Mixed reaction to Budget speech

Posted 25 February 2015 Written by Business Day
Category Budget

The ANC government was generally slammed for a Budget that saw personal income tax rates for the first time in 20 years, while not nearly enough was being done to tackle government spending and crony capitalism, according to opposition MPs, according to Business Day.

Opposition party MPs and some analysts expressed a general disappointment with Finance Minister Nhlanhla Nene’s budget speech delivered on Wednesday afternoon.

The following are quotes from the MPs immediately on leaving the National Assembly after the speech, together with some analyst comment:

Freedom Front Plus leader Pieter Mulder: "For the first time in 20 years government has had to raise personal income tax. In the past government succeeded, and even through the recession did not do that. I would have gone for a one percentage point increase in VAT (value-added tax) and there you would have had R180bn to R120bn immediately. Right now they are milking that small group of people who are working. Interest payments on government debt is now R153bn a year. Their credit card is maxed out."

African Christian Democratic Party MP Steve Swart: "We do not support the increases in personal taxes and the fuel levy. A significant amount is going to the Road Accident Fund’s (RAF’s) unfunded contingency of almost R100bn. What government should have looked at is supporting the fight against corruption, at R30bn a year, and then it would not have been necessary to raise personal taxes.

Congress of the People (COPE) leader Mosiuoa Lekota: It is quite clear he (Nene) was in a difficult situation, but he didn’t give us a clue how he would deal with it. He was bold in saying that our debt was growing ever higher but he did not say how he was going to deal with that. The worst thing is the recurring decimal of how they are going to deal with corruption, but they keep the machinery in place.

Ahead of Mr Nene’s budget speech COPE said that the party was "against tax increases in our constrained economic climate". Mr Lekota said in a statement that the public should see that rising taxes, collapsing infrastructure, failing services and stubborn unemployment together as constituting "a toxic mix that will stifle economic growth. Money in peoples’ pockets is what makes an economy grow.

"Another point: the first thing should have been to highlight the need to reduce the size of government. One of the biggest consumers of our resources is a bloated executive that is consuming and consuming and consuming."

Inkatha Freedom Party MP Narend Singh: "One percent increase in taxes is not unreasonable for South Africans. We are a bit concerned about fuel levies — 30c is okay, but 50c for the RAF is concerning. The R9bn that they will raise will just sort out cash flow problems with the RAF, without sorting out its R100bn contingency (shortfall)."

"Expenditure is of the normal kind but taxpayers need to get value for money. He said nothing on the nuclear build programme, could have said more on the National Health Insurance scheme and land reform is a paltry R4.7bn."

Economic Freedom Fighters leader Julius Malema: "We (are) disappointed that ordinary people will have to take responsibility for the electricity crisis and that personal income tax will have to rise.

"We are very happy that he acknowledged that transfer pricing was a problem as we were the ones who raised it. We are supportive of cutting of government expenditure especially for political principals, however, we never see a report back on it."

United Democratic Movement leader Bantu Holomisa: "There is a worry that there is a projection that government debt will rise from R1.8-trillion to R2.3-trillion in two years’ time. And now we are being asked to pay that money through taxes.

"But the question is what is this money being used for? For how long is this money going to be used to pay for consultants and special advisors to the ministers. We don’t know what is being trickled down to the ground where it is needed."

Democratic Alliance (DA) MP Dion George said: "We are very disappointed with this budget. He mentioned getting rid of the cadres who are deployed in the public service sector and the inefficiencies therein. But he came up with nothing on how to solve it. That way the public sector wage bill can be thinned out.

"Cutting taxation for small businesses we welcome. However, he continued to use ANC (African National Congress) ideology that puts the state at the centre of the economy and this includes doing nothing about the wasteful and inefficient state-owned enterprises."

DA parliamentary leader Mmusi Maimane said on his Twitter handle on Wednesday that there was some "good news in the budget". He said that the spending on education and health was "welcome". However, "the bad news was worse". He cited examples of this as the expected hikes in fuel, energy and personal taxes.

North West University Business School professor Raymond Parsons: "If you consider the tailwinds and headwinds and whirlwinds he has to contend with both externally and internally, I think he did a very good job within the framework of the National Development Plan.

"There were a number of important proposals, especially for small businesses, that were quite significant. He scaled down his growth forecast to 2%, the question now is can he take those proposals and push for the growth that we really need?

"The weakest link for the economy is the question of the supply of energy. That is the single biggest question for business too. Throwing money at Eskom is not enough, there needs to be structural changes to back that up and that is what business is looking for to build its confidence on.

Independent macroeconomic research company Capital Economics said the increase in consumption taxes to limit SA’s fiscal deficit was likely to add to the headwinds facing economic growth. However, said the firm: "The government’s new economic forecasts do at least look more realistic than in the past."

The National Association of Automobile Manufacturers of SA welcomed the budget announcement, saying that on balance it should contribute to improved investment sentiment. "Overall, the budget proposals — given the circumstances confronting SA at this juncture — appeared pragmatic and reasonable," Naamsa president Johan Van Zyl said.

HSBC economist David Faulkner: "Government raised taxes on personal income and fuel … to support its fiscal consolidation efforts. These tax changes raise an additional R16.8bn in revenues in fiscal year 2015-16, and in combination with spending restraint, help narrow the consolidated budget deficit from 3.9% of GDP (gross domestic product) in fiscal year 2014-15 to 2.6% of GDP in 2016-17.

"The country’s weak growth outlook amid energy supply concerns has made the consolidation task more difficult and several risks remain, however, we think these fiscal adjustments are necessary for SA to start stabilising its debt levels and make the public finances sustainable over the medium term."

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