing the number of teachers, with R800 million of this to fund Grade R teachers.
Gordhan said allocations from the contingency reserve – of R4 billion – will be made later this year, mainly for unforeseeable and unavoidable expenditure.
“Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in the Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga,” he said.
He said an allocation will be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects subject to finalisation of implementation plans.
Of the items in the Budget, debt-service costs will rise the most over last year’s budget, with a 12.9% increase.
Other significant increases in spending include that on social grants – which will account for R134.9 billion – up 9.2% over last year, spending on housing and amenities such as water to municipalities up 11% and spending on economic affairs up 10.8%.
Debt-service costs total R100 billion for 2013/14 and are expected to stabilise at 2.8% of GDP in 2012/13. A further R4 billion will be set aside as a contingency reserve.
The government will borrow R215.5 billion in 2013/14, which will be financed mainly with domestic bonds.
Net loan debt is project to reach 38.6% of GDP by the 2013 financial year, climbing to 40.3% in 2015/16.
Gordhan said there were several steps that the government was taking to improve revenue and spending. These include carrying out a review of expenditure, focusing on both spending and controls in government programmes and agencies, the initiation of a tax review later this year and a competitiveness enhancement programme introduced in last year’s budget.
The capacity of the state to implement plans and programmes would also be strengthened.
He said new policy initiatives over the next three years would be financed from savings, efficiency gains and reprioritisation of spending.
“If we succeed in driving growth towards 5% a year and government revenue doubles in the next 20 years, major infrastructure projects and new policy initiatives such as national health insurance and expanded vocational education will be affordable with limited adjustments to tax policy,” he said.
“But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending,” he warned.
The National Treasury has prepared a report for Parliament – which is currently before government – that considers the country’s fiscal sustainability from a long-term perspective.
Gordhan said the Budget took into consideration the National Development Plan (NDP) by focusing on growth and employment creation, prioritising improvements in education and training and by promoting progress towards a more equal society.
The medium-term budget plans are also framed in the long-term vision and strategy embodied by the NDP, he said.
Gordhan also stressed that South Africa has substantial strengths on which to build.
These include a well-established legal system, secure property rights, an effective tax system, world-class universities and science councils, established transport, water and communications infrastructure networks, a sound macro-economic and fiscal framework and expertise in a number of areas – such as mining, retail, construction, logistics and manufacturing.
Financing of R827 billion on infrastructure projects over the next three years, to be drawn from the fiscus and state-owned enterprises, is in place, the Minister of Finance Pravin Gordhan said today.
Presenting the Budget Speech in the National Assembly, Gordhan said financing for infrastructure projects is not affected by the spending cuts in the budget.
The government spent R642 billion on infrastructure over the last three years.
While R430 billion will come from the fiscus, R400 billion will be drawn from Eskom, Transnet and other state-owned enterprises, he said.
The R430 billion from the fiscus has been allocated to build schools, hospitals, clinics, dams, lay out water and sanitation projects, expand electricity networks and supply electricity to over a million new homes, build more courtrooms and prisons and construct better bus, commuter rail and road links.
Most of the spending falls under provinces and municipalities.
Funding from state-owned enterprises will be drawn from their respective balance sheets and from additional borrowing over the next three years, backed by guarantees from the National Treasury.
The R400 billion from state-owned enterprises will fund the ongoing building of power stations and the rolling out of new electricity transmission lines, as well as for new rail, ports, pipelines, water-transfer schemes and fund various airport upgrades.
Gordhan said though there are agencies and departments that have struggled to spend their full infrastructure budgets, particularly as funding levels have increased, progress is being made.
“Records show that government’s ability to spend has been steadily rising from year to year, but it is not yet fast enough,” he said.
The Budget Review points out that R3.6 trillion in major infrastructure projects are in progress or under consideration.
