Tuesday, 5 March 2013

Annuity settlements Facebook Status

GENERAL INTRODUCTION TO THE SUNDAY SERIES

People tend to reserve their Sundays to include something different from what they might do other days of the week. No different here in the Facebook world, when I take a break from writing about sustainable development.

Today I'm striking out here on a special path that will be reserved for Sundays. We're dedicating Sunday time and space here exclusively to matters Palestine, to everything and anything Palestinian. It is a dedication based on the insight we arrived at 10 years ago in our Dossier on Palestine collective about Palestine being "a land, a people, a history and a future".

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Welcome to the first installment of the Dossier on Palestine on Facebook. This series continues in online format the line of work opened up by the original printed “Dossier on Palestine.”

That 96-page colour supplement was published in Shunpiking Discovery Magazine just over 10 years ago in Halifax, Canada in October 2003, by New Media Publications. As the editors wrote back at that time, its direction was to excavate the history of the Palestinians “as a land, a people, a history and a future.”

The following text appeared in Appendix I of Adolf Böhm, Die Zionistische Bewegung
vol. I, pp. 704-9. English translation by Norbert Scholz. This version of the text is reproduced from pp 44-47 of Dr Walid Khalidi’s article “The Jewish-Ottoman Land Company — Herzl’s Blueprint for the Colonization of Palestine”, Journal of Palestine Studies, Vol 22 No 2, pp. 30-47.

The document outlines a deal cooked up in 1901-02 between Theodor Herzl, an Austrian journalist acting on behalf of the “modern” Zionist movement launched with the convening of the First Zionist Congress in Basle, Switzerland in 1897, and the Sultan of the Ottoman Empire. European Jews would settle Palestine as agents of the “Jewish-Ottoman Land Company” (JOLC), much as English people could settle in India on terms set by local Indian princes and the East india Company. As Dr Khalidi outs it: “if the Basle Program shows the tip of the Zionist iceberg at the turn of the century, the JOLC draft comprises its bulk”.

This document, and how it came to be, shed light on a little-discussed dimension of Great Power manipulation of the post-Dreyfus atmosphere surrounding the Jewish Question and the emergence of the reorganized Zionist movement as a player within the Anglo-German inter-imperialist rivalry that dominated Great-Power politics of that time.

Herzl’s idea was to link the Zionist movement’s future to that of the Rothschild interests that had financed the Suez Canal. But for Herzl to bring the Ottoman Sultan on board would entail presenting his movement as a a front for potential Rothschild investment investment in Ottoman projects. The hydra-headed character of the Rothschild bank was already a well-understood complicating fact of European politics: with major bases in Frankfurt, Paris and London, it was uniquely positioned to render the armed forces of all the contending European powers dependent on its favor, possibly even arming both sides of major conflicts as it eventually would do with Britain and Germany in the First World War.

In the end the Ottoman Sultan declined Herzl’s bait/offer, and what the British Empire subsequently did with the Zionist movement is well-known. The fact that the British Empire was not the Zionist movement’s first choice of bed partners, however, has become buried, along with the fact that the Turkish state has never taken its snout out of the affairs of the Arab and other Muslim peoples of the Middle East. Recently, some confusion has broken out over what the present modern-day, post-Ottoman and possibly even post-Ataturk government of Prime Minister Recep Tayyep Erdogan in Ankara expects to obtain from the imperialist world system today with the tacit support of the Israeli Zionists. It is with the intention of throwing some light on a long forgotten cat-and-mouse episode involving the Ottoman Turks and the first Herzl-led leadership of the modern (but still pre-State of Israel) Zionist movement that I am publishing this particular document today for readers to read, pass on, discuss and make comment.



AGREEMENT
concerning the privileges, rights, liabilities, and duties of the Jewish-Ottoman Land Company (JOLC) for the settlement of Palestine and Syria.

His Majesty the Sultan grants and guarantees the JOLC the following special rights and privileges for the purpose of settling Palestine and Syna with Jews who assume Ottoman citizenship [in order to enable them] to open up the natural food and occupational resources of these countries under the following conditions, and in return for assuming the obligations listed below.

I. A special right to purchase large estates and small farms (Jifliks of whatever kind), and to use them for agriculture, horticulture, forestry, and mining (the latter without having to purchase the entire surface of the ground to be used). On these areas [the JOLC] may build all installations, roads,
bridges, buildings and houses, industrial and other facilities, which it considers appropriate, without being restricted in the choice of means to be used, and without having to apply for special permits. [The JOLC is entitled] to
drain and utilize swamps (if there are any) by planting or in any other way, to establish small and large settlements, and to settle Jews in them.

II. The limited proprietorship of all estates and landed properties belonging to His Majesty the Sultan in the above mentioned "Privileged Territories." [The JOLC shall express its] eternal recognition of his supreme proprietorship through a permanent annual payment of 3 Turkish Piasters
per dunum. This refers to the areas which [the company] has the right to utilize according to article I of this agreement. Likewise, a special right to occupy all those areas for which nobody can prove legal title or the right of
ownership. This occupation has to be carried out in the name of His Majesty the Sultan, and the occupied areas have to be treated like the estates mentioned in the first paragraph of this item with regard to the supreme proprietorship, the annual payment, and the utilization.

III. The right to exchange economic enclaves of its territory, with the exception of the holy places or places already designated for worship. The owners shall receive plots of equal size and quality procured by it [the JOLC] in other provinces and territories of the Ottoman Empire. It will not only compensate these owners for the costs of resettlement from its own funds, but it will also grant modest loans for the building of necessary housing and the acquisition of the necessary equipment. These loans are to be repaid in
equal installments over several years, and the new plots can be used as collateral [for the loans].

IV. The right to purchase railroads [Bahnen] already existing on the territories of the Company, including all rights, privileges, and any other special authorities, from the legal owners by means of free agreements. Moreover, an
exclusive privilege to build and operate such railroads and railroad links with the same special rights and preferences which have been granted to any project of this kind in the Ottoman Empire, or will be granted in the future. Likewise [the right] to build canals between rivers or to the adjacent sea, to construct shipyards and harbors, and to allow navigation in them by its own or others' commercial ships; in general, [the JOLC] may use the rivers, lakes, seas or parts of seas which are on Company territory industrially and under special law, and utilize their resources.

V. The JOLC will take over taxation in the "Privileged Territory," stipulating that it [the company] is entitled to reform taxation and make it more efficient. The purpose of this measure is [to enable it] to cover its needs resulting from its liabilities mentioned below, as well as for the payment and amortization of the annuity-loans (mentioned in article VIII) which the JOLC will take out, and for which the "Privileged Territory" will be charged for the account of His Majesty the Sultan. On the other hand, if it imposes
customs duties, it has to respect the international treaties of the Ottoman government, adhering to the customary procedures and amounts.

VI. Within its "Privileged Territory," and under the protection of His Majesty the Sultan, the JOLC has complete autonomy, guaranteed by the Ottoman Empire. But it is obligated to ensure on its territory the maintenance of law and order, as well as the personal security and the property both of the
inhabitants and of peaceful visitors and groups of pilgrims from foreign countries. [In addition] it has to secure the borders against attack, and to equip and pay from its own funds the officials, civil servants, policemen and constables, who are required for the administration of justice and public affairs. The president of the JOLC is at the head of the administration (article IX).

VII.

A. All Jews whom the JOLC has settled in the "Privileged Territory" become subjects of His Majesty the Sultan by virtue of their acceptance as colonists or their employment as functionaries; they enjoy full Ottoman citizenship.
By joining the JOLC as colonists or as its functionaries they ipso facto abandon their former citizenship. The same applies for the Jews who are already settled in Palestine and Syria, who consider themselves protégés of the JOLC, and who sign a certificate of admission of the Company. The
JOLC is responsible for keeping the legal register, as well as for building and maintaining schools and institutions of higher learning, where the children and pupils must be educated not only in their national language and history, in religion and general science, but also in physical education and patriotism in order to make them reliable Ottoman citizens and grateful subjects of His Majesty the Sultan.

B. Every protégé of the JOLC is subject to military service in the Imperial Ottoman Syrian-Palestinian Land [I.O.S.P.L.] or Navy [S.P.N.] division: Upon reaching the age of 19 he is subject to a year-long service in the standing army and a 1/2-year long cadre service [Cadredienstl; until he reaches 26 he serves in the militia [Landwehr], including three weeks of maneuver per year; finally, between the age of 27 and 35 he is part of the general levy (Landsturm]. The two divisions mentioned above are to be entirely composed of
Jewish soldiers, and foreign nationals can only be accepted temporarily as instructors and trainers. The JOLC is responsible for equipping and paying the I.O.S.P.L. and the navy divisions. The formation of the land division is to
begin immediately, the formation of the navy division within ten years.

C.
During peacetime the trained troops of the standing army and the cadres of the militia have to secure the borders of Syria and Palestine against attack; they have to be used for the maintenance of law and order in the interior of the country. In the case of war with a foreign power the entire
militia can be used for the defense of Asian parts of the Ottoman Empire, to be determined in more detail.

D.
In the latter case, the Sublime Porte is responsible for the equipment and payment of the troops for the duration of the war. During peacetime, the Sublime Porte also provides the JOLC with the means for the required military academies, barracks, depots, weapons and ammunition factories, as well as ships [Sch.] which the navy needs in the initial period for training purposes. The general levy may only be used for the defense of Palestine and Syria in the case of an actual or impending invasion of these territories, and the S.P.N. [Syrian-Palestinian Navy] division may only be used for the protection and defense of the coastal areas of the countries mentioned above.

E.
The Sublime Porte will repay the money which the JOLC advances for the S.P.L.D. [Synan-Palestinian Land Division] of His Majesty the Sultan under item D. paragraph one, including an annual interest of 4 percent, not later than at the contracting of a subsequent S.P. [Syrian-Palestinian] annuity loan (article VIII).

VIII. Using as collateral its income, privileges, and other capital, which are guaranteed by the Sublime Porte, the JOLC contracts an annuity debt of 4 million Turkish pounds, which shall be subject to 4 percent interest per annum;
after the first ten years, payments of principle shall begin, which shall be paid off within a period of another forty-five years. The loan revenues [interest and principal] shall be paid to the Treasury of His Majesty the Sultan, or upon his direction to another account to be placed at his disposal. In
order to ensure the punctual payment of interest during the initial period, [the JOLC] will be exempted from one quarter million pounds, while the systematization and regulation of the income of the JOLC is being carried out. But this amount has to be considered as an advance to the JOLC, and must be repaid within five years. After thirty years, another annuity loan of the same amount and subject to the same modalities shall be contracted. But first of all, the revenues [interest and principle] from this loan have to be used to
refund whatever money may have been advanced by the JOLC under Article VII.D., if that money has not been repaid at that time.

The JOLC will also be entitled to take out other loans, in the form of bonds for public purposes, or to issue preferred shares to create or improve industrial and transportational facilities. The former have to be secured by the JOLC's general revenues; the latter by the individual enterprises. However, the "Syrian-Palestinian Sultan bonds" have priority over all other [forms ofl loans by virtue of their collateral, being backed by the revenues of the "Privileged Territory."

IX. The president of the JOLC, who is elected by this company and approved by His Majesty the Sultan, enjoys personal immunity and is subject to the special protection of His Majesty the Sultan, to whom alone he is accountable.
Within the "Privileged Territory" he is the deputy of His Majesty the Sultan. He has to send a permanent representative to the Sublime Porte; [this representative] alone is to convey the wishes and orders of His Majesty
the Sultan to the president, as well as the reports of the president to His Majesty. This representative can only be a Jew or a Muslim.

X. As the holy site of all religions, the city of Jerusalem is exempt from the special rights of article 111. The protégés of the JOLC there are still subject to its jurisdiction and administration, and it [the company], like any other
Ottoman citizen, can make acquisitions there. But the supervision of the holy sites is left to the Sublime Porte, and can only at the wish of the same be taken over by the JOLC. With respect to taxes and duties, Jerusalem is also part of the "Privilege Territories." But [the company] is responsible for equipping and paylng the troops which the Sublime Porte provides for guarding and protecting the holy sites.

XI. His Majesty the Sultan exempts the JOLC from 40 percent of the permanent payment which it has to submit according to article II. [This is meant] as a partial compensation for the means which according to article
VII.D., the Sublime Porte during peacetime will grant for the Syrian-Palestinian divisions of His Majesty the Sultan for the purpose of establishing military academies, depots, ammunition and weapons factories, etc. The remaining
60 percent, however, has to be paid on time to the treasuries of His Majesty in two equal semi-annual installments.


Part 2.

Zeez Time Sentiments Theory for the Muslim Management Faculties globally in the art of war in Time.

Teamwork as against anti-teamwork (Yaasin)

The game of the mind in the art of war. The ultimate victory to an army. Ordaint upon a general of a Muslim army that are betrayed by his soldiers’. A battle lost as leadership is questioned. To most general in this world, teamwork is what he needs in seeing that victory are won .A battle are fought gallantly but the war was just a forgotten time piece of a brilliant general.
The Palestinian war is for the right of ownership of their own land is a steadfast remedy to a weak general of the Muslim army. Motivations after motivations could not outpaced the minds of the general of the people of Israel. Maybe, their allies are winning it for the Israel and not the Israel themselves. For the Muslim army, the used to be the blue eye boy of the Americans and British allies are enemies now that display insensitivity for the plights of their used to be friends as greed and creed took tolls on the victorious allies general of the Second World War. Their pride today is out washed by their wealth and arrogant new friend in Israel.
In fact, it is the sign of the breakups of the allies general and this should be an advantage to the Muslim general. Management and their strategic art of war system. Their antagonizing defeat through the killings of the innocents will create another wave of hatred by their former enemies which have applied time chronolism well through their present political allies’ generals. In it, countries that used to favor Americans and the British Empire are now working openly with Germany and Japan. This includes bi - lateral economic and social ties.

Teamwork from every rank of the army is what a general needs in preparation for its ministry of defence. The art of an efficient management magneto, clean image, discipline, fluent and decisive in administration of its government will ensure a victorious actions through the end.

The allegiance of good teamwork on the Moslem league have seen a diminishing slogans and advertisement campaign that failed the heart of every Muslim portrayed by their own arrogant behavior by turning their back on the hands that gave them life as having to consent and console is indeed favoring only for the hardship living allowances.

The verse of Yassin sustained the concept of “Kun Fayakun” which meant, be it as what it will be could not be a diminishing voice of an ailing army but actually a solitude of wisdom of Allah s.w.t. and his follower which includes the people of the holy Bible, Torah and Zabur. The art of the Islamic Strategic predatation system in war, that are obligated through a cohesive teamwork and disfavor anti-teamwork of all religions from Allah s.w.t. A verse of the creator in seeing his army battling and winning through all the obstacles .The loss and wins of an army general and its army depicted in a real business organization profit and loss account when an initial forecasted profit has turn out to be a real loss. A test to the owner and workers in the art of war and solitudes of providing remedial actions in times to come.

Being obligated in a vow to defend their rights and honor till the last breath indicates a forward outlook for the business future .In business organization, it is termed loyalty to your fellow workers that have supported you in providing a verbal training and advice when you are faced with uncertainties as the losses incurred by the owner are in fact losses that his workers have to accept as in leadership of the gallant army .The privilege of a treasuring the gift of a hand that help another should be up most respected and not to be treated the opposites as the concept of Kun Fayakun obligate everyone to share the profit and losses simultaneously . Like talking behind a good friends back after he has help you would not be a good teamwork example that are required in the organization .This would demotivate teamwork .This is what “Kun Fayakun” stands for in the Islamic Strategic art of war system. It stood for a cohesive teamwork and not anti-teamwork. It could be a forsaken purpose into sidelining our differences when having to serve an organization objectives .Coming closer with one another in giving a team of soldiers the motivation they need in the art of war is similar to our business organization which requires suggestion for improvements.

In view that the concept are less spoken in management forums globally, non knew of its advantages .However the Islamic management art of war predatation system has been here over centuries ago. It has three distinct criteria that encamp and engulf the true meaning of teamwork and what teamwork could do. The vital criteria would be in ensuring victory .It requires synthesis of options in predatations and converting retaliations into a defensive attack is its vital criteria. It construed human to individually gain their knowledge and from knowledge obtained, objectives can be coordinated to be walk simultaneously with objectives of the team in the organization or army before leadership role takes over in granting them with rewards and benefits.
The three distinct criteria are,



The criteria of the Yassin Teamwork in Zeez art of war strategic predatation syst

1. The solitude of believing in life hereafter

In human, there is one distinct similarity. The similarities are there is another life after this world. The management purpose of incepting such awareness is that there are no human that are invincible and even an enemy has his own weaknesses. It creates a purpose of humbleness in leadership of a general as there is more purpose in life apart from having to fight a losing war due to pride. Pride is not an advantage. Being brilliant and decisive would be better than having to fight for pride. These continuous mind games will indeed prepare a general with thousands of options .Options will then be weighted into serving a military purpose formulated as a team goal in organization .From the whole process, the charity of the innocents will be an upmost importance as war are fought in cities and not an open battlefield anymore .Strategies must be enhanced through knowing what lies beyond the ultimate horizons. It is similar to business organization as every product has a life cycle. A new product could not sustain competition if their advertising departments are not proactive to their competitor’s strategies. Knowing your limitations and strength will outlast your product brand to a longer mile. This will be important as profit could be based on a short and long term plan. Remedial and options will enhance strategies with amendments and creative thinking skills. Similar to the tactics of war. If it needs to be fought in the cities, evacuations of its civilians must be given the highest priority in the decision making hierarchy. As the purpose of war is to protect the life and served the objectives of the country, through evacuations, the purpose of protecting the civilian’s life will be achieved and the concept of Kun Fayakun is acknowledged and served.

