Finance Minister Pravin Gordhan is set to deliver the 2011 national budget this week, with business looking forward to a speech which will boost business confidence following a global recession.
Company tax relief is expected to be limited and focused on encouraging capital expenditure as well as job creation, according to Nedbank’s economic unit.
The bank, along with Business Unity South Africa (BUSA), expects clarification on R20 billion in tax incentives for manufacturing investments announced by President Jacob Zuma in the State of the Nation Address.
It is likely that there will be very limited personal income tax relief, with the top marginal tax rate remaining unchanged at 40 percent. “However, there will be some compensation for the effects of inflation,” said Nedbank.
Consumers should expect increases in general fuel levies and excise duties on tobacco products as well as on alcoholic beverages. The rise of administered prices was a concern raised by BUSA, which said increases in prices for transport, water and electricity threaten to “upset a benign inflationary outlook at a time when the inflationary protection offered by the strength of the rand appears to be waning.”
President Zuma announced the creation of a R9 billion jobs fund in his address last week. “We believe Minister Gordhan should clarify the timeframes on the roll-out and the workings of the fund,” BUSA spokesperson Masego Lehihi said.
She further wanted to know if the fund was the mooted wage subsidy for first time workers, or if it will be used to fund new ventures or expansions that hold the potential for job creation.
Word is also expected on the R10 billion allocated to the Industrial Development Corporation (IDC) that will encourage as well as develop small to medium sized businesses.
In the Medium Term Budget Policy Statement (MTBPS) in October 2010, R811 billion was set aside for infrastructural development over a three-year period. While supporting the roll-out of large scale network infrastructure, BUSA urged for Treasury’s public-private partnership to be strengthened.
“We believe that reducing the costs of doing business in South Africa across the spectrum will be imperative. We need to encourage vigorous entrepreneurship, as well as a rapid improvement in our global competitiveness to [stimulate] job creation,” said Lehihi.
Nedbank, meanwhile, said the projected deficit for 2011/12 was likely to be only slightly lower than the 5.3 percent of GDP estimated in October. “Consequently, the financing requirement is not expected to vary greatly from R146. 3 billion predicted in the MTEF,” said Nedbank.
Law firm Deneys Reitz Attorneys said there would be no “unexpected shocks” when the minister delivers the budget in Parliament on Wednesday.
“There are no quick fixes and no magic bullet to achieving job creation and economic growth. The basic problems of lack of accountability and acceptance of incompetence cannot be ignored and must be fixed. Government initiatives are welcome but they cannot work in a vacuum.”
The firm expected Gordhan to outline measures to make provision for free education and to detail where the funding will come from, as well as include government’s intention to link social grants to the promotion of economic activity, the financing of the national health scheme and measures to combating corruption.
The minister’s address will come a day after the release of GDP figures for the fourth quarter of 2010.
The Bureau for Economic Research (BER) last week said recent economic data strongly suggests that GDP growth accelerated towards 4 percent quarter-on-quarter in the fourth quarter of 2010, with the more upbeat data following a loss of growth momentum in mid 2010. – BuaNews
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