Ongoing programmes or construction on new projects accounts for almost a quarter of the total expenditure – with most of this being spent on new power generation projects (R537 billion), transport (R151 billion), new schools (R52 billion), hospitals and clinics (R37 billion) and on building dams and pipelines (R35 billion).
Several private-sector projects are also contained in the government’s Strategic Infrastructure Projects, bringing the total value of projects to over R4 trillion.
Public and private-sector capital spending increased in real terms by 4.3 percent and 4.6 percent respectively in 2011 and by 11.1 percent and 4.3 percent in the first three quarters of 2012.
However as a percentage of GDP, capital spending has not yet recovered to the level reached in 2008, before the Global Financial Crisis.
With the National Health Insurance (NHI) pilot programmes already being rolled out in some of the country’s major cities, government says the country’s health infrastructure remains a priority.
The health sector received R133.6 billion from the National Budget tabled by Finance Minister Pravin Gordhan in Parliament on Wednesday. Gordhan said some of the money will go towards ensuring the completion of some 1 967 health facilities and 49 nursing colleges which he said were in different stages of planning, construction and refurbishment.
More than R800 million would have been allocated for the scale up of the provision of antiretroviral treatment. The Treasury says an additional budget allocation of R100 million in 2014/15 and R384 million in 2015 will be necessary to partly address the announced decrease in funding over the medium term from the US President’s Emergency Plan for AIDS Relief.
This programme has contributed roughly R4 billion a year towards the South African national HIV and Aids and tuberculosis response, but the amount is likely to decrease by 50 percent over the next five years. But Gordhan said there had been progress in the reducing mortality and improving the country’s HIV and TB programmes with medical and nurse training capacity proving a success.
As announced in 2011, the spending focus over the medium term will also be on the preparing for the implementation of the NHI scheme. The bulk of spending will go to hospitals and human resource development programmes.
Government concedes that achieving the health sector objectives will require a fundamental reform in the country’s health system. The National Development Plan, a growth document approved by Cabinet recently, also endorses a health system which raises life expectancy, reduces infant mortality and HIV and Aids. The plan further highlights several areas of the South African health system for attention and these include demographics, and disease burden, health systems and social and environmental causes of poor health.
A closer look at the Treasury’s annual estimates of expenditure reveals that as a result of the anticipated phasing in of the NHI, spending on infrastructure increased from R3.3 billion in 2009/10 to R5.4 billion in 2012/13 financial year and this is expected to grow to R6.5 billion over three years.
Spending focus over the next few years will be on overseeing the 10 NHI pilot projects and conducting health economics research focusing on the roll out of the plan and alternative health care financing mechanisms.
The Treasury said that due to slow spending on the NHI conditional grant, Cabinet approved reductions of R10.5 million, R10 and R5.2 million to the grant over the medium term. Subsequently, the allocation to the provinces for the existing NHI grant is R48 million, R70 million and R74 million over three years.
Gordhan pointed out that the initial phase of the NHI will not place substantial new revenue demands on the fiscus during that period because investments in improved health facilities are accommodated within annual health budgets.
But over long term, more significant funding will be required and it is anticipated that a tax increase will be needed to fund implementation.
“The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI,” Gordhan said, adding that a discussion paper inviting public comment on various options will be published this year.
Government is set to prioritise education infrastructure in the next three years, with Finance Minister Pravin Gordhan on Wednesday announcing an allocation of more than R23 billion towards beefing up school infrastructure and increasing the number of no-fee schools.
As in previous years, education received the biggest slice of the country’s national budget of over R1 trillion with R232.5 billion allocated to the sector.
In his budget Speech in the National Assembly on Wednesday, the Finance Minister said over the medium term, the Basic Education Department will be expected to use some of its budget to improve numeracy and literacy, expand enrolment in Grade R and reduce the school infrastructure backlog.
R1 billion will go to provinces to increase the number of teachers.
About R700 million will be channelled towards the technical secondary schools recapitalisation grant.
“This will finance construction and refurbishment of 259 workshops and training of over 1 500 technology teachers,” Gordhan said.