The Hamas military strategies. The prayer. The fast and many of the ethical. They still could not win. Why? A careless art of war strategies being applied. It should be the Ministry of Defense of the Palestinian government or it’s a political turmoil internally?

2. The solitude of believing in the concept of Kun Fayakun

These concepts should not be misread and applied wrongly as it could end up on the wrong end of what a general wants .Similar to business organization. The above concept is to safeguard ownership or entity or life if it was a war .Like the war in Palestine that wants their entity of land be return to them .It is similar to business organization where each business entity are segregated and given ownership based on laws. Do you want someone to come into your office and say that the business belongs to him as his name is similar to the name used by your company? You would surely deny his request even if you have to kill him for instances. These are insanity. As such, the above concept entails a significant function of a military leader into focusing as to what he wants. If he wants to win a war, then his focal point is only on winning the war in every aspect of his functions. Even by saving life is considered as winning the war. Sentiments of politics and many others should not be included, as war is not a place where heroes are made. unless it is for a strategic purpose. In the art of war, the situations are similar to the followings.
A general is given an option as whether to undertake peace talks over a prolonged war. As his aim is to defend his territory, he was not given much of options as his enemies are wheeled and well prepared and equipped. In addition, the target is an open city where millions of civilians live. In the art of war, the general should have accepted the offer. The criteria of Kun Fayakun are not a privilege in commanding a role of Allah s.w.t. in promising heaven to your army or civilians. It entails the need of wisdom in leadership. In addition it entails the needs to witnessed what is the level of damaged done on his part as a truce pact will give a general ample time to reorganized and saving life is a purpose of an army. Life of his civilians living in a country. .In view that a peace talk does not command respects from his army, he stood behind his decision and accepted the truce.

Could the Palestinian apply their art of war strategy, if plights in politics are a mean of cosolidation? Strategic acceptance of the true misconceptions in the concept of Kun Fayakun.As failing to plan is similar to failing a plan.

The time allowance was then put to good use. He analyze his situations and his army .Command a new plan if necessary and prepare for the worst if another attack falls in or retaliate with a similar strategy if necessary .Knowing the need to defend and converting defend to attack is important. In predatations, what comes need not be a disadvantage to his military command but more of a decoy to another plan that he has in mind, which normally falls on a similar predating path as his enemies. Strike and win points rather than incepting and hoping the attack will ease due to fatigue of his enemies. The predatation purpose in defending his autonomy in accordance to the Geneva rules for instances will allow access of other allies into seeing a disintegration of human ethics on his entity that are being predated openly by forced would also be a winning strategy if he has what it takes in winning the heart of his allies .In other words , converting a defensive strategy into attack through mass media reports of the insane killings made by their enemies on civilian life. A tactical decoy that could place the predating country into the world map as one of the highly dangerous humans in the world would be a great attack in retaliations. This is an example of the art of war at its best.

If his actions were of significant to the attempt of a conservative leadership style of management, many would favor to take side on his plights. These again is a strategic move in the art of war .Please refer to the various strategies based on the Islamic perspectives.

!. The Sarawak Time to Ball Womb and Wind over Time intellism that could be applied in organization and strategic art of war.
2. The Sarawak Eight Paradigm shift of Time (Mind) Management system.
3. The Sarawak Compassionate Based Management System.
4. The Zeez Dominant Neutral Time management system.
5. The Zeez Orange and Banana Management system.
6. The ZDM Decision making and reason articulation system
7. The Time Chronolism technique and many more.
3. The solitude of our purpose in life

The knowledge of knowing what your purpose in life is will command a better leadership role in an army. The chaotic and confused leader of an army will denounce victory upon a sight of his enemies. In other words, they just surrender or run from the battlefield. The none performing general on the other hand will sustain delegations all the time without control. What it meant is that, the hierarchy of command are delegated to every level of his army. This means everyone is a general. The purpose might be, if the general are captured, he might just say that he is not a general.

The poor planner type will see disastrous outcome as inevitable even before a battle .So what makes a good general be better than a general of his nemesis.

The answer is a Task performer commanding a good leadership quality and knowledge in the strategic system of predatation and defence in the art of war.

In all, to me , the Palestinian country have won the war through Strategic Defence and Predatation skills in managing decision that are social, religious, values and belief oriented. In other words, they won the war without having to fight with weapons but just good time management. The answer could be that Muslim intellectuals have no other choice but to accept the concept of living in good Time as we are weak and disorganize or is it that we are forbidden to challenge the verse of Allah s.w.t.

“Man acquire knowledge and experience (Action) through reason (Reason) and this help him to understand and control (Caused) his environment. It gives him sense of power. Faith (Purpose) represents a moral framework within which he conducts his life. That framework cannot be demonstrated or sustained by reason alone. An act of faith is essentially as an act of acceptance which inspires a course of conduct and this is what gives direction and purpose to life.”(Al-Baqarah, Verse 30-34)

Look at the present rate of war inflicted countries in the world. Iraq, Iran, Palestine, Afghanistan, Bosnia Herzegovina and Pakistan to name a few .In an organization sense, it is similar to the conflict of promotion, acknowledgement and rewards in the non Moslem countries. Why? The answer is due to the above verse. The verse of reason or reflections. In the Financial sector, it could be which Islamic theory is more acceptable, whether Pakistan, India, Malaysia or United Arab Emirates. Maybe some never like to questioned or asked about their promotion chances, or even speak about their talent apart from leaving it to the audience to judge it as it is not for Moslem countries maybe. Some may prefer to keep silence about it or be a self proclaimed Management philosophies like me. In all, Muslim is at loss due to our failure in understanding as to the meaning of what are Time ( jail, money, evil, monkey, mayas to name a few) and its relationship to our purpose in life in that we need to fight the a war with weapons of mass destructions like seeing a nuclear bomb exploding in Israel . To understand this relationship better, lets looked at Table 1 below, as to understand as to why do subordinate tend to show or depict a silent faced when it come to promotion, reward, bonus and other fringe benefit.

ITEM EXPLAINATION RESULTS OF ACTIONS

1 Purpose with Reason with Caused and Action equals
TASK PERFORMANCE
2 Purpose with Reason with Caused but without Action equals
NON-PERFORMING
3 Purpose with Reason without Caused but with Action
TROUBLE SHOOTING
4 Purpose without Reason with Caused and Action equals
POOR PLANNING
5 Reason with Caused and Action but without Purpose
CONFUSION AND CHAOS

Table 1 – Relationship of Time management to Purpose, Reason, Caused, and Action

Let us take the above analogy and placed it on a leader or manager in any organization today.

Task Performer

It is all about the right purpose, the exact caused the perfect reason and a perfect action. A right purpose is important as it carry the weight of all action. The caused is somehow referred to as the pattern of how the action will be done so as it is alienated to the initial purpose. Like the perfect reason symbolizing the heart of all action that must be pure , as it imply the caused and purpose of its existence in the first place , as reason must be pure and clear as it weight the limitation that one has. For example, if you only have RM 50.00, you surely would not want to carry a dream of buying a car, as it is an arrogant reason application, which could lead you to apply the vengeance of reason in getting it. For example by stealing it for your girlfriend. Finally, action must be controlled, as it should not deviate from the purpose. In other word, by stealing a car to fulfil a deviated purpose of proving your love to your girlfriend is forbidden, as the initial purpose is only to spend RM 50.00 for item that is within your limited resources, even though your wants are unlimited. Another illustration as who are the Task performers can be ascertained as follow. A manager underlines the objective of the organization, with a sole purpose of making profit. The direction of action of all subordinate are based on a reason of seeing the capital injected into the organization amounting RM 1 billion will generate profit. The caused are by way of Planning, Leading, Organizing and controlling all action of everyone, so as it would not deviate from the main purpose. These are the task performer.

On the other hand, the Non - Performer

It is all about the right purpose, the exact caused, the perfect reason but without action. For example, the reason for the government allocation of the 20 acres town land is for the sole purpose of developing 20 stories Trade Centre building that could accommodate 1000 visitors at a single time and the caused was in line with the Malaysian Trade Fair to be held in 2 years from now. However, the responsible parties did not act on it in that the organizer was penalized for not completing the project as plan. Brunei Darussalam replaced Malaysia instead. These are non-performer.

Another reason finding for an annuity settlement? A standoff. The cold war. The cold shoulder. Similar to America and Russia. What happens at the end? America got neutralized and Russia got disintegrated? By whom? By the Al - Mighty Creator of mankind. Now , it seems like Palestinian and Israel are paying for it. A fight for love and a glorious country. In another, is just a man who has nothing to do? A general who made a lot of mistakes. A reason for all in the world to use as a decoy to their unethical actions. The victims will win. The unethical human will make profit out of him. A ball to ball situation.

The human who watch it just made a careless whisper.

Management just give you an answer as how far human would go. In the art of war, as a million tons of ammo could not be the determinant to a winner. The looser is the one who carries the weights of the past loosers and weights of hopes to a new purpose for the disintegrated and neutralized leaders in America and Russia.

In a war, a general just want to achieve his mission. In the art of war, mission is only to stop, disarm or eradicate the weapons and its carriers. Killing is not part of war. As vengeance are wars of pagans.

WAR. If the word is read from the right to the left, like how we recite the Quran, In Islam, it stands for Romance, Action and Womb. Make love rather than killing one another as it’s the Men who likes to fight. Another miracles that Men did not see or ego maybe.

Love always.

Aziz


Trouble Shooters

It however entails the right purpose, the perfect reason, and a perfect action but without an exact caused. It is like living without any purpose in life. An example is a company that received numerous rejection and complaint of its product. The Production Manager who received the rejected product wants further validation before a new replacement can be made .The purpose was clear as the customer want redemption from the manufacturer. However, due to the misfortune of the organization quality control and planning department, the defect product was said to be produced from their manufacturing site in Africa when it was produced in Malaysia. As a result, the replacement and redemption process took 6 month to process. These trouble shooting incident have caused internal conflict within the organization headquarter and their African counterpart.

Results of a general who applies Trouble shooting today, equivalent to a devastation outcome in the Palestine war .It would be a similar outcome if a poor planner general takes over.



Then we have the Poor Planners

Those who have the purposed, the caused and action but without any reason. The result will be wastage in Islam, which is forbidden, as Reason is compulsory in initiating any act in Islam (verse of reason). A good example would be a company that have made a profit of RM 2 million last year and suggested to improve the corridor of the office building as the present corridor have been out of fashioned and style and many complaint was made by their client about the situation .The wall need to be painted and tiles need to be fixed against the dirty tiles where walking can be made more comfortable. The administration department was required to open up the tender for the renovation work and it was estimated to cost the company RM 100,000.00. Upon completion, the management was surprised with the outcome. The tiles used are of poor quality and design. The new corridor is now made into a VVIP hall for visitors and the open concept are now walled with glass. The management was disappointed with the result as the previous corridor was much better as it allow clean fresh air and provide a relaxation corner with a garden view. These are result of poor planning which result to a continuous feeling of dissatisfaction even though their company registered a huge profit.

The wrong Ball I guess. But the womb has to incept and accept it. Misconceptions or family planning pills? Who did the planning any way? I only knew who balled her!

Finally, we meet individual who have the perfect action, the exact caused, and a justified reason but this time without any purpose. This confused leader creates chaotic environment for everyone.

For example, a journalist was sent to Iraq for a reason of covering the situation after the war. The caused is to underline the UN charter about the humanitarian aid in Iraq. The action of the editor is considered important as the public need to know about the situation in Iraq. However the journalist soon discover upon arrival in Iraq that he need a United Nation pass in order to allow him to move freely and obtained security surveillance from the UN peace keeper force. As a result of this oversight, he was captured by the rebels and the immediate reaction of the editor was by disowning knowledge of any directive ever given to the journalist .This is an action without purpose of safeguarding the life of the journalist and will result in confusion and chaos to both individual and resulting in another conflict that has no end.

Total banned on cigarettes! Such a confusing decision .Who did it anyway? A guy from Marlboro Company I guess. Why? He quit smoking!

If the above are to be made a benchmark for promotion and reward, would it be fair to say that ,if the purpose of the appraisal are clear, the reason are genuinely honest, the caused are transparent, then the final action will surely be a pleasant news to the hearing of all walk of workers in the organization hierarchy. As I have mentioned earlier, Time Management can caused conflict and other negative end in an organization as it could work in both direction simultaneously.

For instance, helping a friend to be a guarantor to a loan could land another friend in court dispute if the principal borrower failed to pay up the loan.

This is fair under the Principle of Natural Justice or isn’t it? It is similar to sentencing a mother of a killer by hanging. This does not mean that living in a harmony of Time like “Bermasa” is unethical say some.


Who are these few some? Only that, the guideline above should be made a point of discussion and reference in solving problem or conflict even though some Time Chronolies, the Nepotism and Cronies experts may entails otherwise. Why is it so? My answer to it is quite simple. It is only a Malaysian made Management Theory and not from Samuel Certo or Henry Fayol. Only a Malaysian knows how a Malaysian thinks. As Time Predator lurks in every corner of any organization, the plight for help or assistance by the victims, would content a fair purpose, after all, they are their victim in serving both their quest in quenching their thirst. In this case, the Time predator action will always contradict to human purpose in life. If a purpose of the friend is to help a friend in need , and the purpose of the borrower , is to put the friend into legal trouble ,so as he or she wouldn’t be given any priority in promotion or rewards, then it would surely be of a conflicting situations, if he or she did got promoted. A greater slogan technique which are explain later in this write up. However, why must it happen? In today’s modern world, everything is possible as Time generates Time applicator of all sizes and the bottom line is that everyone want equity be served, as fairness and justice are work and walked in both directions. As for the victim of the Time predator, nothing much is to endure, except that they will turn to the vengeance of reason as a cause of action. Maybe seeking fairness of treatment again through plight management. What if he is weak? What would happen to them? Then he will be termed as the victims of the TC. That is why I termed them as the worse nightmare of the Con - Agent of TC, Cronyism and Nepotism (the old version is Clicks). If only they are matched with predators of their own sizes, overweight could be reduce as it was replaced by the heavy weight category .These would be fair, to the victims. In the local sense, it is termed as “ Kalaulah buku bertemu dengan ruas, alangkah baiknya”. It is typical, as victims seeks only the purity or clarity in Time application from the grace of the Creator rather than human, as patience and tolerance are seen as the only way out system .Unless someone heard about it and gave us a helping hand in putting things on a fair and equal platform which are termed as the Console Base. For being a victim of biased practice, a person could only savour the quench of the sweetness of victory as Time can synchronise event of the future as well. Let’s read a conceptive scenario when misconceptions are said to be the cause of failures in getting the message across. For human to be task performers, only perfectionist barricades our noble purpose .The misconceptions of seeing the task performers as a perfect human would scare most of other human as the word perfectionist will carry the burden of being affiliated to the score of Jumping to conclusions methods which has made many homeless and divorced in the organization or country .Normally, their speech or words of advice will only leave us on the wrong end of human analogy. For instances, the Sarawak Time To Ball (Womb and Wind) over Time Intellism system that I practiced , when applied by my superior , will only see that I don’t need to buy a house, get married and have children. What if it is applied by a Political Leader?

Picture of a perfectionist today after a global mishap! Still the uncertainty face! The hard truth is that, they still need further information’s but where are they? How hard is it to ball the wrong womb and womb the wrong ball? Over Time or is it someone told me over time!

Ball to Ball are misread as “Blood for blood”, man to man and as reason accumulates, the devils shifts in, and finally, they became homoSalman Khanual addicts .To a woman, womb to womb, it is similar. A blood for blood situations initially and finally becoming a lesbian couples.

Picture of leaders with certainty. However, they still talk about homoSalman Khanual and lesbianism, ethics and morals .Give me a chance here! Talk about my Time to Ball system and it could save the world.

