South Africa: National Budget

2013/2014

Kevin Lings

Economist

February 2013

Open Budget Index 2012

0 20 40 60 80 100

New ZealandSouth Africa

UKSweden

FranceNorway

USSouth Korea

CzechRussia

BrazilGermany

IndiaChileSpain

PortugalMexico

ItalyNamibiaTurkey

ArgentinaGhana

BotswanaKenya

MalaysiaMoroccoThailand

Angola

VietnamNigeria

EgyptChina

ZambiaSaudi Arabia

Index out of 100

3.2 3.1

4.3

2.6

0.5

2.4

4.2

2.7

3.7

2.9

4.65.3 5.6 5.5

3.6

-1.5

3.13.5

2.5 2.73.5 3.8

-2

-1

0

1

2

3

4

5

6

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

%y/y

SA GDP annual growth rate (government estimate)

Forecast

8.210.7

9.0

5.7 4.8

-7.6

3.92.8 3.5

10.2

12.911.0

12.114.0 13.0

-4.3-2.0

4.56.4 5.7 5.9 6.5

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

%y/y

SA growth in fixed investment (government estimate)

Forecast

0.0

-1.7-1.2 -1.5 -1.8

-0.5-0.1

0.30.8

-1.0

-3.0-3.5

-5.3

-7.0 -7.2

-4.0

-2.8-3.4

-6.1 -6.2 -6.3 -6.0

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

% of GDP

SA balance on the current account (government estimate)

Forecast

5.6

-0.9

2.13.2

6.1

9.9

7.1

4.35.0

5.7 5.6 5.5 5.4

-2

-1

0

1

2

3

4

5

6

7

8

9

10

11

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

%

SA consumer inflation (government estimate)

Forecast

Government revenue and expenditure as % of GDP

24

25

26

27

28

29

30

31

32

33

34

35

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

% Fiscal years

Expenditure as % of GDP

Revenue as % of GDP

SA government’s budget 2013/2014

Main indicators. Consolidated budget

2012/2013 2013/2014 % change

R billion R billion

Revenue 887.8 985.7 11.0%

Less Expenditure 1 055.9 1 149.4 8.9%

Budget deficit -168.0 -163.7

Deficit as % of GDP -5.2% -4.6%

Deb-service cost 88.3 99.7 12.9%

SA budget deficit as % of GDP

% Fiscal years

SA primary budget balance as % of GDP

1.3

-4.2

-2.0-1.4

-2.5-1.8

-1.1

-0.4

-5

-4

-3

-2

-1

0

1

2

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

% Fiscal years

Fiscal balance as % of GDP - 2012

-10

-8

-6

-4

-2

0

2In

dia

Jap

an

Un

ited

Sta

tes

Bri

tain

Sp

ain

So

uth

Afr

ica

Ad

van

ced

eco

no

mie

s

Fra

nce

Can

ad

a

Eu

ro A

rea

Mexic

o

Italy

Em

erg

ing

eco

no

mie

s

Bra

zil

Ch

ina

Germ

an

y

Ru

ssia

%

Breakdown of SA tax revenue (2013/2014)

Fuel levy

5.2%

Individuals

35.1%

Excise duties

3.6%

Customs

4.7%

Other

1.7%

Other

2.4%

VAT

27.8%

Companies

19.5%

Budget revenue increases 2013/2014

8.6

8.8

9.8

10.2

10.8

11.0

11.0

11.7

12.0

12.0

0 2 4 6 8 10 12 14

Companies

Skills development levy

Customs duties

Excise duties

TAX REVENUE

Fuel levy

Total revenue

Individuals

Transfer duties

VAT

After tax proposals

Government budget revenue over-runs/under-collection

8.2 6.5 5.214.9 13.3

-5.1

20.9

41.2

29.5

13.4

-14.5

-66.4

16.6

-16.3

12.0

-75

-65

-55

-45

-35

-25

-15

-5

5

15

25

35

45

19

98

/99

19

99

/00

20

00

/01

20

01

/02

20

02

/03

20

03

/04

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

'20

11

/12

20

12

/13

Rbn, relative to the original budget and not the MTBPS

Main tax proposals 2013/2014Additions

Rm

Subtractions

Rm

Personal income tax

Personal income tax adjustment

Adjustment in monetary thresholds

Business tax

Employment tax incentive

Small business relief

Indirect taxes

Increase in fuel levy

Increase in excise duties

Other

LOSS ON TAX PROPOSALS

+5 830

+3 270

+2 065

+495

-7 382

-7 032

-350

-860

-500

-360

-2 412

Personal tax relief in previous tax years

Tax relief for individuals announced in the budget:

• 1998/1999 R4.0bn

• 1999/2000 R5.0bn

• 2000/2001 R10.0bn

• 2001/2002 R8.0bn

• 2002/2003 R15.0bn

• 2003/2004 R13.0bn

• 2004/2005 R4.0bn

• 2005/2006 R6.8bn

• 2006/2007 R13.5bn

• 2007/2008 R8.4bn

• 2008/2009 R7.2bn

• 2009/2010 R13.0bn

• 2010/2011 R6.5bn

• 2011/2012 R8.1bn

• 2012/2013 R9.5bn

• 2013/2014 R7.0bn

Tax reductions for individuals <65

3015

3015

2555

2075

1469

1032

1032

640

640

640

640

640

640

640

0 500 1000 1500 2000 2500 3000 3500

1000000

750000

500000

400000

300000

250000

200000

150000

120000

100000

90000

85000

80000

75000

Taxable income (rands). Tax relief of R7.0 billion in 2013/2014

Customs union payments by SA government

1.8 2.8 3.0 3.1 3.2 3.9 4.4 5.2 5.67.2 8.4 8.2 8.3

9.713.3 14.1

25.2 24.7

28.9 27.9

17.9

21.8

42.2 43.4

0

5

10

15

20

25

30

35

40

45

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

'12

/13

13

/14

Rbn

SA tax revenue as a % of GDP

19

Breakdown of expenditure (including interest) 2013/2014

4.1

6.3

6.7

7.4

8.2

8.6

10.3

10.4

10.5

12.4

12.9

0 2 4 6 8 10 12 14

Health

Defence

Education

Public Order and Safety

Economic Affairs

Total

Housing and Community

Social Protection

Recreation and Culture

Environmental Protection

State Debt

%

Budget Expenditure increases in 2013/14

•Consolidated national and provincial expenditure

0

2

4

6

8

10

12

14

16

18

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

%y/y

Increase in the cost of state debt

Index, 2000 = 100

SA government salary payments vs consumer inflation

90

130

170

210

250

290

330

370

410

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

SA consumer inflation

Government salary payments

+32.8% since 2008

+79.8% since 2008

160

200

240

280

320

360

400

440

480

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

Billions

Government salary payments

+7.9%

+6.3%

+6.5%

+9.0%+11.6%

+13.0%

Social grant beneficiary numbersNumber of people obtaining a social grant

• 2000 2 946 618

• 2003 5 808 494

• 2004 7 941 562

• 2005 9 406 829

• 2006 10 918 263

• 2007 11 983 141

• 2008 12 374 770

• 2009 13 066 118

• 2010 13 778 649

• 2011 14 624 580

• 2012 15 198 000

• 2013 16 095 000

• 2014 16 514 000

• 2015 16 875 000

• 2016 17 172 000

R billion

SA social grant payments

10

20

30

40

50

60

70

80

90

100

110

120

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

1

2

3

4

5

6

7

8

9

10

11

12

13

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

%y/y

Increase in the spending on social grants

Public sector infrastructural spending

70.783.6

130.2

193.0 203.6177.8

208.3

255.9 262.8 271.1293.2

0

50

100

150

200

250

300

350

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

20

15

/16

Rbn

In 2011/12 public sector

spent 91.9% of budget

R827.1bn

In 2010/11 public sector

spent 68% of budget

SA budgeted infrastructure spending over next 3 years (R827.1bn)

Local government

18.2%

Rand Water

0.7%

Public private

partnerships

3.1%

Provincial

departments

17.8%

CEF

0.7%

Other

16.0%

Transnet

15.0%

SANRAL (non toll)

3.8%

Eskom

24.7%

12.8

13.0

13.2

13.4

13.6

13.8

14.0

14.2

Q1 2

008

Q2 2

008

Q3 2

008

Q4 2

008

Q1 2

009

Q2 2

009

Q3 2

009

Q4 2

009

Q1 2

010

Q2 2

010

Q3 2

010

Q4 2

010

Q1 2

011

Q2 2

011

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

Million

SA total employment

Still 450 000 below the previous peak

0

20

40

60

80

100

120

140

160

180

200

2004 2005 2006 2007 2008 2009 2010 2011 2012

Number of protests per year

SA major service delivery protests

SA non-financial corporate deposits

250

300

350

400

450

500

550

600

2006

2007

2008

2009

2010

2011

2012

R billion

68

70

72

74

76

78

80

82

84

86

88

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

%

SA manufacturing capacity utilisation

Government gross loan debt as % of GDP

10

15

20

25

30

35

40

45

50

55

88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

%

SA government debt to GDP compared with other emerging economies

35

Government net domestic long-term bonds issued

-20

0

20

40

60

80

100

120

140

160

89

/90

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

Rbn Fiscal years

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$ billion, cumulative

2012

2010

2011

2009

2012 was a record year for bond inflows

Net foreign purchases of SA bonds

Government net foreign funding

-10

-5

0

5

10

15

20

25

30

35

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

Rbn Fiscal years

Debt servicing costs as % of total spending

5

7

9

11

13

15

17

19

21

23

89

/90

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

13

/14

14

/15

15

/16

% Fiscal years

Evaluating the budget

Negative Positive

Budget objectives clearly stated Yes

Budget deficit contained No

Revenue :

Appropriate composition Yes

No ad hoc measures Yes

Efficiency of collection Yes

Spending:

Appropriately allocated Yes

Public sector salary increases contained Yes?

Increases in public sector investment Yes

Positive impact on the economy:

Growth Yes

Inflation Yes?

Encouraging private sector investment No

Help encourage job creation Yes?

Provide poverty relief/welfare Yes

Encourage savings No

Encourage small business No?

Further exchange control relaxation No

Innovation No