The education infrastructure grant is critical to government’s plans of eradicating unsafe school structures, as it supplements the infrastructure programme in provinces to accelerate construction, maintenance and upgrading of new and existing school infrastructure.
Up to R8 billion has been allocated to the school infrastructure backlog grant, which was established in 2011. The grant aims to ensure that schools have basic services such as water, sanitation and electricity.
The transfer to higher education institutions will increase from just over R20 billion in the previous financial year to R24.6 billion over the next three years.
Gordhan confirmed that construction of the much-awaited two new universities in Mpumalanga and Northern Cape will finally commence this year as authorities expect an increase in student enrolment in higher education institutions from 910 000 to 990 000 by 2015.
Government projects that expenditure trends will focus on infrastructure funding in the form of transfers to provinces through the education infrastructure grant. These grants account for the bulk of spending increases over the medium term.
As a result of the increased spending on grants, the Department of Basic Education’s spending rose by 25.6 percent last year, as part of the department’s commitment to ensure that teaching takes place in secure and safe buildings.
In recent years, government also increased funding to help students from poor backgrounds obtain tertiary education and vocational training.
The Student Financial Aid Scheme will provide loans and bursaries to 288 188 students from poor backgrounds, up from just over 118 000 in 2008/9 financial year.
To increase access to basic education, the budget further notes the expansion of no fee schools to 20 688 by the end 2012.
Foreign companies that are based in South Africa and that are keen on investing in countries outside of Africa – including in Bric (Brazil, Russia, India and China) members, will be able to benefit from relaxed cross-border financial regulations and tax requirements, the Minister of Finance Pravin Gordhan announced today.
In the Budget Speech Gordhan said the outward investment reforms that apply as part of the Gateway to Africa reforms will also apply to those companies seeking to invest in countries outside of Africa, including Bric countries.
These reforms include the relaxation of cross-border financial regulations and tax requirements on companies and making it easier for banks and other financial institutions to invest and operate in other countries.
Gordhan said Africa now accounts for 18 percent of South Africa’s exports – including nearly a quarter of its manufactured exports.
He said over the past five years the Reserve Bank has approved over 1 000 large investments into 36 African countries.
South Africa is also helping to fund several development projects in the region, with the Development Bank of SA (DBSA) accelerating investment into neighbouring countries particularly in the field of electricity generation and transmission and roads.
Added to this the Industrial Development Corporation (IDC) last year funded 41 projects in 17 countries to the tune of R6.2 billion.
Most of these projects were in industrial infrastructure, agro-processing and tourism.
Eskom is now considering investing in several regional generation and transmission projects, Gordhan said.
Gordhan said there is a proposal to pool Brics member countries foreign exchange reserves with the idea of using this to support one another in times of balance of payments or currency crisis.
Brazil, Russia, India, China and South Africa – the grouping of emerging economies – collectively hold reserves of $4.5 trillion.
He said work is underway to create a trade and development insurance risk pool, with the aim of setting up a sustainable and alternative insurance and reinsurance networks for Brics members.
Minister of Finance Pravin Gordhan has proposed further tax relief for small businesses, including an increase in the monetary thresholds of Graduated Tax for Small Business Corporations, which translates to R360 million in tax relief to small firms.
Government proposes that the R14 million turnover threshold for small business corporations be lifted to R20 million and that the graduated tax structure also be adjusted.
The proposal is that small firms classed as Small Business Corporations with a taxable income of less than R67 111 not be subject to any tax – up from the present threshold of R63 556 – while those with a taxable income of between R67 112 and R365 000 will be taxed at 7 percent.
Currently small business corporations with taxable incomes of above R350 000 are subject to the corporate tax rate of 28 percent.
But the proposal is to shift this so that entities with a taxable income of between R360 001 and R550 000 are subject to 21 percent, while those with a taxable income of above R550 001 are subject to 28 percent.