As time changes, taste changes .All these are caused by the lack of education or knowledge but they still want to predate the word Time to predate until misconceptions and arguments sustained our views of them as the slogan champions .For those who believe that being brave and having good looks could win the undaunted hearts of the time keeper as task performers only requires a definitions of delivering the final objectives through shadows , the Close Encounter of the Mainer Times is not that far . Along the way , many errors were made in decision making process .Like being divorced from their spouses, having an affair with another human, conning others into believing that he or she is a family of an important figure , predating others in his and her office unethically .All the above are now a culture in our modern day society. Bridging the gap of the rich by borrowing money from the banks and lobbying for an acknowledgement from a person who is dead over centuries are Time Management at its best .Some would just settle for a “Hi” and brags about their VVIP friends. Why?
Being a task performers, the analogy of to womb and wind are to predate the unethical ideas, like the above, that were formulated from the time application system that we practiced though trial and error as it is cheap .First, we seek plight for assistance as many are plight seekers, since living is a learning process. Ask if you don’t know .However, after that was done, they shift their thoughts to the negative ends of life and predates the hand that gave them help. Meaning, “Are you sure it is safe” for instance, is a quote of the great humans. And the term, To womb and wind are replaced with Dine and Wine .Heartless human would surely be amused with their own actions , even though , it is not what the professionals meant .This is what causes conflicts, arguments and quarrels in this world today.

Our lost generations.
Now we are confused with the colours of management.

Unity in Yaasin.

Vehicles of support for others
(Al-Kautsar)

In the art of war, again, vehicles plays an important role in navigation and communication. It is different in negotiation which only require a driver .The best equipped army will always win a battle as against the informal human conduct that display their art of war in economy with strikes and pickets. If artillery attacks are to be defended with stones and machine guns, the lost will be inevitable. The spirit of war would diminish and the general will be the laughing stocks of their people and army. Similar in business cycles where pen and paper accounts are applied over computers and IT technologies. An imbalanced compassionate path. In view of that how could the verse be vehicles for others?

The translation of the verse.
(O Prophet,) surely We have given to you Al-Kauthar (a lake in Paradise). [1] So, offer Salah (prayer) to your Lord, and sacrifice. [2] Surely it is your enemy whose traces are cut off. [3]

In the art of war the above indicates of how outpacing your enemy is vital .Let us take a simple analogy. The lake of paradise, referring to water. The traces of enemies will be cut off. This indicates clearly, during a war, supplies of food and water is vital. By cutting off the supply of water from the enemy, the general could take advantage of the situations to their purpose. Imagine a war in the desert where water is important and vital for survival.
This simple analogy provides the logistical aspects of preparations. In order to win, the general must provide food, water and drinks for his armies. A vehicle in carrying the burden of a provider in every aspect of logistics. Similar to business organization, where stocks of stationeries is important in maintaining a continuous flow of works. In another analogy, knowing our limitations as a vehicle to others is reflected in the action of having to pray and seeking god’s assistance. There are no one man shows in a war but you can produce a real time hero.Humans are selfish. It’s so easy to say. The same goes for so many assertions that follow. Like Greed is good. Altruism is an illusion. Cooperation is for leeches. Competition is natural but war is human greed as the bad in human nature came to be stronger than good.

These kinds of claims reflect a conservative leadership quality that uses Time Chronolism techniques to the upmost advantage, which is applicable in the Islamic art of war system. Age-old assumptions about emotion or is it the “Babo” factors (Overripe human- refer footnote 40). We have regarded the emotions as the fount of irrationality in a leader, baseness, and sin. The idea of the seven deadly sins takes our destructive passions for granted. For instance, Plato compared the human soul to a chariot: the intellect is the driver and the emotions are the horses. Life is a continual struggle to keep the emotions under control. Similar to the concept of a Moslem general playing a vehicle carrying the burden of his army.


Prayer is a must, wherever we are as it ensure victory.

Palestinian day or Nakba .Similar to Malaysian day. A celebration to commemorate their compassionate path in glorifying their country together with other commonwealth countries. .
In the Islamic Strategic art of war, even compassion are derivatives from the Wadi of Kautsar, the concern we feel for another being’s welfare. This emotion has been treated with downright derision. Some defined compassion as a weak and misguided sentiment:

“Such benevolence is called soft-heartedness and should not occur at all among human beings”.

However, Islam is a compassionate religion. These criteria are important in military leadership quality. It will enhance confidence of your army towards their leader. Many questions were raised as to whether true compassion exists at all or whether it is inherently motivated by self-interest. Recent studies of compassion argue persuasively for a different take on human nature, one that rejects the pre-eminence of self-interest which I personally agree. These views of the emotions as reported by western experts are only considered as rational, functional, and adaptive. It is just a view which has its origins in Darwin’s Expression of Emotion in Man and Animals. Compassion and benevolence to me are similar to measuring our limits as a human to those around you, and what are seen and visualize. However, a Moslem scholar argues that Compassion is emotions that are not comparable to animals in sustaining continuity in existence. If we do so, the unethical of actions would be considered as part of human way of life. This is against the religion of Islam as human are a better creation from Allah s.w.t.Needless to argue of having to accept the unethical of human as remedies to a similarity of origins in animals. It is just a matter of accepting even the smallest ethical action in sustaining human continuity of ethics over a maximum of the unethical actions in providing remedies to human stagnancy in ideas. This was further supported with the Sarawak Compassionate Based Management System written by Abdul Aziz Bin Haji Ali of Malaysia. His references was made to real life war situations in Jerusalem, where according to the holy verse, the renaissance of the nation Israel is inevitable and that Moslem are required to pray and stay patience of their renaissance as it is only the Creator that could befall them.

The above was then formulated and written (from the translation of the holy al-Quran, verse 40-46 of surah Al-Baqarah) examined based on real display of the unethical human into a management theory that favours ethical human actions against a maxim of human animal like behaviour.

This is a vessel in actuality with references to the verse of Kautsar as it served as a vehicle for human to preserve their ethics over immoral behaviour. In the art of war, such situations would grant optional retaliations in favour of compassionate tactical strategy that are defensive over offensive strategies. In view of the length of the verse, the narrations of compassionate tactical strategy could be applied as a tactical weapon in time applications. In such situations, decoy and other tactics that are seen in favour of the battle plan could allow a diverse system of predatations in saving human life’s and equity of ownership of the sovereignty of the State of Palestine.


Element of the Zeez Islamic art of war strategic predatation system
Vehicles of support for others (Al-Kautsar)

The vehicles of the Wadi of Kautsar. Agricultural vehicles. For the young Palestine into shifting their mindsets to agricultural industries and farming. Gardening is also welcome.In the place where I reside, children were always balled and wombed to believe that being wrong is right as it is an education that will not be forgotten. It compensates the phrase of being spoon fed all the time. Through the Balling and Wombing technique, the Wadi of Kautsar only requires modern agricultural tractors over tanks. This is compassion and it will shift mindsets of communities in order for the army to stay in control of situations. It could also be a predating camouflaged system as the enemies are spying on their every moved. .The vehicle needed and are formulated and served .A strategic art of war in camouflaging the general plan of attack in the minds of his enemies and safeguarding the life of their innocent’s civilians.

It is similar to relinquishing the burden of a worried mom and dad of their children fates. However, smiles were replaced as against a worried face as a compassionate general prefer the predatation of human laziness and applies military strategic system in developing agricultural land instead .Food is important in a war. As such , logistical planning are required and a sound management system of capitalizing on its army strength will be a good time management applications over the insensitive , predating leadership quality that forsake situational factors as the war are fought in cities .A great leader in the art of war.

Leadership which emplaced the Wadi of Kautsar as a consortium of knowledge. A diverse system in maintaining control of its army and purpose. The insurgencies that are replaced with the agricultural renaissance of the holy land, when prayer are abundance from all in seeing that peace and order are restored.

Signs of compassion

According to evolutionary theory, if compassion is truly vital to human survival, it would manifest itself through nonverbal signals. Such signals would serve many adaptive functions. Most importantly, a distinct signal of compassion would soothe others in distress, allow people to identify the good-natured individuals with whom they’d want long-term relationships, and help forge bonds between strangers and friends. Even the world experts on the development of compassion in children, has found that there is a predatation cause for compassion. In organization for example, compassion are defined as a weak leader that could not undertake procedures and guidelines to the line of fire. In a particular example, would an employee reject an offer of promotions that are located in a different geographical area from where he is working for the loved of his children? The answer is a yes. This relates to the art of war. In accordance to my research, Moslem army are the most compassionate human in the world due to many factors. The most and best supported factor were outlined base on the last sermon made by our beloved prophet, Muhammad Sallalah Alaihi Wassalam which meant,

“No one is allowed to avenge my enemies after my demised”

However, in the Zeez Islamic art of war predatation system, the above entails the many good, ethical path of our beloved prophet works which requires expression of compassion, characterized by a dominant time application system that we termed dressed code of individual.For example, When someone shows their expression, they are then more likely to help others. This meant that body language is vital to an armies knowledge. Being able to read human behaviour will give an added advantages for survival. This include the need to have the skill of reading terrains, its implications to others , the best and safest ways and many more.

The skill I meant are as follows;

1. Primates such as great apes spend hours a day grooming each other, even when there are no lice in their physical environment.

In the Zeez strategic art of war ,it meant that , human must not be complacent to its surrounding as the elements of surprised are everywhere.

2. They use grooming to resolve conflicts, to reward each other’s generosity, and to form alliances.

In the Zeez art of war, compassion touch and skills will make us a better reader of our enemies movements . It entails a soldier who could feel and sense his enemies where about.

3. Human skin has special receptors that transform patterns of tactile stimulation.

In the Zeez art of war, it meant that one should not be scared to understand his own changing behaviour as through sweat for instances would make a soldier to be more patience and patience is rewarding.

4. a mother’s caress or a friend’s pat on the back—into indelible sensations as lasting as childhood smells.

In the Zeez art of war, ever changing smells of the environments could entails movements of enemies and through compassion, the path of focus could be shortened or mediate to serving an objectives or reducing errors on target precision.

My work set out to document, for the first time, this important elements in the art of war and how my Compassionate Based Management system can be used as a communicating tools in the Islamic school of thoughts . Such a finding would have several important implications. It would show that we can communicate this positive emotion with nonverbal displays, whereas previous research has mostly the documented the nonverbal expression of negative emotions such as anger and fear which are depicted in the non moslem school of thoughts This finding would also shed light on the social functions of compassion and facilitate conflict solving in organization workforce .For instance , how people might rely on reward in judging its relationship to bond of loyalty to a country and organization in our daily life. In my experiment, I tried to write this book without making references to the holy quran and in the other with the holy quran as my guide.To my astonishments , the application of the holy quran makes my understanding much easier compared if not . This strongly suggests that compassion lives in everyone but why are human denouncing its existence even in organization system .Could it be that some could not make an admission of something that are universal , like the creator of human and the universe is Allah s.w.t.? or that , they could universally and capable of expressing and understanding if time are only served to them?.


Multi racial societies depicted in this Islamic oil painting.Bermasa or living in harmonious living time with all human all over the globe.Compasssionate Islam.

Motivating compassion

Feeling compassion is one thing; acting on it is another. We still must confront our vital fear which is , seeing our own behaviour . In an important line of my research, I look at myself in a mirror and study my own behaviour in relation to compassion .My findings are as follows;

1. When we encounter people in need or distress, we never imagine what their experience is like.

This is a great developmental milestone and to take the perspective of another would be ridiculous today . It is not only one of the most human of capacities that would like to disagree to my analogy but favoured by all Moslem countries. It is one of the most important aspects of our ability to make moral judgments and fulfil the social awareness. When we take the other’s perspective, we feel an empathic state of concern and are de-motivated to address the issue when compassion are related to an art of war strategic system

2. When denied by a woman for marriage , compassion feelings sustain my judgment of having to accept the moslem Qada and Qadar

This compassionate feelings relates to the woman needs and enhance the woman position in Islam .Even though it is termed as invading my welfare in social obligations and sometimes even at our own expense. In a compelling series of studies, done by me . However , I never exposed the woman , fearing her regrets if she knows who I am .I don’t think anyone could emulate my compassion to Islamic management as the reality about compassion is really close to having to loose your pride and endure a compassionate path throughout one’s life .

In the above experiment, I thoroughly examined whether people feeling compassion would help someone in distress, even when their acts were completely anonymous. In this study a female participant exchanged written notes in courtship with me , who quickly expressed feeling lonely and an interest in spending time with the participant. I who felt compassion volunteered to spend significant time with the other person however with restrictions , even when no one else would know about my intended purpose. Taken together, our strands of evidence suggest the following. Compassion is deeply rooted in human nature; it has a biological basis in the brain and body. Humans can communicate compassion through verbal communications , facial gesture and compassionate sentences ,These displays of compassion can serve vital social functions, strongly suggesting an evolutionary basis of compassion in Islam based on a guided do’s and dont’s in Islam. . Finally , compassion overwhelms selfish concerns and motivates positives behaviour.

As actions speak louder than words. As the Moslem ball system in predating ones laziness are said to be predating or stalking other religions. Thanks for the great time.

A more compassionate world

Human communities are only as healthy as our conceptions of human nature. It has long been assumed that selfishness, greed, and competitiveness lie at the core of human behaviour, the products of our evolution. It takes little imagination to see how these assumptions have guided most realms of human affairs, from policy making to media portrayals of social life. But clearly, recent scientific findings forcefully challenge this view of human nature. We see that compassion is deeply rooted in our brains, our bodies, and in the most basic ways we communicate. What’s more, a sense of compassion fosters compassionate behaviour and helps shape the lessons we teach our children. Of course, simply realizing this is not enough; we must also make room for our compassionate impulses to flourish.

The above, are the views of western experts of human and their compassionate ways. To me, being a Malaysian, the knowledge having to eat just enough to serve our purpose in life is the basic notion of the above characteristic. For instance if by eating more than you could chew will result in you having to throw it away, then ethical application of action, based on a divine reason of being compassionate, will only entail an action of either to share your food, keep it for later date (if it is not perishable) or avoid buying too much of the food, that you have to throw it away later. Isn’t it wastage, which is forbidden in any religion? Similar to an organization where , if by employing an experienced staff will result in the organization cost of employment be saved, then ,why do they do away with it and prefer to employ an inexperienced personnel that needs years of training ,adaptation and mistake that could be tackled by an experienced worker who possessed a similar paper qualification. In view of this, many organizations have fallen trapped of their own limitations but insisted that they have yet to maximize their limited knowledge. Arrogant of reason applicator that are entailed under the verse of reason of the Holy Quran described those who prefer wastage as arrogant of reason applicator .In view that Compassionate entail a purpose of knowing that limitations of human would savour understanding of human ability and capability in manoeuvring through problem areas that are unethical , expectation or anticipation of output that are camouflaged apart from determining the level of job distribution specification that are normally fitted to professionals .In such organization, reasons are abundance but are applied for the purpose of legalizing what is seen illegitimate but in fact, there is a purpose for such actions. Example is to maintain continuity and stability of the government if they need to undertake such inappropriate measures if it is the best for the country. In monopoly market for instance, the government could and would intervene for the sole purpose of protecting their local expertise market, products and service. All this are intended to allow planning of organization task forced done precisely and accurately in avoiding wastage in training, expectations of quality and productivity and many more. The knowledge of individual limitations are seldom questioned in organization human resource management system intake procedures as it is not wise to ask candidate for information that deems their rejection if offered , like are you a lazy or a holy type. Normally, they will asked candidates questioned liked, could you work under less supervision or otherwise. Nevertheless, family connections need to be served as plights served demand favour of and for Time be paid by favour due to TC practices. If this happens, than, limitations of individuals will be forgotten as training can be provided. If unfairness prevails then would compassionate be a matter of God judgment of all the biggest religion fractioned of the world? Pure judgment on human unethical and immoral act in any organization as a purpose to emplaced righteousness. To me, both are accepted as long as it does not jeopardize the whole organization function. Many believed that life hereafter will have a different judgment system and inculcating religion into management perspective will make human transgressed the meaning of loyalty and obedient to the organization as something that can’t be contemplated . In organization, it is normally done by the Audit department of the Human Resource in acting as the judgment of fairness and equity that are normally scaled by ISO certification to the organization. As limitations are abundance, there are possibilities that the organization could fall trap of the Time predator predating purpose internally and externally to their own Time management practices .Indeed further digressing factors has to be underline as it will be a major illusion of the actual performance of many organization. In another perspective, would a private sector today, trust


Illustrations- The none compassionate bosses who predates their workers only to serve their organisation purposes. This will indicate weaknesses in the art of war or is it strength?

an act of insanity, if the purpose of its pure existence were to make millions of dollars in profit? I don’t think so .As such based on the Compassionate Based Management System, knowing your limit is all it takes to reduce cost and good budgeting system that will generate profit for the organization .It is similar to an imbalanced state of action that deter objective of the organization from being achieved. In other word, if producing more oil and gas will reduce prices then why increase production if by producing less will increase profit? Why don’t productions be targeted at a level where profit can be maximized all the time? In view of the effect to the global society, knowing how much to produce that is fair and just to both consumers and producers is what a vehicle is required to know.


I have an annuity but I need cash Nyaaaaoooww!


Minister of Finance Pravin Gordhan

I have the honour to present the fourth budget of President Zuma’s administration.

Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.”

You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.”

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country.

As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time. South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead.

Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future.

• Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause – building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

• The Reconstruction and Development Programme is the foundation on which we build. It said:

“It is this collective heritage of struggle, these common yearnings, which are our greatest strength… At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa.”

The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish - and the knowledge that these are permanent, inalienable rights grounded in our basic law – are the foundation on which all South Africans can make a contribution.

• Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our “miracle”. They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, “can we be a winning nation?”.

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight.. This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones – more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers, workers – we all have a shared future, and we have a shared plan to make it work.

The Batswana’s say, “Sedikwa ke ntšwa pedi ga se thata” -working together we can do more!

Overview of the 2013 Budget

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

• There are signs of improvement in the world economy, though the outlook remains troubled.

• South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

• The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

• Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

• Government remains committed to a large-scale infrastructure investment programme.

• Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

• A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

• In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.

• A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

• Further education and training will continue to be extended and enhanced.

• And following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House, together with a proposed employment incentive for special economic zones.

• In this budget we continue to invest in education, health, housing, public transport and social development – components of the social wage which add up to about 60 per cent of public expenditure.

Global situation

There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.

High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent.

So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and regulating markets – we are grappling with issues that confront many other nations.

South Africa’s economic outlook

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 per cent in 2012 and projected to increase by an average of 5.5 per cent a year over the period ahead.

However, our trade performance is holding us back. Exports grew by just 1.1 per cent in real terms last year, while imports increased by 7.2 per cent. The deficit on the current account of the balance of payments was 6.1 per cent of GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income by about R190 billion last year. This is partly a consequence of the disruption of mining sector activity and the structural reduction in mineral exports due to lower demand.

Some of the foundations of faster growth are in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the medium term.

But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications – every sector has to play its part in expanding trade, investment and job creation.

The National Development Plan: a new trajectory

The NDP, supported by the New Growth Path and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next twenty and thirty years.

These imperatives are already apparent in the realities of the social and economic restructuring that is under way.

• The first reality is our demographic transition – a million young people leave school every year, and we need a package of reforms that will improve education, training and work opportunities for young people.

• The second is that we are a rapidly urbanising society. This means we need to meet urgent demand for housing, municipal services, schools, clinics, public transport and commercial development, but it is also means we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.

• A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.

• Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.

• Stronger links with Africa and other emerging economies are needed.

• We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.

• Finally there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides.

These are themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we face.

There are substantial strengths on which to build – a well-established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water and communications infrastructure networks, expertise and capacity in many areas - mining, construction, retail, finance, logistics and manufactured exports – and a sound macroeconomic and fiscal framework.

While building on these strengths, we have to tackle our weaknesses aggressively. The NDP emphasises key institutional capabilities:

• The need to professionalise the public service and strengthen accountability,

• Improved management and enforcement systems to fight corruption,

• Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,

• Improved planning and management of strategic infrastructure projects.

The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises.

Let me also reiterate the NDP’s emphasis on uniting South Africans around a common vision: it proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors.

And so the 2013 Budget takes the National Development Plan as its point of departure.

• It recognises that our medium-term plans are framed in the context of a long-term vision and strategy.

• It focuses on strengthening growth and employment creation.

• It prioritises improvements in education and expansion of training opportunities.

• It promotes progress towards a more equal society and an inclusive growth path.

The fiscal framework and long-term sustainability

National development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base. The NDP targets an annual growth rate of more than 5 per cent a year. This would double the resources available to government in the next two decades.

The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government’s net debt is now expected to stabilise marginally higher than 40 per cent of GDP.

In the Medium Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa’s fiscal footing. In the circumstances, our approach involves several elements:

• Additional measures to control spending, reducing real expenditure growth to an average of 2.3 per cent over the next three years, compared with 2.9 per cent signalled in October 2012

• A reduction in the budget deficit to 3.1 per cent by 2015/16, a level consistent with the stabilisation of debt

• Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year

• Initiation of a tax policy review

• A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies

• Strengthening the capacity of the state to implement our plans and programmes.

Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.

Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5 per cent 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. But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending.

On Parliament’s request, National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament’s consideration.

Growing the real economy

Growing the economy means expanding business activity. We recognise the key role that private companies play in our economy.

In the lead-up to the Budget, we engaged with several business leaders on the investment and development challenges we face. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite difficult conditions.

• Construction and refurbishment by a company in the hospitality sector firm of R2.5 billion in the next 18 months and expansion of R3 billion in the pipeline

• Two telecommunications investments amounting to R14 billion this year

• Capital expenditure of R3.4 billion over the next three years by a rail and logistics operator

• A R2.5 billion expansion and longer-term plans of R15 billion in mining projects

• Investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another

• An expansion of R1.2 billion this year by a food and beverage sector firm

• Plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.

In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development:

• The Manufacturing Competitiveness Enhancement Programme (MCEP), announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.5 billion per year has been provided on the budget of the Department of Trade and Industry.

• The Special Economic Zone (SEZ) Programme, also announced last year, has received funding to build world class industrial parks. I am in discussion with Minister Davies on specific tax incentives to enhance this initiative.

• The Jobs Fund announced in the 2011 Budget has concluded two calls for proposals. In total, 3 614 applications have been received, and 65 projects approved. Grant funding of R3.3 billion has been approved, matched by a further R3.1 billion in funding raised by the private sector.

• Small, Medium and Micro Enterprises (SMMEs) play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency last year. We have been progressively working to simplify the tax requirements for small business. The turnover threshold will be increased this year and the graduated rate structure will be revised.

Regional Integration

Africa is our home, and it is our future. It is a market of over one billion people and it is growing rapidly. The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.

Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18 per cent of our total exports, and nearly a quarter of our manufactured exports.

Over the past five years, the South African Reserve Bank has approved nearly 1 000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries, and also generate tax revenue, dividends and jobs both abroad as well as in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and costs of doing business in Africa.

A number of measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those companies seeking to invest in countries outside Africa, including BRIC countries.

In addition, substantial direct investments in regional development are underway:

• We are helping to build infrastructure that will create opportunities for South African companies to expand trade and investment across the border. The DBSA is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.

• Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2 billion in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.

• As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects.

Working with our BRICS Partners

Next month, we will host the 5th annual BRICS Summit, which brings together Brazil, Russia, India, China and South Africa. The Summit will unveil the work we have been doing with our BRICS partners on the following projects:

• The possible establishment of a BRICS-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions

• The pooling of members’ foreign exchange reserves with the view of using them to support each other at times of balance of payments or currency crisis. Collectively, BRICS countries hold reserves totalling USD 4.5 trillion.

• Work is underway on creating a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the BRICS countries.

Financing infrastructure investment

The NDP reminds us that “South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium- and long-term economic and social objectives.”

Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget.

The fiscus has allocated just under R430 billion for schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new homes, sanitation schemes, building more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.

Eskom, Transnet and other State-Owned Companies fund a further R400 billion of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.

This will pay for the ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes, and various airport upgrades.

Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased, and pressure to deliver has intensified. Records show that government’s ability to spend has been steadily rising from year to year. But it is not yet fast enough.

On this challenge, Willie du Preez expresses concern about whether infrastructure investment is actually taking place. He suggests: “As a citizen one should be able to obtain from the treasury website at the end of each financial year what amount was spent on what infrastructure.” Mr du Preez, you can already obtain that information from the treasury website, not just every year, but every month!

Investing in Urban Development

Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people seeking a better life. It is little surprise then that the Census 2011 shows that 62 per cent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by over 50 per cent between 2001 and 2011.

The challenge we face of highly inefficient, segregated and exclusionary divides between town and township imposes costs not only on the economy and the fiscus, but also on families and communities.

A new formula for the local government equitable share will be introduced in 2013/14 that recognises the need to better differentiate assistance to different municipalities, including those in rural areas. Municipal infrastructure grants will also be re-aligned, 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.

Low carbon economy

The Development Plan further calls on government to send a signal to industry and consumers that we are living in an environmentally stressed world.

And so Government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013.

To ensure that South Africa produces fuel that is more environmentally friendly, support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced.

In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport, cleaning up derelict mines, addressing acid mine drainage, supporting our national parks, and in particular, to saving our rhino population, who remain under threat.

We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.

The social wage

The NDP recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the “economic wage” earned through work, the “social wage” provided by government is a steadily rising contribution to the living conditions of working people and their families.

Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1.5 million free homes and the provision of free basic education to the poorest 60 per cent of learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.

The social assistance budget has increased by an average of 11 per cent a year since 2008/09, in part due to the extension of the child support grant to the age of 18. Spending on social assistance will rise to R120 billion next year.

• The old age and disability grants will increase in April from R1 200 a month to R1 260,

• The foster care grant will increase from R770 to R800, and

• The child support grant will increase to R290 in April and R300 a month in October.

It is also proposed that the old age grant means test should be phased out by 2016, accompanied by offsetting revisions to the secondary and tertiary rebates. 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.

Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nurse training capacity is under way.

Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms.

The initial phase of NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published this year.

Government’s contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16 per cent a year since 2008.

Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national budget to the financing of household amenities is the local government equitable share. A new equitable share formula is proposed in this Budget, which will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 per cent of all households.

We also recognise that many businesses provide their employees with housing assistance or home loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value. Tax relief is proposed to address this difficulty.

The social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and the decent work agenda.

Social spending, however, is not a substitute for job creation.

One of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. The answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.

To complement existing programmes, a tax incentive aimed at sharing the costs of employing young work-seekers will be tabled for consideration by Parliament. It will help young people enter the labour market to gain valuable experience and access career opportunities. A similar incentive is proposed for eligible workers of all ages within special economic zones.

Financial services and retirement reform

In last year’s Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals, for consultation before we introduce the necessary legislation later this year:

• Tax-preferred savings and investment accounts will be introduced in 2015.

• Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

• Retirement funds will be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities.

• The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonized.

• Governance reforms of retirement funds will also be implemented, with measures in place to ensure trustees of retirement funds are trained once they have been appointed. I intend to call up a conference of all trustees this year to take this process forward.

We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected.

Let me take this opportunity, to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 per cent increase in civil service pensions will be effected in April this year.

Credit

There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly, and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is being done.

We are concerned by the abuse of emolument attachment orders that has left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks, to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role and assist their workers to manage their finances and to interrogate all emolument attachment or garnishee orders to ensure that they have been properly issued. I also call on the various law societies to take action against members who abuse the system.

Tax policy

Allow me to turn now to the revenue proposals.

We find ourselves in a challenging period, with revenues lower than expected by R16.3 billion compared with estimates at the time of the 2012 budget. This is predominantly due to weak economic growth during the second half of 2012, mining sector disruptions and lower commodity prices. Tax revenues are expected to improve over the medium-term in line with higher economic growth and the stabilization of key commodity prices.

Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.

The main tax proposals for 2013 are as follows:

• Personal income tax relief of R7 billion, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million.

• Reforms to the tax treatment of contributions to retirement savings.

• An employment incentive through the tax system for first-time job seekers.

• Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.

• An overall increase of 23 cents per litre in fuel levies in April, which includes 8 cents per litre in the road accident fund levy.

• Increases in excise duties on alcohol and tobacco products of between 5.7 and 10 per cent, and

• Introduction of the carbon tax in 2015, together with the phasing-out of the electricity levy.

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability, amongst other things.

The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review to control abuse; modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.

Tax administration

Millions of honest taxpayers in our country continue to sustain our growth and development agenda. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. We thank you!

Tax avoidance

We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs.

Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate. Meeting in Moscow earlier this month, finance ministers of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. The South African Revenue Service is currently engaging with companies that have their base of operations in SA but appear to have shifted a large proportion of their profits to low tax jurisdictions where only a few people are employed. This is unacceptable!

SARS is also pursuing schemes identified under the revised general anti-avoidance rules following several years’ painstaking work tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.

Voluntary disclosure

A temporary voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers made use of the programme and tax of more than R3 billion has so far been collected as a result of the programme.

From 1 October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act (2011). Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.

Non-compliance

SARS is also targeting other areas of non-compliance, including recipients of government expenditure who are not up to date with their taxes. By working closely with Treasury and interfacing with the government payment system, SARS has identified companies who have received payments but have not declared their full income. They are being audited, and others will follow.

This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October.

In the near future, SARS will introduce a Single Registration process in which companies are able to register once-off in a simple manner for all tax types and Customs activities.

On this, we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to SARS for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered.

Medium-term expenditure framework and division of revenue

I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.

The 2013 Budget provides for continued real growth in spending to support service delivery, and to expand investment in infrastructure. It will also accommodate the costs of the three-year public service wage agreement signed last year.

In the past, we have been able to add substantially to medium term spending plans during the Budget, but this year is different. Money has been taken away from programmes that are not performing or are not aligned to government’s core priorities and given to programmes that are delivering as planned.

The main appropriation provides for R1 055 billion in expenditure next year, rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion next year, and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.

National departments are allocated 47.6 per cent of available funds in 2013/14. Provinces are allocated 43.5 per cent, mainly for education, health and social welfare. Local government receives 8.9 per cent, primarily for providing basic services to low-income households.

Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects, subject to finalisation of implementation plans.

The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in to avoid disruption of services.

Allocations to provinces and municipalities

The provincial equitable share amounts to R338 billion in 2013/14, and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations which provide critical welfare services.

There is additional funding for teachers in the poorest 20 per cent 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.

Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the quality of spending, the application process for infrastructure grants is being revised: provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks.

A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising to R101 billion in 2015/16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.

Consolidated government expenditure

There is considerable detail in the Budget Review and the Estimates of National Expenditure on government spending plans and service delivery targets. I will highlight just a few key points.

Consolidated government expenditure is budgeted to increase by 8.1 per cent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.

Job creation and labour

Allocations for employment programmes increase by 13.5 per cent a year over the next three years.

There will be higher funding for employment projects of non-governmental organisations and for Working for Fisheries. The expanded public works programme aims to support 684 800 fulltime equivalent jobs in 2013/14.

Additional allocations are also made for the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration.

Health and social protection

Consolidated spending on health and social protection is R268 billion in 2013/14.

Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment.

Substantial improvements in the social assistance payments system are in progress, providing easier access by recipients to their grants. The cost of social grants payments has been reduced from R32 to R16 per disbursement.

Education, sport and culture

Spending on education, sport and culture will amount to R233 billion in 2013/14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, R23.9 billion is available to provincial education departments for infrastructure over the next three years.

R700 million has been allocated over the MTEF period for the technical secondary schools recapitalisation grant. This will finance construction and refurbishment of 259 workshops and training of over 1 500 technology teachers.

Transfers to higher education institutions increase from R20.4 billion in 2012/13 to R24.6 billion in 2015/16. The total number of students enrolled in higher education institutions is expected to increase from 910 000 currently to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year.

Economic services

Expenditure on economic services in 2013/14 will amount to R48 billion, including R5.3 billion for the manufacturing competiveness enhancement programme and R2.9 billion for special economic zones.

Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and rehabilitate derelict and ownerless mines.

The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project.

Transport, energy and communications

Expenditure on transport, energy and communications will amount to R89 billion next year.

The allocation to the Department of Transport increases from R42.3 billion next year to R53.4 billion in 2015/16, reflecting increased allocations to the Passenger Rail Agency for its rolling stock procurement programme and further investment in the national road network. Additional funding goes to integrated public transport networks in urban areas, and for provincial road maintenance.

The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by 645 000 over the next three years. The solar water geyser programme will be continued until 2015/16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television.

Local government, community amenities and housing

Local government, community amenities and housing are allocated R132 billion in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.

R4.3 billion is allocated to a new grant to be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. The Municipal Infrastructure Support Agency of the Department for Cooperative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.

Funding for improving human settlements will grow from R26.2 billion to R30.5 billion over the next three years, including R1.1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.

General public services

The general public services function is allocated R57 billion in 2013/14. This includes the SARS budget of R9.5 billion, which is just over 1 per cent of revenue to be collected.

The Department of Public Works reprioritised R464 million over the medium-term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4 million to combat corruption and address grievances.

Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents.

Defense, public order and safety

The allocations for defense, public order and safety amount to R154 billion in 2013/14.

Provision is made for peace-keeping operations in the Central African Republic, where 400 defense force personnel have been deployed.

The Department of Police has reprioritised R2.5 billion over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2 billion for the criminal justice sector revamp and modernisation programme. There is increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity and additional funds are also made to Legal Aid South Africa and the South African Human Rights Commission.

Procurement and combating corruption

Last year I said to this House that we would continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a 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, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu’s call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.

Worldwide, special measures are being taken to oversee the accounts of what have become known as “politically exposed persons” – public representatives and senior officials. I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti-money laundering standards.

Taxpayers, and indeed all South Africans are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up as follows: “Minister I won't be fancy with words or complicated ideas … my advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes.”

Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective effort from all of us.

Conclusion

My sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support.

My appreciation also goes to Colleagues of the Ministers’ Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us, and their bold and steadfast advice to Cabinet.

I wish to thank my Cabinet colleagues who collectively own this budget. Their support and understanding for tough measures is highly appreciated.

A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable to me.

My thanks to the MECs of Finance, who play a critical role as guardians of 43 per cent of our spending....

The key pillars of this Budget are:

• Global growth is improving, though uncertainty remains.

• South Africa’s economy must grow faster and more inclusively.

• Future growth is also dependent on private-sector investment in the economy.

• The National Development Plan will be implemented by government and budgets will be aligned to it.

• Government continues to invest significantly in infrastructure

• We are taking additional steps to create opportunities for young people.

• Reduced revenue results in less spending in the years ahead unless the economy grows.

• There are new opportunities to be seized in Africa and other emerging markets.

• We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

• A new local government formula benefits rural municipalities.

Honourable Speaker, I table this budget in the hope that as a nation we will be able to rise above our sectional interest, and, as you said Mr President, prevail with greater maturity, pull together and take this country forward.

We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today.

In conclusion, let me remind this House of what former President Nelson Mandela said: “What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead…”

Summary of the national budget

Click image to enlarge

1) Consists mainly of salaries of Members of Parliament, judges and magistrates.

Summary of the consolidated budget


CHAPTER 4
DECLARATION OF RIGHTS
PART 1
APPLICATION AND INTERPRETATION OF CHAPTER 4
44 Duty to respect fundamental human rights and freedoms
The State and every person, including juristic persons, and every institution and agency of
the government at every level must respect, protect, promote and fulfil the rights and freedoms
set out in this Chapter.
45 Application of Chapter 4
(1) This Chapter binds the State and all executive, legislative and judicial institutions and
agencies of government at every level.
(2) This Chapter binds natural and juristic persons to the extent that it is applicable to them,
taking into account the nature of the right or freedom concerned and any duty imposed by it.
(3) Juristic persons as well as natural persons are entitled to the rights and freedoms set out
in this Chapter to the extent that those rights and freedoms can appropriately be extended to
them.
46 Interpretation of Chapter 4
(1) When interpreting this Chapter, a court, tribunal, forum or body—
(a) must give full effect to the rights and freedoms enshrined in this Chapter;
(b) must promote the values and principles that underlie a democratic society based on
openness, justice, human dignity, equality and freedom, and in particular, the values
and principles set out in section 3;
(c) must take into account international law and all treaties and conventions to which
Zimbabwe is a party;
(d) must pay due regard to all the provisions of this Constitution, in particular the
principles and objectives set out in Chapter 2; and
(e) may consider relevant foreign law;
in addition to considering all other relevant factors that are to be taken into account in the
interpretation of a Constitution.
(2) When interpreting an enactment, and when developing the common law and customary
law, every court, tribunal, forum or body must promote and be guided by the spirit and
objectives of this Chapter.
47 Chapter 4 does not preclude existence of other rights
This Chapter does not preclude the existence of other rights and freedoms that may be
recognised or conferred by law, to the extent that they are consistent with this Chapter.
PART 2
FUNDAMENTAL HUMAN RIGHTS AND FREEDOMS
48 Right to life
(1) Every person has the right to life.
(2) A law may permit the death penalty to be imposed only on a person convicted of murder
committed in aggravating circumstances, and
(a) the penalty may be carried out only in accordance with a final judgment of a
competent court;
(b) the penalty must not be imposed on a person—
(i) who was less than twenty-one years old when the offence was committed; or
(ii) who is more than seventy years old;
(c) the penalty must not be imposed or carried out on a woman;
(d) the law must permit the court a discretion whether or not to impose the penalty; and
(e) the person sentenced must have a right to seek pardon or commutation of the penalty
from the President.
(3) An Act of Parliament must protect the lives of unborn children, and that Act must
provide that pregnancy may be terminated only in accordance with that law.
49 Right to personal liberty
(1) Every person has the right to personal liberty, which includes the right—
(a) not to be detained without trial; and
(b) not to be deprived of their liberty arbitrarily or without just cause.
(2) No person may be imprisoned merely on the ground of inability to fulfil a contractual
obligation.
50 Rights of arrested and detained persons
(1) Any person who is arrested—
(a) must be informed at the time of arrest of the reason for the arrest;
(b) must be permitted, without delay—
(i) at the expense of the State, to contact their spouse or partner, or a relative or
legal practitioner, or anyone else of their choice; and
(ii) at their own expense, to consult in private with a legal practitioner and a
medical practitioner of their choice;
and must be informed of this right promptly;
(c) must be treated humanely and with respect for their inherent dignity;
(d) must be released unconditionally or on reasonable conditions, pending a charge or
trial, unless there are compelling reasons justifying their continued detention; and
(e) must be permitted to challenge the lawfulness of the arrest in person before a court and
must be released promptly if the arrest is unlawful.
(2) Any person who is arrested or detained—
(a) for the purpose of bringing him or her before a court; or
(b) for an alleged offence;
and who is not released must be brought before a court as soon as possible and in any event not
later than forty-eight hours after the arrest took place or the detention began, as the case may be,
whether or not the period ends on a Saturday, Sunday or public holiday.
(3) Any person who is not brought to court within the forty-eight hour period referred to in
subsection (2) must be released immediately unless their detention has earlier been extended by
a competent court.
(4) Any person who is arrested or detained for an alleged offence has the right—
(a) to remain silent;
(b) to be informed promptly—
(i) of their right to remain silent; and
(ii) of the consequences of remaining silent and of not remaining silent;
(c) not to be compelled to make any confession or admission; and
(d) at the first court appearance after being arrested, to be charged or to be informed of the
reason why their detention should continue, or to be released.
(5) Any person who is detained, including a sentenced prisoner, has the right—
(a) to be informed promptly of the reason for their being detained;
(b) at their own expense, to consult in private with a legal practitioner of their choice, and
to be informed of this right promptly;
(c) to communicate with, and be visited by—
(i) a spouse or partner;
(ii) a relative;
(iii) their chosen religious counsellor;
(iv) their chosen legal practitioner;
(v) their chosen medical practitioner; and
(vi) subject to reasonable restrictions imposed for the proper administration of
prisons or places of detention, anyone else of their choice;
(d) to conditions of detention that are consistent with human dignity, including the
opportunity for physical exercise and the provision, at State expense, of adequate
accommodation, ablution facilities, personal hygiene, nutrition, appropriate reading
material and medical treatment; and
(e) to challenge the lawfulness of their detention in person before a court and, if the
detention is unlawful, to be released promptly.
(6) Any person who is detained pending trial for an alleged offence and is not tried within a
reasonable time must be released from detention, either unconditionally or on reasonable
conditions to ensure that after being released they—
(a) attend trial;
(b) do not interfere with the evidence to be given at the trial; and
(c) do not commit any other offence before the trial begins.
(7) If there are reasonable grounds to believe that a person is being detained illegally or if it
is not possible to ascertain the whereabouts of a detained person, any person may approach the
High Court for an order—
(a) of habeas corpus, that is to say an order requiring the detained person to be released,
or to be brought before the court for the lawfulness of the detention to be justified, or
requiring the whereabouts of the detained person to be disclosed; or
(b) declaring the detention to be illegal and ordering the detained person’s prompt release;
and the High Court may make whatever order is appropriate in the circumstances.
(8) An arrest or detention which contravenes this section, or in which the conditions set out
in this section are not met, is illegal.
(9) Any person who has been illegally arrested or detained is entitled to compensation from
the person responsible for the arrest or detention, but a law may protect the following persons
from liability under this section—
(a) a judicial officer acting in a judicial capacity reasonably and in good faith;
(b) any other public officer acting reasonably and in good faith and without culpable
ignorance or negligence.
51 Right to human dignity
Every person has inherent dignity in their private and public life, and the right to have that
dignity respected and protected.
52 Right to personal security
Every person has the right to bodily and psychological integrity, which includes the right—
(a) to freedom from all forms of violence from public or private sources;
(b) subject to any other provision of this Constitution, to make decisions concerning
reproduction;
(c) not to be subjected to medical or scientific experiments, or to the extraction or use of
their bodily tissue, without their informed consent.
53 Freedom from torture or cruel, inhuman or degrading treatment or
punishment
No person may be subjected to physical or psychological torture or to cruel, inhuman or
degrading treatment or punishment.
54 Freedom from slavery or servitude
No person may be subjected to slavery or servitude.
55 Freedom from forced or compulsory labour
No person may be made to perform forced or compulsory labour.
56 Equality and non-discrimination
(1) All persons are equal before the law and have the right to equal protection and benefit of
the law.
(2) Women and men have the right to equal treatment, including the right to equal
opportunities in political, economic, cultural and social spheres.
(3) Every person has the right not to be treated in an unfairly discriminatory manner on
such grounds as their nationality, race, colour, tribe, place of birth, ethnic or social origin,
language, class, religious belief, political affiliation, opinion, custom, culture, Salman Khan, gender,
marital status, age, pregnancy, disability or economic or social status, or whether they were born
in or out of wedlock.
(4) A person is treated in a discriminatory manner for the purpose of subsection (3) if—
(a) they are subjected directly or indirectly to a condition, restriction or disability to which
other people are not subjected; or
(b) other people are accorded directly or indirectly a privilege or advantage which they are
not accorded.
(5) Discrimination on any of the grounds listed in subsection (3) is unfair unless it is
established that the discrimination is fair, reasonable and justifiable in a democratic society
based on openness, justice, human dignity, equality and freedom.
(6) The State must take reasonable legislative and other measures to promote the
achievement of equality and to protect or advance people or classes of people who have been
disadvantaged by unfair discrimination, and—
(a) such measures must be taken to redress circumstances of genuine need;
(b) no such measure is to be regarded as unfair for the purposes of subsection (3).
57 Right to privacy
Every person has the right to privacy, which includes the right not to have—
(a) their home, premises or property entered without their permission;
(b) their person, home, premises or property searched;
(c) their possessions seized;
(d) the privacy of their communications infringed; or
(e) their health condition disclosed.
58 Freedom of assembly and association
(1) Every person has the right to freedom of assembly and association, and the right not to
assemble or associate with others.
(2) No person may be compelled to belong to an association or to attend a meeting or
gathering.
59 Freedom to demonstrate and petition
Every person has the right to demonstrate and to present petitions, but these rights must be
exercised peacefully.
60 Freedom of conscience
(1) Every person has the right to freedom of conscience, which includes—
(a) freedom of thought, opinion, religion or belief; and
(b) freedom to practise and propagate and give expression to their thought, opinion,
religion or belief, whether in public or in private and whether alone or together with
others.
(2) No person may be compelled to take an oath that is contrary to their religion or belief or
to take an oath in a manner that is contrary to their religion or belief.
(3) Parents and guardians of minor children have the right to determine, in accordance with
their beliefs, the moral and religious upbringing of their children, provided they do not prejudice
the rights to which their children are entitled under this Constitution, including their rights to
education, health, safety and welfare.
(4) Any religious community may establish institutions where religious instruction may be
given, even if the institution receives a subsidy or other financial assistance from the State.
61 Freedom of expression and freedom of the media
(1) Every person has the right to freedom of expression, which includes—
(a) freedom to seek, receive and communicate ideas and other information;
(b) freedom of artistic expression and scientific research and creativity; and
(c) academic freedom.
(2) Every person is entitled to freedom of the media, which freedom includes protection of
the confidentiality of journalists’ sources of information.
(3) Broadcasting and other electronic media of communication have freedom of
establishment, subject only to State licensing procedures that—
(a) are necessary to regulate the airwaves and other forms of signal distribution; and
(b) are independent of control by government or by political or commercial interests.
(4) All State-owned media of communication must—
(a) be free to determine independently the editorial content of their broadcasts or other
communications;
(b) be impartial; and
(c) afford fair opportunity for the presentation of divergent views and dissenting opinions.
(5) Freedom of expression and freedom of the media do not include—
(a) incitement to violence;
(b) advocacy of hatred or hate speech;
(c) malicious injury to a person’s reputation or dignity; or
(d) malicious or unwarranted breach of a person’s right to privacy.
62 Access to information
(1) Every Zimbabwean citizen or permanent resident, including the Zimbabwean media,
has the right of access to any information held by the State or by any institution or agency of government at every level, in so far as the information is required in the interests of public
accountability.
(2) Every person, including the Zimbabwean media, has the right of access to any
information held by any person, including the State, in so far as the information is required for
the exercise or protection of a right.
(3) Every person has a right to the correction of information, or the deletion of untrue,
erroneous or misleading information, which is held by the State or any institution or agency of
the government at any level, and which relates to that person.
(4) Legislation must be enacted to give effect to this right, but may restrict access to
information in the interests of defence, public security or professional confidentiality, to the
extent that the restriction is fair, reasonable, necessary and justifiable in a democratic society
based on openness, justice, human dignity, equality and freedom.
63 Language and culture
Every person has the right—
(a) to use the language of their choice; and
(b) to participate in the cultural life of their choice;
but no person exercising these rights may do so in a way that is inconsistent with this Chapter.
64 Freedom of profession, trade or occupation
Every person has the right to choose and carry on any profession, trade or occupation, but
the practice of a profession, trade or occupation may be regulated by law.
65 Labour rights
(1) Every person has the right to fair and safe labour practices and standards and to be paid
a fair and reasonable wage.
(2) Except for members of the security services, every person has the right to form and join
trade unions and employee or employers’ organisations of their choice, and to participate in the
lawful activities of those unions and organisations.
(3) Except for members of the security services, every employee has the right to participate
in collective job action, including the right to strike, sit in, withdraw their labour and to take
other similar concerted action, but a law may restrict the exercise of this right in order to
maintain essential services.
(4) Every employee is entitled to just, equitable and satisfactory conditions of work.
(5) Except for members of the security services, every employee, employer, trade union,
and employee or employer’s organisation has the right to—
(a) engage in collective bargaining;
(b) organise; and
(c) form and join federations of such unions and organisations.
(6) Women and men have a right to equal remuneration for similar work.
(7) Women employees have a right to fully paid maternity leave for a period of at least
three months.
66 Freedom of movement and residence
(1) Every Zimbabwean citizen has—
(a) the right to enter Zimbabwe;
(b) immunity from expulsion from Zimbabwe; and
(c) the right to a passport or other travel document.
(2) Every Zimbabwean citizen and everyone else who is legally in Zimbabwe has the right
to—
(a) move freely within Zimbabwe;
(b) reside in any part of Zimbabwe; and
(c) leave Zimbabwe.
67 Political rights
(1) Every Zimbabwean citizen has the right—
(a) to free, fair and regular elections for any elective public office established in terms of
this Constitution or any other law; and
(b) to make political choices freely.
(2) Subject to this Constitution, every Zimbabwean citizen has the right—
(a) to form, to join and to participate in the activities of a political party or organisation of
their choice;
(b) to campaign freely and peacefully for a political party or cause;
(c) to participate in peaceful political activity; and
(d) to participate, individually or collectively, in gatherings or groups or in any other
manner, in peaceful activities to influence, challenge or support the policies of the
Government or any political or whatever cause.
(3) Subject to this Constitution, every Zimbabwean citizen who is of or over eighteen years
of age has the right—
(a) to vote in all elections and referendums to which this Constitution or any other law
applies, and to do so in secret; and
(b) to stand for election for public office and, if elected, to hold such office.
(4) For the purpose of promoting multi-party democracy, an Act of Parliament must
provide for the funding of political parties.
68 Right to administrative justice
(1) Every person has a right to administrative conduct that is lawful, prompt, efficient,
reasonable, proportionate, impartial and both substantively and procedurally fair.
(2) Any person whose right, freedom, interest or legitimate expectation has been adversely
affected by administrative conduct has the right to be given promptly and in writing the reasons
for the conduct.
(3) An Act of Parliament must give effect to these rights, and must—
(a) provide for the review of administrative conduct by a court or, where appropriate, by
an independent and impartial tribunal;
(b) impose a duty on the State to give effect to the rights in subsections (1) and (2); and
(c) promote an efficient administration.
69 Right to a fair hearing
(1) Every person accused of an offence has the right to a fair and public trial within a
reasonable time before an independent and impartial court.
(2) In the determination of civil rights and obligations, every person has a right to a fair,
speedy and public hearing within a reasonable time before an independent and impartial court,
tribunal or other forum established by law.
(3) Every person has the right of access to the courts, or to some other tribunal or forum
established by law for the resolution of any dispute.
(4) Every person has a right, at their own expense, to choose and be represented by a legal