National Treasury has also proposed that public-benefit organisations be subject to the same new rate structure as small business corporations.
The Budget Review says the feasibility of special support for social-impact businesses (or social enterprises) which have both profit-making and social objectives, is being explored.
Gordhan introduced several initiatives that support business development.
Additional funding of R1.5 billion has been provided to the Department of Trade and Industry to disburse to manufacturers through the Manufacturing Competitiveness Enhancements Programme, which was introduced last year.
The programme has received 215 applications – mainly from the chemicals, agro-processing and metals sectors – with requests for grants totaling R2.3 billion, he said.
Gordhan said he was in talks with the Minister of Trade and Industry Rob Davies on the introduction of tax incentives for the Special Economic Zones (SEZs) programme which was announced last year.
He said the National Treasury’s Jobs Fund, which was announced in the 2011 Budget, has so far received 3 614 applications, with grant funding of R3.3bn approved for 65 projects, topped up with an additional R3.3 billion from the private sector.
The National Treasury is investigating 76 business entities with contracts worth R8.4 billion believed to have infringed procurement rules, Finance Minister Pravin Gordhan said.
Delivering the National Budget speech in Parliament on Wednesday, Gordhan said the value of these contracts was estimated at over R10 billion. So far, 216 cases have been finalised, resulting in assessments of more than R480 million being raised.
Gordhan said the process for setting up the Chief Procurement Officer, as announced in 2012 had “begun in earnest”.
“I shall soon announce the name of the Chief Procurement Officer. A project team seconded from state agencies and the private sector has identified four main streams of work, involving immediate remedial actions,” he said.
Smokers can expect to pay 60 cents more for a packet of cigarettes, while consumers will pay R1.08 more for a can of beer.
Finance Minister Pravin Gordhan, in the Budget Speech today, announced increases of 5.7 percent and 10 percent to the so-called ‘sin taxes’ in respect of alcohol and tobacco products, which are determined in accordance with a targeted total tax burden of 52% of the retail price.
Ciders and alcoholic fruit beverages increase by 7.5 cents to R1.08 per 340ml can.
The current targeted tax burden (excise duties plus vat) expressed as a percentage of the weighted average retail selling price for wine, beer and spirits are 23, 35 and 48 percent respectively.
Unfortified wine will increase by 15 cents per 750ml bottle, with spirits going up by R3.60 per 750ml bottle.
Employment tax incentive proposed by Treasury
The Minister of Finance Pravin Gordhan today proposed an employment tax incentive for young, first-time workers, which will use a new graduated formula and will replace the contested youth wage subsidy announced by Gordhan in the 2011 Budget.
Presenting the Budget Speech in the National Assembly today, Gordhan also revealed plans for several tax incentives for special economic zones (SEZs).
He also announced personal income tax relief of R7 billion, and tax relief of a further R350 million with adjustments to the medical tax credit.
An overall increase of 23c per litre in fuel levies will made in April, while excise duties on alcohol and tobacco products will increase by between 5.7 percent and 10 percent.
Further tax relief for small businesses, including an increase in the monetary thresholds of Graduated Tax for small business corporations, has also been proposed.
On the employment tax incentive for young, first-time workers, the Budget Review says the incentive, which will amount to R500 million in tax relief once implemented, will operate using a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold.
Protection provided by the existing labour legislation, combined with oversight by the South African Revenue Service (Sars) and the Department of Labour will ensure that employers don’t replace older workers in favour of first-time workers just to take advantage of the tax incentive.
A similar tax incentive will be made available to eligible workers of all ages within SEZs. This will allow employers to make a tax deduction for employing workers earning less than R60 000 a year.
The Budget Review also contains a proposal that businesses based in SEZs be subject to a 15% corporate tax rate, almost half that of South Africa’s current corporate tax rate of 28%.
Added to this an accelerated depreciation for buildings in these areas based on the existing tax regime for urban development zones, to encourage developers to invest more in industrial premises.