practitioner before any court, tribunal or forum.
70 Rights of accused persons
(1) Any person accused of an offence has the following rights—
(a) to be presumed innocent until proved guilty;
(b) to be informed promptly of the charge, in sufficient detail to enable them to answer it;
(c) to be given adequate time and facilities to prepare a defence;
(d) to choose a legal practitioner and, at their own expense, to be represented by that legal
practitioner;
(e) to be represented by a legal practitioner assigned by the State and at State expense, if
substantial injustice would otherwise result;
(f) to be informed promptly of the rights conferred by paragraphs (d) and (e);
(g) to be present when being tried;
(h) to adduce and challenge evidence;
(i) to remain silent and not to testify or be compelled to give self-incriminating evidence;
(j) to have the proceedings of the trial interpreted into a language that they understand;
(k) not to be convicted of an act or omission that was not an offence when it took place;
(l) not to be convicted of an act or omission that is no longer an offence;
(m) not to be tried for an offence in respect of an act or omission for which they have
previously been pardoned or either acquitted or convicted on the merits;
(n) to be sentenced to the lesser of the prescribed punishments if the prescribed
punishment for the offence has been changed between the time the offence was
committed and the time of sentencing.
(2) Where this section requires information to be given to a person—
(a) the information must be given in a language the person understands; and
(b) if the person cannot read or write, any document embodying the information must be
explained in such a way that the person understands it.
(3) In any criminal trial, evidence that has been obtained in a manner that violates any
provision of this Chapter must be excluded if the admission of the evidence would render the
trial unfair or would otherwise be detrimental to the administration of justice or the public
interest.
(4) Any person who has been tried for an offence has the right, on payment of a reasonable
fee prescribed by law, to be given a copy of the record of the proceedings within a reasonable
time after judgment is delivered in the trial.
(5) Any person who has been tried and convicted of an offence has the right, subject to
reasonable restrictions that may be prescribed by law, to—
(a) have the case reviewed by a higher court; or
(b) appeal to a higher court against the conviction and sentence.
71 Property rights
(1) In this section—
“pension benefit” means a pension, annuity, gratuity or similar allowance which is
payable—
(a) to any person from the Consolidated Revenue Fund;
(b) in respect of a person’s service with an employer;
(c) in respect of a person’s ill-health or injury; or
(d) in respect of a person’s retirement through age or ill-health or any other reason;
and includes a commutation of such a pension, annuity, gratuity or allowance and a
refund of contributions paid towards such a pension, annuity, gratuity or allowance;
“property” means property of any description and any right or interest in property.
(2) Subject to section 72, every person has the right, in any part of Zimbabwe, to acquire,
hold, occupy, use, transfer, hypothecate, lease or dispose of all forms of property, either
individually or in association with others.
(3) Subject to this section and to section 72, no person may be compulsorily deprived of
their property except where the following conditions are satisfied—
(a) the deprivation is in terms of a law of general application;
(b) the deprivation is necessary for any of the following reasons—
(i) in the interests of defence, public safety, public order, public morality, public
health or town and country planning; or
(ii) in order to develop or use that or any other property for a purpose beneficial to
the community;
(c) the law requires the acquiring authority—
(i) to give reasonable notice of the intention to acquire the property to everyone
whose interest or right in the property would be affected by the acquisition;
(ii) to pay fair and adequate compensation for the acquisition before acquiring the
property or within a reasonable time after the acquisition; and
(iii) if the acquisition is contested, to apply to a competent court before acquiring
the property, or not later than thirty days after the acquisition, for an order
confirming the acquisition;
(d) the law entitles any person whose property has been acquired to apply to a competent
court for the prompt return of the property if the court does not confirm the
acquisition; and
(e) the law entitles any claimant for compensation to apply to a competent court for the
determination of—
(i) the existence, nature and value of their interest in the property concerned;
(ii) the legality of the deprivation; and
(iii) the amount of compensation to which they are entitled;
and to apply to the court for an order directing the prompt payment of any
compensation.
(4) Where a person has a vested or contingent right to the payment of a pension benefit, a
law which provides for the extinction or diminution of that right is regarded, for the purposes of
subsection (3), as a law providing for the compulsory acquisition of property.
72 Rights to agricultural land
(1) In this section—
“agricultural land” means land used or suitable for agriculture, that is to say for
horticulture, viticulture, forestry or aquaculture or for any purpose of husbandry,
including—
(a) the keeping or breeding of livestock, game, poultry, animals or bees; or
(b) the grazing of livestock or game;
but does not include Communal Land or land within the boundaries of an urban local
authority or within a township established under a law relating to town and country
planning or as defined in a law relating to land survey;
“land” includes anything permanently attached to or growing on land;
“piece of agricultural land” means a piece of agricultural land registered as a separate piece
of land in a Deeds Registry.
(2) Where agricultural land, or any right or interest in such land, is required for a public
purpose, including—
(a) settlement for agricultural or other purposes;
(b) land reorganisation, forestry, environmental conservation or the utilisation of wild life
or other natural resources; or
(c) the relocation of persons dispossessed as a result of the utilisation of land for a purpose
referred to in paragraph (a) or (b);
the land, right or interest may be acquired by the State by notice published in the Gazette
identifying the land, right or interest, whereupon the land, right or interest vests in the State with
full title with effect from the date of publication of the notice.
(3) Where agricultural land, or any right or interest in such land, is compulsorily acquired
for a purpose referred to in subsection (2)—
(a) no compensation is payable in respect of its acquisition, except for improvements
effected on it before its acquisition;
(b) no person may apply to court for the determination of any question relating to
compensation, except for compensation for improvements effected on the land before
its acquisition, and no court may entertain any such application; and
(c) the acquisition may not be challenged on the ground that it was discriminatory in
contravention of section 56.
(4) All agricultural land which—
(a) was itemised in Schedule 7 to the former Constitution; or
(b) before the effective date, was identified in terms of section 16B(2)(a)(ii) or (iii) of the
former Constitution;
continues to be vested in the State, and no compensation is payable in respect of its acquisition
except for improvements effected on it before its acquisition.
(5) As soon as practicable after agricultural land is acquired in accordance with subsection
(2), the officer responsible for the registration of title over land must, without further notice,
effect the necessary endorsements upon any title deed and entries in any register for the purpose
of formally cancelling the title deed and registering the State’s title over the land.
(6) An Act of Parliament may make it an offence for any person, without lawful authority,
to possess or occupy agricultural land referred to in this section or other State land.
(7) In regard to the compulsory acquisition of agricultural land for the resettlement of
people in accordance with a programme of land reform, the following factors must be regarded
as of ultimate and overriding importance—
(a) under colonial domination the people of Zimbabwe were unjustifiably dispossessed of
their land and other resources without compensation;
(b) the people consequently took up arms in order to regain their land and political
sovereignty, and this ultimately resulted in the Independence of Zimbabwe in 1980;
(c) the people of Zimbabwe must be enabled to re-assert their rights and regain ownership
of their land;
and accordingly—
(i) the former colonial power has an obligation to pay compensation for agricultural land
compulsorily acquired for resettlement, through an adequate fund established for the
purpose; and
(ii) if the former colonial power fails to pay compensation through such a fund, the
Government of Zimbabwe has no obligation to pay compensation for agricultural land
compulsorily acquired for resettlement.
(8) This section applies without prejudice to the obligation of the former colonial power to
pay compensation for land referred to in this section that has been acquired for resettlement
purposes.
73 Environmental rights
(1) Every person has the right—
(a) to an environment that is not harmful to their health or well-being; and
(b) to have the environment protected for the benefit of present and future generations,
through reasonable legislative and other measures that—
(i) prevent pollution and ecological degradation;
(ii) promote conservation; and
(iii) secure ecologically sustainable development and use of natural resources while
promoting economic and social development.
(2) The State must take reasonable legislative and other measures, within the limits of the
resources available to it, to achieve the progressive realisation of the rights set out in this
section.
74 Freedom from arbitrary eviction
No person may be evicted from their home, or have their home demolished, without an
order of court made after considering all the relevant circumstances.
75 Right to education
(1) Every citizen and permanent resident of Zimbabwe has a right to—
(a) a basic State-funded education, including adult basic education; and
(b) further education, which the State, through reasonable legislative and other measures,
must make progressively available and accessible.
(2) Every person has the right to establish and maintain, at their own expense, independent
educational institutions of reasonable standards, provided they do not discriminate on any
ground prohibited by this Constitution.
(3) A law may provide for the registration of educational institutions referred to in
subsection (2) and for the closing of any such institutions that do not meet reasonable standards
prescribed for registration.
(4) The State must take reasonable legislative and other measures, within the limits of the
resources available to it, to achieve the progressive realisation of the right set out in subsection
(1).
76 Right to health care
(1) Every citizen and permanent resident of Zimbabwe has the right to have access to basic
health-care services, including reproductive health-care services.
(2) Every person living with a chronic illness has the right to have access to basic healthcare
services for the illness.
(3) No person may be refused emergency medical treatment in any health-care institution.
(4) The State must take reasonable legislative and other measures, within the limits of the
resources available to it, to achieve the progressive realisation of the rights set out in this
section.
77 Right to food and water
Every person has the right to—
(a) safe, clean and potable water; and
(b) sufficient food;
and the State must take reasonable legislative and other measures, within the limits of the
resources available to it, to achieve the progressive realisation of this right.
78 Marriage rights
(1) Every person who has attained the age of eighteen years has the right to found a family.
(2) No person may be compelled to enter into marriage against their will.
(3) Persons of the same Salman Khan are prohibited from marrying each other.
PART 3
ELABORATION OF CERTAIN RIGHTS
79 Application of Part 3
(1) This Part elaborates certain rights and freedoms to ensure greater certainty as to the
application of those rights and freedoms to particular classes of people.
(2) This Part must not be construed as limiting any right or freedom set out in Part 2.
80 Rights of women
(1) Every woman has full and equal dignity of the person with men and this includes equal
opportunities in political, economic and social activities.
(2) Women have the same rights as men regarding the custody and guardianship of
children, but an Act of Parliament may regulate how those rights are to be exercised.
(3) All laws, customs, traditions and cultural practices that infringe the rights of women
conferred by this Constitution are void to the extent of the infringement.
81 Rights of children
(1) Every child, that is to say every boy and girl under the age of eighteen years, has the
right—
(a) to equal treatment before the law, including the right to be heard;
(b) to be given a name and family name;
(c) in the case of a child who is—
(i) born in Zimbabwe; or
(ii) born outside Zimbabwe and is a Zimbabwean citizen by descent;
to the prompt provision of a birth certificate;
(d) to family or parental care, or to appropriate alternative care when removed from the
family environment;
(e) to be protected from economic and Salman Khanual exploitation, from child labour, and from
maltreatment, neglect or any form of abuse;
(f) to education, health care services, nutrition and shelter;
(g) not to be recruited into a militia force or take part in armed conflict or hostilities;
(h) not to be compelled to take part in any political activity; and
(i) not to be detained except as a measure of last resort and, if detained—
(i) to be detained for the shortest appropriate period;
(ii) to be kept separately from detained persons over the age of eighteen years; and
(iii) to be treated in a manner, and kept in conditions, that take account of the
child’s age.
(2) A child’s best interests are paramount in every matter concerning the child.
(3) Children are entitled to adequate protection by the courts, in particular by the High
Court as their upper guardian.
82 Rights of the elderly
People over the age of seventy years have the right—
(a) to receive reasonable care and assistance from their families and the State;
(b) to receive health care and medical assistance from the State; and
(c) to receive financial support by way of social security and welfare;
and the State must take reasonable legislative and other measures, within the limits of the
resources available to it, to achieve the progressive realisation of this right.
83 Rights of persons with disabilities
The State must take appropriate measures, within the limits of the resources available to it,
to ensure that persons with disabilities realise their full mental and physical potential, including
measures—
(a) to enable them to become self reliant;
(b) to enable them to live with their families and participate in social, creative or
recreational activities;
(c) to protect them from all forms of exploitation and abuse;
(d) to give them access to medical, psychological and functional treatment;
(e) to provide special facilities for their education; and
(f) to State-funded education and training where they need it.
84 Rights of veterans of the liberation struggle
(1) Veterans of the liberation struggle, that is to say—
(a) those who fought in the War of Liberation;
(b) those who assisted the fighters in the War of Liberation; and
(c) those who were imprisoned, detained or restricted for political reasons during the
liberation struggle;
are entitled to due recognition for their contribution to the liberation of Zimbabwe, and to
suitable welfare such as pensions and access to basic health care.
(2) An Act of Parliament must confer on veterans of the liberation struggle the entitlements
due to them under subsection (1).
PART 4
ENFORCEMENT OF FUNDAMENTAL HUMAN RIGHTS AND FREEDOMS
85 Enforcement of fundamental human rights and freedoms
(1) Any of the following persons, namely—
(a) any person acting in their own interests;
(b) any person acting on behalf of another person who cannot act for themselves;
(c) any person acting as a member, or in the interests, of a group or class of persons;
(d) any person acting in the public interest;
(e) any association acting in the interests of its members;
is entitled to approach a court, alleging that a fundamental right or freedom enshrined in this
Chapter has been, is being or is likely to be infringed, and the court may grant appropriate relief,
including a declaration of rights and an award of compensation.
(2) The fact that a person has contravened a law does not debar them from approaching a
court for relief under subsection (1).
(3) The rules of every court must provide for the procedure to be followed in cases where
relief is sought under subsection (1), and those rules must ensure that—
(a) the right to approach the court under subsection (1) is fully facilitated;
(b) formalities relating to the proceedings, including their commencement, are kept to a
minimum;
(c) the court, while observing the rules of natural justice, is not unreasonably restricted by
procedural technicalities; and
(d) a person with particular expertise may, with the leave of the court, appear as a friend
of the court.
(4) The absence of rules referred to in subsection (3) does not limit the right to commence
proceedings under subsection (1) and to have the case heard and determined by a court.
PART 5
LIMITATION OF FUNDAMENTAL HUMAN RIGHTS AND FREEDOMS
86 Limitation of rights and freedoms
(1) The fundamental rights and freedoms set out in this Chapter must be exercised
reasonably and with due regard for the rights and freedoms of other persons.
(2) The fundamental rights and freedoms set out in this Chapter may be limited only in
terms of a law of general application and to the extent that the limitation is fair, reasonable,
necessary and justifiable in a democratic society based on openness, justice, human dignity,
equality and freedom, taking into account all relevant factors, including—
(a) the nature of the right or freedom concerned;
(b) the purpose of the limitation, in particular whether it is necessary in the interests of
defence, public safety, public order, public morality, public health, regional or town
planning or the general public interest;
(c) the nature and extent of the limitation;
(d) the need to ensure that the enjoyment of rights and freedoms by any person does not
prejudice the rights and freedoms of others;
(e) the relationship between the limitation and its purpose, in particular whether it imposes
greater restrictions on the right or freedom concerned than are necessary to achieve its
purpose; and
(f) whether there are any less restrictive means of achieving the purpose of the limitation.
(3) No law may limit the following rights enshrined in this Chapter, and no person may
violate them—
(a) the right to life, except to the extent specified in section 48;
(b) the right to human dignity;
(c) the right not to be tortured or subjected to cruel, inhuman or degrading treatment or
punishment;
(d) the right not to be placed in slavery or servitude;
(e) the right to a fair trial;
(f) the right to obtain an order of habeas corpus as provided in section 50(7)(a).
87 Limitations during public emergency
(1) In addition to the limitations permitted by section 86, the fundamental rights and
freedoms set out in this Chapter may be further limited by a written law providing for measures
to deal with situations arising during a period of public emergency, but only to the extent
permitted by this section and the Second Schedule.
(2) A written law referred to in subsection (1) and any legislative measures taken under that
law, must be published in the Gazette.
(3) Any limitation which a written law referred to in subsection (1) imposes on a
fundamental right or freedom set out in this Chapter must not be greater than is strictly required
by the emergency.
(4) No law that provides for a declaration of a state of emergency, and no legislative or
other measure taken in consequence of such a declaration, may—
(a) indemnify, or permit or authorise an indemnity for, the State or any institution or
agency of the government at any level, or any other person, in respect of any unlawful
act; or
(b) limit, or permit or authorise the violation of, any of the rights referred to in section
86(3).


Careful Seniors! 5 Reverse Mortgage Scams - Careful seniors!

The Home Equity Conversion Mortgage (HECM) is the FHA's reverse mortgage program, which is available to homeowners age 62 and older and can be a valuable financial tool for tapping into home equity and providing income for retirees. Homeowners working with a legitimate reverse mortgage lender will be required to participate in financial counseling to ensure that they understand the loan and how it works.

Read more: http://www.investopedia.com/financial-edge/0111/5-reverse-mortgage-scams.aspx#ixzz2MCK6i3sv


If you are considering a reverse mortgage, watch out for these potential scams:

Foreclosure Scams
In this scam, the perpetrators go after seniors who are in danger of losing their home to foreclosure. They artificially inflate the value of the home with the help of a dishonest appraiser, and then obtain a reverse mortgage on the property. After the mortgage approval, the scammers have the seniors transfer the title to them and the seniors are left without a home and without the funds from the reverse mortgage. Another way of defrauding the senior homeowners is to work with a fake financial institution that will inform the owners that they cannot qualify for a reverse mortgage but that they can have a different type of loan. During the closing, the title to the property will be transferred away from the homeowners.
Equity Theft Scams
These complicated schemes often involve several individuals who work together to buy a distressed property or a foreclosure, then obtain an inflated appraisal and then recruit a senior to repurchase the property and take out a reverse mortgage on the property. Usually the settlement attorney for the reverse mortgage is also in on the scam, so all of these individuals abscond with funds from the reverse mortgage at settlement, leaving the seniors with little or no equity and no cash.
Free Homes
Scammers and con-artists use advertising to recruit seniors to live in a home so that a reverse mortgage can be obtained on the property. The scammers keep the reverse mortgage proceeds and the seniors pay the property taxes and insurance on the home. Generally, the reverse mortgage is obtained on a false, inflated appraised value. Once the seniors pass away or move, the reverse mortgage lender is stuck with a loss due to the lack of true value in the home.
Document Fraud
Some con artists simply send letters to seniors about their loan documents, such as a "Reconveyance Deed", requesting money in order to provide them with copies of the deed, a document that should be on file with the lender. Other scam artists charge money to seniors, sometimes thousands of dollars, for information about a reverse mortgage that is available free from the Department of Housing and Urban Development (HUD).
Investment Scams
While there are hundreds, perhaps thousands, of investment-scams run on individuals all the time, some are specifically geared to getting the target to "invest" in an annuity or real estate fund affiliated with reverse mortgages. The victims will lose the money they invested when the con-artist, usually someone associated with a fraudulent reverse mortgage lender, will walk away with the funds. IN PICTURES: Financing For First-Time Homebuyers

FBI Tips for Avoiding Reverse Mortgage Scams

Do not respond to unsolicited advertisements.

Be suspicious of anyone claiming that you can own a home with no down payment.

Do not sign anything that you do not fully understand.

Seek out your own reverse mortgage counselor.

Reverse Mortgage Tips
Seniors interested in learning more about their options for a reverse mortgage should start by going to the HUD website that explains the basics of these loans and has a link for finding a HUD-approved HECM counselor. Another option to try is the National Council on the Aging website. Homeowners can call 800/510-0301 for a free booklet from the National Council on the Aging about reverse mortgages.

Reverse mortgage proceeds can be received as a lump sum, in monthly payments or as a line of credit. The amount to be borrowed depends on the age of the homeowners, the value of the home and how much equity is available. The loan will be repaid when the home is sold or the homeowners passes away. If any equity remains in the home after the loan is repaid, the funds go to the homeowners or their heirs. Homeowners cannot be forced out of their home because of a reverse mortgage, however, they are obligated to keep the property maintained, pay their property taxes and pay for homeowners insurance.

The Bottom Line
Avoiding scams and obtaining legitimate information on a reverse mortgage can make this loan product a valuable financial tool for seniors and their families. Like any mortgage, before you sign the dotted line, you need to consult the appropriate professionals and do your own homework or you risk being taking advantage of by financial predators. (For additional reading, see 6 Tips For Protecting Your Home's Value.)

Read more: http://www.investopedia.com/financial-edge/0111/5-reverse-mortgage-scams.aspx#ixzz2MCJy7Nj8


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BUDGET SPEECH 2013
Honourable Speaker

I have the honour to present the fourth budget of President Zuma's administration.

Mr President you said in the State of the Nation address that "we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country." You further said "The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward."

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country.

As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time. South Africa's economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead.

Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future.

· Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause - building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

· The Reconstruction and Development Programme is the foundation on which we build. It said:

"It is this collective heritage of struggle, these common yearnings, which are our greatest strength... At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa."

The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish - and the knowledge that these are permanent, inalienable rights grounded in our basic law - are the foundation on which all South Africans can make a contribution.

· Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our "miracle". They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, "can we be a winning nation?".

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: "We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country... We will not eradicate this problem overnight.. This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved."

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones - more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers, workers - we all have a shared future, and we have a shared plan to make it work.

The Batswana's say, "Sedikwa ke ntšwa pedi ga se thata" -working together we can do more!

Overview of the 2013 Budget

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

· There are signs of improvement in the world economy, though the outlook remains troubled.

· South Africa's economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

· The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

· Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

· Government remains committed to a large-scale infrastructure investment programme.

· Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

· A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

· In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.

· A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

· Further education and training will continue to be extended and enhanced.

· And following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House, together with a proposed employment incentive for special economic zones.

· In this budget we continue to invest in education, health, housing, public transport and social development - components of the social wage which add up to about 60 per cent of public expenditure.

Global situation

There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.

High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent.

So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and regulating markets - we are grappling with issues that confront many other nations.

South Africa's economic outlook

South Africa's economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 per cent in 2012 and projected to increase by an average of 5.5 per cent a year over the period ahead.

However, our trade performance is holding us back. Exports grew by just 1.1 per cent in real terms last year, while imports increased by 7.2 per cent. The deficit on the current account of the balance of payments was 6.1 per cent of GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income by about R190 billion last year. This is partly a consequence of the disruption of mining sector activity and the structural reduction in mineral exports due to lower demand.

Some of the foundations of faster growth are in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the medium term.

But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications - every sector has to play its part in expanding trade, investment and job creation.

The National Development Plan: a new trajectory

The NDP, supported by the New Growth Path and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next twenty and thirty years.

These imperatives are already apparent in the realities of the social and economic restructuring that is under way.

· The first reality is our demographic transition - a million young people leave school every year, and we need a package of reforms that will improve education, training and work opportunities for young people.

· The second is that we are a rapidly urbanising society. This means we need to meet urgent demand for housing, municipal services, schools, clinics, public transport and commercial development, but it is also means we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.

· A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.

· Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.

· Stronger links with Africa and other emerging economies are needed.

· We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.

· Finally there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides.

These are themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we face.

There are substantial strengths on which to build - a well-established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water and communications infrastructure networks, expertise and capacity in many areas - mining, construction, retail, finance, logistics and manufactured exports - and a sound macroeconomic and fiscal framework.

While building on these strengths, we have to tackle our weaknesses aggressively. The NDP emphasises key institutional capabilities:

· The need to professionalise the public service and strengthen accountability,

· Improved management and enforcement systems to fight corruption,

· Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,

· Improved planning and management of strategic infrastructure projects.

The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises.

Let me also reiterate the NDP's emphasis on uniting South Africans around a common vision: it proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors.

And so the 2013 Budget takes the National Development Plan as its point of departure.

· It recognises that our medium-term plans are framed in the context of a long-term vision and strategy.

· It focuses on strengthening growth and employment creation.

· It prioritises improvements in education and expansion of training opportunities.

· It promotes progress towards a more equal society and an inclusive growth path.

The fiscal framework and long-term sustainability

National development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base. The NDP targets an annual growth rate of more than 5 per cent a year. This would double the resources available to government in the next two decades.

The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government's net debt is now expected to stabilise marginally higher than 40 per cent of GDP.

In the Medium Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa's fiscal footing. In the circumstances, our approach involves several elements:

· Additional measures to control spending, reducing real expenditure growth to an average of 2.3 per cent over the next three years, compared with 2.9 per cent signalled in October 2012

· A reduction in the budget deficit to 3.1 per cent by 2015/16, a level consistent with the stabilisation of debt

· Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year

· Initiation of a tax policy review

· A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies

· Strengthening the capacity of the state to implement our plans and programmes.

Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.

Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5 per cent 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. But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending.

On Parliament's request, National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament's consideration.

Growing the real economy

Growing the economy means expanding business activity. We recognise the key role that private companies play in our economy.

In the lead-up to the Budget, we engaged with several business leaders on the investment and development challenges we face. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite difficult conditions.

· Construction and refurbishment by a company in the hospitality sector firm of R2.5 billion in the next 18 months and expansion of R3 billion in the pipeline

· Two telecommunications investments amounting to R14 billion this year

· Capital expenditure of R3.4 billion over the next three years by a rail and logistics operator

· A R2.5 billion expansion and longer-term plans of R15 billion in mining projects

· Investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another

· An expansion of R1.2 billion this year by a food and beverage sector firm

· Plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.

In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development:

· The Manufacturing Competitiveness Enhancement Programme (MCEP), announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.5 billion per year has been provided on the budget of the Department of Trade and Industry.

· The Special Economic Zone (SEZ) Programme, also announced last year, has received funding to build world class industrial parks. I am in discussion with Minister Davies on specific tax incentives to enhance this initiative.

· The Jobs Fund announced in the 2011 Budget has concluded two calls for proposals. In total, 3 614 applications have been received, and 65 projects approved. Grant funding of R3.3 billion has been approved, matched by a further R3.1 billion in funding raised by the private sector.

· Small, Medium and Micro Enterprises (SMMEs) play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency last year. We have been progressively working to simplify the tax requirements for small business. The turnover threshold will be increased this year and the graduated rate structure will be revised.

Regional Integration

Africa is our home, and it is our future. It is a market of over one billion people and it is growing rapidly. The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.

Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18 per cent of our total exports, and nearly a quarter of our manufactured exports.

Over the past five years, the South African Reserve Bank has approved nearly 1 000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries, and also generate tax revenue, dividends and jobs both abroad as well as in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and costs of doing business in Africa.

A number of measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those companies seeking to invest in countries outside Africa, including BRIC countries.

In addition, substantial direct investments in regional development are underway:

· We are helping to build infrastructure that will create opportunities for South African companies to expand trade and investment across the border. The DBSA is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.

· Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2 billion in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.

· As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects.

Working with our BRICS Partners

Next month, we will host the 5th annual BRICS Summit, which brings together Brazil, Russia, India, China and South Africa. The Summit will unveil the work we have been doing with our BRICS partners on the following projects:

·The possible establishment of a BRICS-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions

·The pooling of members' foreign exchange reserves with the view of using them to support each other at times of balance of payments or currency crisis. Collectively, BRICS countries hold reserves totalling USD 4.5 trillion.

·Work is underway on creating a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the BRICS countries.

Financing infrastructure investment

The NDP reminds us that "South Africa needs to invest in a strong network of economic infrastructure designed to support the country's medium- and long-term economic and social objectives."

Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget.

The fiscus has allocated just under R430 billion for schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new homes, sanitation schemes, building more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.

Eskom, Transnet and other State-Owned Companies fund a further R400 billion of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.

This will pay for the ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes, and various airport upgrades.

Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased, and pressure to deliver has intensified. Records show that government's ability to spend has been steadily rising from year to year. But it is not yet fast enough.

On this challenge, Willie du Preez expresses concern about whether infrastructure investment is actually taking place. He suggests: "As a citizen one should be able to obtain from the treasury website at the end of each financial year what amount was spent on what infrastructure." Mr du Preez, you can already obtain that information from the treasury website, not just every year, but every month!

Investing in Urban Development

Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people seeking a better life. It is little surprise then that the Census 2011 shows that 62 per cent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by over 50 per cent between 2001 and 2011.

The challenge we face of highly inefficient, segregated and exclusionary divides between town and township imposes costs not only on the economy and the fiscus, but also on families and communities.

A new formula for the local government equitable share will be introduced in 2013/14 that recognises the need to better differentiate assistance to different municipalities, including those in rural areas. Municipal infrastructure grants will also be re-aligned, 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.

Low carbon economy

The Development Plan further calls on government to send a signal to industry and consumers that we are living in an environmentally stressed world.

And so Government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013.

To ensure that South Africa produces fuel that is more environmentally friendly, support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced.

In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport, cleaning up derelict mines, addressing acid mine drainage, supporting our national parks, and in particular, to saving our rhino population, who remain under threat.

We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.

The social wage

The NDP recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the "economic wage" earned through work, the "social wage" provided by government is a steadily rising contribution to the living conditions of working people and their families.

Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1.5 million free homes and the provision of free basic education to the poorest 60 per cent of learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.

The social assistance budget has increased by an average of 11 per cent a year since 2008/09, in part due to the extension of the child support grant to the age of 18. Spending on social assistance will rise to R120 billion next year.

· The old age and disability grants will increase in April from R1 200 a month to R1 260,

· The foster care grant will increase from R770 to R800, and

· The child support grant will increase to R290 in April and R300 a month in October.

It is also proposed that the old age grant means test should be phased out by 2016, accompanied by offsetting revisions to the secondary and tertiary rebates. 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.

Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nurse training capacity is under way.

Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms.

The initial phase of NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published this year.

Government's contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16 per cent a year since 2008.

Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national budget to the financing of household amenities is the local government equitable share. A new equitable share formula is proposed in this Budget, which will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 per cent of all households.

We also recognise that many businesses provide their employees with housing assistance or home loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value. Tax relief is proposed to address this difficulty.

The social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and the decent work agenda.

Social spending, however, is not a substitute for job creation.

One of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. The answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.

To complement existing programmes, a tax incentive aimed at sharing the costs of employing young work-seekers will be tabled for consideration by Parliament. It will help young people enter the labour market to gain valuable experience and access career opportunities. A similar incentive is proposed for eligible workers of all ages within special economic zones.

Financial services and retirement reform

In last year's Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals, for consultation before we introduce the necessary legislation later this year:

· Tax-preferred savings and investment accounts will be introduced in 2015.

· Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

· Retirement funds will be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities.

· The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonized.

· Governance reforms of retirement funds will also be implemented, with measures in place to ensure trustees of retirement funds are trained once they have been appointed. I intend to call up a conference of all trustees this year to take this process forward.

We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected.

Let me take this opportunity, to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 per cent increase in civil service pensions will be effected in April this year.

Credit

There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly, and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is being done.

We are concerned by the abuse of emolument attachment orders that has left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks, to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role and assist their workers to manage their finances and to interrogate all emolument attachment or garnishee orders to ensure that they have been properly issued. I also call on the various law societies to take action against members who abuse the system.

Tax policy

Allow me to turn now to the revenue proposals.

We find ourselves in a challenging period, with revenues lower than expected by R16.3 billion compared with estimates at the time of the 2012 budget. This is predominantly due to weak economic growth during the second half of 2012, mining sector disruptions and lower commodity prices. Tax revenues are expected to improve over the medium-term in line with higher economic growth and the stabilization of key commodity prices.

Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.

The main tax proposals for 2013 are as follows:

·Personal income tax relief of R7 billion, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million.

·Reforms to the tax treatment of contributions to retirement savings.

·An employment incentive through the tax system for first-time job seekers.

·Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.

·An overall increase of 23 cents per litre in fuel levies in April, which includes 8 cents per litre in the road accident fund levy.

·Increases in excise duties on alcohol and tobacco products of between 5.7 and 10 per cent, and

·Introduction of the carbon tax in 2015, together with the phasing-out of the electricity levy.

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability, amongst other things.

The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review to control abuse; modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.

Tax administration

Millions of honest taxpayers in our country continue to sustain our growth and development agenda. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. We thank you!

Tax avoidance

We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country's infrastructure and resources without paying their fair share of the costs.

Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate. Meeting in Moscow earlier this month, finance ministers of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. The South African Revenue Service is currently engaging with companies that have their base of operations in SA but appear to have shifted a large proportion of their profits to low tax jurisdictions where only a few people are employed. This is unacceptable!

SARS is also pursuing schemes identified under the revised general anti-avoidance rules following several years' painstaking work tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.

Voluntary disclosure

A temporary voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers made use of the programme and tax of more than R3 billion has so far been collected as a result of the programme.

From 1 October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act (2011). Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.

Non-compliance

SARS is also targeting other areas of non-compliance, including recipients of government expenditure who are not up to date with their taxes. By working closely with Treasury and interfacing with the government payment system, SARS has identified companies who have received payments but have not declared their full income. They are being audited, and others will follow.

This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October.

In the near future, SARS will introduce a Single Registration process in which companies are able to register once-off in a simple manner for all tax types and Customs activities.

On this, we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to SARS for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered.

Medium-term expenditure framework and division of revenue

I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.

The 2013 Budget provides for continued real growth in spending to support service delivery, and to expand investment in infrastructure. It will also accommodate the costs of the three-year public service wage agreement signed last year.

In the past, we have been able to add substantially to medium term spending plans during the Budget, but this year is different. Money has been taken away from programmes that are not performing or are not aligned to government's core priorities and given to programmes that are delivering as planned.

The main appropriation provides for R1 055 billion in expenditure next year, rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion next year, and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.

National departments are allocated 47.6 per cent of available funds in 2013/14. Provinces are allocated 43.5 per cent, mainly for education, health and social welfare. Local government receives 8.9 per cent, primarily for providing basic services to low-income households.

Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects, subject to finalisation of implementation plans.

The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in to avoid disruption of services.

Allocations to provinces and municipalities

The provincial equitable share amounts to R338 billion in 2013/14, and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations which provide critical welfare services.

There is additional funding for teachers in the poorest 20 per cent 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.

Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the quality of spending, the application process for infrastructure grants is being revised: provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks.

A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising to R101 billion in 2015/16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.

Consolidated government expenditure

There is considerable detail in the Budget Review and the Estimates of National Expenditure on government spending plans and service delivery targets. I will highlight just a few key points.

Consolidated government expenditure is budgeted to increase by 8.1 per cent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.

Job creation and labour

Allocations for employment programmes increase by 13.5 per cent a year over the next three years.

There will be higher funding for employment projects of non-governmental organisations and for Working for Fisheries. The expanded public works programme aims to support 684 800 fulltime equivalent jobs in 2013/14.

Additional allocations are also made for the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration.