The revised tax revenue collection for 2012/13 is R810.2 billion – R16.3 billion lower than the estimate made in last year’s budget.
Most of this was owing to lower than expected collections from personal income tax – R12 billion less than was estimated last year – and corporate income tax – under by R11.5 billion.
This was only partly offset by VAT collections exceeding estimated takings by R7.3 billion.
Gordhan attributed this to weak economic growth during the second half of last year, labour unrest and lower commodity prices.
However, he said tax revenues are expected to improve over the next three years in line with higher economic growth.
He said 700 taxpayers had so far made use of the voluntary disclosure programme which came into effect last year on October 1.
Tax of more than R200 million will be collected before the end of next month, he said.
He said working with the National Treasury and with the help of the government payment system, the Sars has identified a number of companies that have received payments from government but that have not declared their full income to the Receiver.
These companies are being audited and others will follow, he said, adding that the intervention will be underpinned by the reform of the tax clearance certificate process which he announced in October.
Sars was also working with the Department of Home Affairs and other agencies to register small and micro enterprises owned by foreigners.
The Receiver last year made a total of 1 531 seizures of goods to the value of almost R152 million in connection with customs duty fraud, smuggling, counterfeiting and tax evasion.
He said in the near future, Sars will introduce a single registration process in which companies will be able to register in a once-off manner for all tax types and custom activities.
There are also plans to introduce a new company income tax requiring fewer fields to be completed by smaller businesses.
Cash boost for poor municipalities
In a move that could change the face of local government, Finance Minister Pravin Gordhan has announced that a new formula for the local government equitable share will be introduced in the upcoming financial year.
Delivering the Budget Speech in the National Assembly on Wednesday, Gordhan said the new formula will address the need to better differentiate assistance to different municipalities, including those in rural areas.
Under the current formula, municipalities get their budget share according to their size. But the new formula will result in significant changes in allocations with municipalities that have higher poverty rates and less ability to raise their own revenue.
The formula for calculating equitable share will also be updated to reflect population changes as published in the 2011 Census. The Census count showed that overall, the South African population grew from 44.8 million in 2001 to 51.8 million in 2011.
“Municipal infrastructure grants will also be realigned, and go hand in hand with more integrated planning of new developments so that we can make meaningful strides in overcoming the spatial inequalities of the past,” said Gordhan.
The new budget for 2013/14 puts the equitable share for provinces to just off R338 billion.
Struggling rural municipalities are set to benefit more from the new allocation formula to be phased in over a period of five years.
Conditional grants to provinces will be over R77 billion with further R5.3 billion over three years added to the education infrastructure grant, including the construction of Grade R classrooms and facilities for learners with special needs.
Gordhan said additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations that provide critical welfare services.
“There’s additional funding for teachers in the poorest 20 percent of schools and Grade R classes and for community library services. Provinces are also funded for an expansion in HIV and AIDS programmes and an improved TB diagnosis system,” Gordhan added.
It is also worth noting that during the 2011/12 financial year, national and provincial spending amounted to R885.9 billion, including transfers to provinces and municipalities.
Provincial expenditure fell 1.3 percent short of an adjusted budget of R373 billion in 2011/12, primarily due to under spending on health and basic education in the Eastern Cape, KwaZulu- Natal and the Free State.
In the same period, municipalities underspent by R31 billion, representing 11.7 percent of the total budgeted municipal expenditure. Of 278 local municipalities, 212 underspent their transfer receipts by more than five percent while 30 over spent by more than five percent.
Old age grant test to be scrapped
The current means test for the old age grant will be phased out in order to simplify administration and prevent the exclusion of vulnerable individuals, Finance Minister Pravin Gordhan announced in the Budget Speech on Wednesday.
“All citizens over a designated age will be eligible for the grant which will simplify its administration and address the disincentive to save that arises from the present means test,” Gordhan said.
He announced that the old age and disability grants will increase from R1200 a month to R1260 from April. The foster care grant increases from R770 to R800 while the child support grant increases to R290 in April and to R300 in October.
More than half of all households in South Africa benefit from government’s social assistance programme.
According to the Treasury, for 22 percent of households, social grants are the main source of income. More than 11 million children receive the child support grant. The social assistance budget increased by an average of 11 percent a year since 2008/09, in part due to the extension of the child support grant to the children up to the age of 18.
Gordhan said spending on social assistance will rise to R120 billion next year.
Long-awaited carbon tax to come into effect in 2015
The Minister of Finance Pravin Gordhan today announced plans to introduce a long-awaited carbon tax on 1 January 2015.
Presenting the 2013 National Budget in the National Assembly on Thursday, Gordhan said carbon would be priced by way of a carbon tax at the rate of R120 per ton of CO2 equivalent.
A tax-free exemption threshold of 60% will be set to soften the impact of the tax, with additional allowances for emissions intensive and trade-expose industries, he said.
The National Treasury will next month release an updated carbon tax policy paper for comment.
He said mechanisms to support the production of biofuel and more environmentally friendly fuel through the upgrade of oil refineries will be introduced.
Gordhan also encouraged organisations, smaller public entities and businesses to be creative and develop low-carbon projects through the Green Fund.
He said 590 applications were received in the first call for proposals, adding that the R800 million previously allocated to the fund will be topped up with an extra R300 million.
The tax on motor vehicle CO2 emissions will increase on April 1 – from R75 to R90 for every gram of emission per kilometer above 120g of C02 per kilometer and in the case of double cabs from R100 to R125 for every gram per kilometer in excess of 175g per CO2 per kilometer.
The levy on plastic bags will increase from 4c per bag to 6c per bag, while the environmental levy on incandescent light bulbs will increase from R3 to R4 per bulb. These increases will come into effect on 1 April.
Gordhan announces proposals on retirement reform
In a bid to encourage South Africans to save more, the Minister of Finance Pravin Gordhan, has announced plans to introduce tax-preferred savings and investment accounts in 2015.
Presenting the 2013 National Budget in the National Assembly on Wednesday, Gordhan said this and other initiatives formed part of proposals to encourage households to save more. The legislation would be introduced later this year.
This follows the publication of a discussion document in September last year and after consideration of the comments received; the government intends to proceed with the implementation of tax-preferred savings and investment accounts.
Under the proposal, all returns accrued in these accounts, as well as any withdrawals, would be exempt from tax.
The account would have an initial annual contribution limit of R30 000 and a lifetime limit of R500 000, to be increased regularly in line with inflation.
The new accounts will be introduced by April 2015.
In the meantime, with effect from March 1, tax-free interest-income annual thresholds will be increased from R33 000 to R34 500 for individuals 65 years and over, and from R22 800 to R23 800 for individuals below 65 years old.
Other initiatives the minister announced include making it compulsory for retirement funds to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.
Retirement funds will also be required to guide their members through the process of converting savings into a regular income after retirement and to choose or set up default annuity products that meet appropriate principles and standards.
He said in a bid to promote competition, providers who are not life officers will be allowed to sell living annuities.
The tax treatments of pension, provident and retirement annuity funds will also be simplified and harmonised.
Governance reforms of retirement funds will also be implemented and measures will be put in place to ensure that trustees of retirement funds are trained once they have been appointed.
Gordhan said he would call a conference of all trustees later this year to ensure that the process goes forward.
He said the National Treasury is also looking at how to encourage employers to provide appropriate retirement mechanisms for their employees.
Tax deductions of pension and retirement annuity funds, as well as contributions to provident funds and employer contributions that will constitute fringe benefits, will be increased to 27.5% of remuneration or taxable income – which ever the greater may be.
This would simplify the current way deductions for retirement annuities, fringe benefits and pension funds are calculated.
An annual cap on deductible contributions of R350 000 will be applied. – SAnews.gov.za