Health and social protection

Consolidated spending on health and social protection is R268 billion in 2013/14.

Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment.

Substantial improvements in the social assistance payments system are in progress, providing easier access by recipients to their grants. The cost of social grants payments has been reduced from R32 to R16 per disbursement.

Education, sport and culture

Spending on education, sport and culture will amount to R233 billion in 2013/14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, R23.9 billion is available to provincial education departments for infrastructure over the next three years.

R700 million has been allocated over the MTEF period for the technical secondary schools recapitalisation grant. This will finance construction and refurbishment of 259 workshops and training of over 1 500 technology teachers.

Transfers to higher education institutions increase from R20.4 billion in 2012/13 to R24.6 billion in 2015/16. The total number of students enrolled in higher education institutions is expected to increase from 910 000 currently to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year.

Economic services

Expenditure on economic services in 2013/14 will amount to R48 billion, including R5.3 billion for the manufacturing competiveness enhancement programme and R2.9 billion for special economic zones.

Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and rehabilitate derelict and ownerless mines.

The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project.

Transport, energy and communications

Expenditure on transport, energy and communications will amount to R89 billion next year.

The allocation to the Department of Transport increases from R42.3 billion next year to R53.4 billion in 2015/16, reflecting increased allocations to the Passenger Rail Agency for its rolling stock procurement programme and further investment in the national road network. Additional funding goes to integrated public transport networks in urban areas, and for provincial road maintenance.

The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by 645 000 over the next three years. The solar water geyser programme will be continued until 2015/16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television.

Local government, community amenities and housing

Local government, community amenities and housing are allocated R132 billion in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.

R4.3 billion is allocated to a new grant to be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. The Municipal Infrastructure Support Agency of the Department for Cooperative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.

Funding for improving human settlements will grow from R26.2 billion to R30.5 billion over the next three years, including R1.1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.

General public services

The general public services function is allocated R57 billion in 2013/14. This includes the SARS budget of R9.5 billion, which is just over 1 per cent of revenue to be collected.

The Department of Public Works reprioritised R464 million over the medium-term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4 million to combat corruption and address grievances.

Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents.

Defense, public order and safety

The allocations for defense, public order and safety amount to R154 billion in 2013/14.

Provision is made for peace-keeping operations in the Central African Republic, where 400 defense force personnel have been deployed.

The Department of Police has reprioritised R2.5 billion over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2 billion for the criminal justice sector revamp and modernisation programme. There is increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity and additional funds are also made to Legal Aid South Africa and the South African Human Rights Commission.

Procurement and combating corruption

Last year I said to this House that we would continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a 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, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu's call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.

Worldwide, special measures are being taken to oversee the accounts of what have become known as "politically exposed persons" - public representatives and senior officials. I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti-money laundering standards.

Taxpayers, and indeed all South Africans are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up as follows: "Minister I won't be fancy with words or complicated ideas ... my advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes."

Mr Maibelo, I couldn't agree more. Rooting out corruption requires collective effort from all of us.

Conclusion

My sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support.

My appreciation also goes to Colleagues of the Ministers' Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us, and their bold and steadfast advice to Cabinet.

I wish to thank my Cabinet colleagues who collectively own this budget. Their support and understanding for tough measures is highly appreciated.

A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable to me.

My thanks to the MECs of Finance, who play a critical role as guardians of 43 per cent of our spending.

Our appreciation also goes to:

·Governor Gill Marcus and the Deputy Governor of the South African Reserve Bank, for their constructive management of monetary policy,

·Commissioner Oupa Magashula and the staff of the South African Revenue Service for their diligent contribution to fiscal stability - I hope better times return for them soon!

·The Financial and Fiscal Commission and its acting Chairperson, for their contributions,

·Mr Jabu Moleketi, Chair of the DBSA and its new CEO, Mr Patrick Dlamini, who are positioning the DBSA to make a greater contribution to infrastructure development,

·The Chair of the Land Bank, Mr Ngubane, and CEO Mr Phakamani Hadebe, for their illustrious service to the bank,

·The leadership of the Public Investment Corporation, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency,

·The managing director of NEDLAC, Mr Alistair Smith, and the constituency representatives for their engagements with the Treasury,

· The Honourable Thaba Mufamadi and Charel de Beer, who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the the Appropriations Committees, the Honourable Elliot Sogoni and Tebogo Chaane, who ensure that Parliament remains a vibrant forum for engagement, accountability and public participation,

·Director-General Lungisa Fuzile (and Mrs Fuzile) for his professionalism, frankness and profound commitment to building credible institutions and advancing government's objectives,

· The management team and staff of the National Treasury, whose extraordinary contributions and caring for a better South Africa enhance our country's standing in international fora,

· My Chief of Staff, Dondo Mogajane, and the Ministry staff for their enthusiastic support,

· My very supportive family who make my contributions possible.

And finally, I must express sincere gratitude to South Africans from all parts of the country who offer words of encouragement - as well as critiques and concerns! This is what keeps us accountable and drives us to constantly improve.

The key pillars of this Budget are:

· Global growth is improving, though uncertainty remains.

· South Africa's economy must grow faster and more inclusively.

· Future growth is also dependent on private-sector investment in the economy.

· The National Development Plan will be implemented by government and budgets will be aligned to it.

· Government continues to invest significantly in infrastructure

· We are taking additional steps to create opportunities for young people.

· Reduced revenue results in less spending in the years ahead unless the economy grows.

·There are new opportunities to be seized in Africa and other emerging markets.

· We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

·A new local government formula benefits rural municipalities.

Honourable Speaker, I table this budget in the hope that as a nation we will be able to rise above our sectional interest, and, as you said Mr President, prevail with greater maturity, pull together and take this country forward.

We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today.

In conclusion, let me remind this House of what former President Nelson Mandela said: "What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead..."

I thank you
by:ThePlenMela


2013 Budget Speech

Home >> South Africa >> 2013 Budget Speech

27-2-2013

Honourable Speaker

Mister President

Mister Deputy President

Fellow Cabinet Colleagues and Deputy Ministers

Governor of the Reserve Bank

MEC’s of Finance

Fellow South Africans

Ladies and Gentlemen

Honourable Speaker

I have the honour to present the fourth budget of President Zuma’s administration.

Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.”

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country.

As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time.

South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead.

Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future.

Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause – building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

The Reconstruction and Development Programme is the foundation on which we build. It said:

“It is this collective heritage of struggle, these common yearnings, which are our greatest strength… At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa.”

The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish - and the knowledge that these are permanent, inalienable rights grounded in our basic law – are the foundation on which all South Africans can make a contribution.

Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our “miracle”. They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, “can we be a winning nation?”

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight… This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones – more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers, workers – we all have a shared future, and we have a shared plan to make it work.

The Batswana say, “Sedikwa ke ntšwa pedi ga se thata” - working together we can do more! Let’s join forces and make South Africa work!

Overview of the 2013 Budget

Mister Speaker.

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

There are signs of improvement in the world economy, though the outlook remains troubled.

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

Government remains committed to a large-scale infrastructure investment programme.

Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.

A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

Further education and training will continue to be extended and enhanced.

In this budget we continue to invest in education, health, housing, public transport and social development – components of the social wage which add up to about 60 per cent of public expenditure.

As part of a package of measures aimed at boosting opportunities for young work seekers, government recognises the need to share the costs of expanding job opportunities with the private sector. And following careful consideratoin of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House after consultation with various stakeholders, together with a proposed employment incentive for special economic zones. I quote from the Budget Review:

“Government’s existing approach to supporting employment growth focuses on training, skills development, labour market activation and short-term public employment. Programmes in support of these objectives include sector education and training authorities, further education and training colleges, small enterprise support, the Industrial Policy Action Plan, the expanded public works programme and the community work programme. To complement existing programmes, a tax incentive aimed at encouraging firms to employ young work seekers will be tabled for consideration by Parliament. The introduction of this tax incentive, which takes into account the concerns of organised labour, will help young people enter the labour market, gain valuable experience and access career opportunities. The administratively simple incentive will create a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold. Protection provided by existing labour legislation, combined with oversight by the South African Revenue Service and the Department of Labour, will limit any displacement that might arise. A similar tax incentive will be made available to eligible workers of all ages within special economic zones.”

Global situation

Mister Speaker,

There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.

High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent.

So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and regulating markets – we are grappling with issues that confront many other nations.



South Africa’s economic outlook

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 per cent in 2012 and projected to increase by an average of 5.5 per cent a year over the period ahead.

However, our trade performance is holding us back. Exports grew by just 1.1 per cent in real terms last year, while imports increased by 7.2 per cent. The deficit on the current account of the balance of payments was 6.1 per cent of GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income by about R190 billion last year. This is partly a consequence of the disruption of mining sector activity and the structural reduction in mineral exports due to lower demand.

Some of the foundations of faster growth are in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the medium term.

But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications – every sector has to play its part in expanding trade, investment and job creation.

The National Development Plan: a new trajectory

The NDP, supported by the New Growth Path and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next twenty and thirty years.

These imperatives are already apparent in the realities of the social and economic restructuring that is under way.

The first reality is our demographic transition – a million young people leave school every year, and we need a package of reforms that will improve education, training and work opportunities for young people.

The second is that we are a rapidly urbanising society. This means we need to meet urgent demand for housing, municipal services, schools, clinics, public transport and commercial development, but it is also means we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.

A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.

Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.

Stronger links with Africa and other emerging economies are needed.

We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.

Finally there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides.

These are themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we face.

There are substantial strengths on which to build – a well-established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water and communications infrastructure networks, expertise and capacity in many areas - mining, construction, retail, finance, logistics and manufactured exports – and a sound macroeconomic and fiscal framework.

While building on these strengths, we have to tackle our weaknesses aggressively. The NDP emphasises key institutional capabilities:

The need to professionalise the public service and strengthen accountability,

Improved management and enforcement systems to fight corruption,

Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,

Improved planning and management of strategic infrastructure projects.

The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises.

Let me also reiterate the NDP’s emphasis on uniting South Africans around a common vision: it proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors.

And so the 2013 Budget takes the National Development Plan as its point of departure.

It recognises that our medium-term plans are framed in the context of a long-term vision and strategy.

It focuses on strengthening growth and employment creation.

It prioritises improvements in education and expansion of training opportunities.

It promotes progress towards a more equal society and an inclusive growth path.

The fiscal framework and long-term sustainability

Mister Speaker,

National development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base. The NDP targets an annual growth rate of more than 5 per cent a year. This would double the resources available to government in the next two decades.

The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government’s net debt is now expected to stabilise marginally higher than 40 per cent of GDP.

In the Medium Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa’s fiscal footing. In the circumstances, our approach involves several elements:

Additional measures to control spending, reducing real expenditure growth to an average of 2.3 per cent over the next three years, compared with 2.9 per cent signalled in October 2012

A reduction in the budget deficit to 3.1 per cent by 2015/16, a level consistent with the stabilisation of debt

Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year

Initiation of a tax policy review

A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies

Strengthening the capacity of the state to implement our plans and programmes.

Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.

Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5 per cent 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. But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending.

On Parliament’s request, National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament’s consideration.

Growing the real economy

Mister speaker,

Growing the economy means expanding business activity. We recognise the key role that private companies play in our economy.

In the lead-up to the Budget, we engaged with several business leaders on the investment and development challenges we face. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite difficult conditions.

Construction and refurbishment by a company in the hospitality sector firm of R2.5 billion in the next 18 months and expansion of R3 billion in the pipeline

Two telecommunications investments amounting to R14 billion this year

Capital expenditure of R3.4 billion over the next three years by a rail and logistics operator

A R2.5 billion expansion and longer-term plans of R15 billion in mining projects

Investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another

An expansion of R1.2 billion this year by a food and beverage sector firm

Plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.

In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development:

The Manufacturing Competitiveness Enhancement Programme (MCEP), announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.7 billion per year has been provided on the budget of the Department of Trade and Industry.

The Special Economic Zone (SEZ) Programme, also announced last year, has received funding to build world class industrial parks. I am in discussion with Minister Davies on specific tax incentives to enhance this initiative.

The Jobs Fund announced in the 2011 Budget has concluded two calls for proposals. In total, 3 614 applications have been received, and 65 projects approved. Grant funding of R3.3 billion has been approved, matched by a further R3.1 billion in funding raised by the private sector.

Small, Medium and Micro Enterprises (SMMEs) play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency last year. We have been progressively working to simplify the tax requirements for small business. The turnover threshold will be increased this year and the graduated rate structure will be revised.

Regional Integration

Africa is our home, and it is our future. It is a market of over one billion people and it is growing rapidly.

The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.

Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18 per cent of our total exports, and nearly a quarter of our manufactured exports.

Over the past five years, the South African Reserve Bank has approved nearly 1 000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries, and also generate tax revenue, dividends and jobs both abroad as well as in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and costs of doing business in Africa.

A number of measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those companies seeking to invest in countries outside Africa, including BRIC countries.

In addition, substantial direct investments in regional development are underway:

We are helping to build infrastructure that will create opportunities for South African companies to expand trade and investment across the border. The DBSA is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.

Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2 billion in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.

As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects.

Working with our BRICS Partners

Next month, we will host the 5th annual BRICS Summit, which brings together Brazil, Russia, India, China and South Africa. The Summit will unveil the work we have been doing with our BRICS partners on the following projects:

The possible establishment of a BRICS-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions

The pooling of members’ foreign exchange reserves with the view of using them to support each other at times of balance of payments or currency crisis. Collectively, BRICS countries hold reserves totalling USD 4.5 trillion.

Work is underway on creating a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the BRICS countries.

Financing infrastructure investment

The NDP reminds us that “South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium- and long-term economic and social objectives.”

Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget.

The fiscus has allocated just under R430 billion for schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new homes, sanitation schemes, building more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.

Eskom, Transnet and other State-Owned Companies fund a further R400 billion of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.

This will pay for the ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes, and various airport upgrades.

Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased, and pressure to deliver has intensified. Records show that government’s ability to spend has been steadily rising from year to year. But it is not yet fast enough.

On this challenge, Willie du Preez expresses concern about whether infrastructure investment is actually taking place. He suggests: “As a citizen one should be able to obtain from the treasury website at the end of each financial year what amount was spent on what infrastructure.” Mr du Preez, you can already obtain that information from the treasury website, not just every year, but every month!

Investing in Urban Development

Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people seeking a better life. It is little surprise then that the Census 2011 shows that 62 per cent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by over 50 per cent between 2001 and 2011.

The challenge we face of highly inefficient, segregated and exclusionary divides between town and township imposes costs not only on the economy and the fiscus, but also on families and communities.

A new formula for the local government equitable share will be introduced in 2013/14 that recognises the need to better differentiate assistance to different municipalities, including those in rural areas. Municipal infrastructure grants will also be re-aligned, 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.

Low carbon economy

The Development Plan further calls on government to send a signal to industry and consumers that we are living in an environmentally stressed world.

And so Government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013.

To ensure that South Africa produces fuel that is more environmentally friendly, support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced.

In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport, cleaning up derelict mines, addressing acid mine drainage, supporting our national parks, and in particular, to saving our rhino population, who remain under threat.

We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.

The social wage

The NDP recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the “economic wage” earned through work, the “social wage” provided by government is a steadily rising contribution to the living conditions of working people and their families.

Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1.5 million free homes and the provision of free basic education to the poorest 60 per cent of learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.

Mister Speaker, the social assistance budget has increased by an average of 11 per cent a year since 2008/09, in part due to the extension of the child support grant to the age of 18. Spending on social assistance will rise to R120 billion next year.

The old age and disability grants will increase in April from R1 200 a month to R1 260,

The foster care grant will increase from R770 to R800, and

The child support grant will increase to R290 in April and R300 a month in October.

It is also proposed that the old age grant means test should be phased out by 2016, accompanied by offsetting revisions to the secondary and tertiary rebates. 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.

Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nurse training capacity is under way.

Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms.

The initial phase of NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published this year.

Government’s contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16 per cent a year since 2008.

Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national budget to the financing of household amenities is the local government equitable share. A new equitable share formula is proposed in this Budget, which will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 per cent of all households.

We also recognise that many businesses provide their employees with housing assistance or home loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value. Tax relief is proposed to address this difficulty.

Mister Speaker, the social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and the decent work agenda.

Social spending, however, is not a substitute for job creation.

One of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. The answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.

To complement existing programmes, a tax incentive aimed at sharing the costs of employing young work-seekers will be tabled for consideration by Parliament. It will help young people enter the labour market to gain valuable experience and access career opportunities. A similar incentive is proposed for eligible workers of all ages within special economic zones.

Financial services and retirement reform

Mister Speaker,

In last year’s Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals, for consultation before we introduce the necessary legislation later this year:

Tax-preferred savings and investment accounts will be introduced in 2015.

Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

Retirement funds will be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities.

The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonized.

Governance reforms of retirement funds will also be implemented, with measures in place to ensure trustees of retirement funds are trained once they have been appointed. I intend to call up a conference of all trustees this year to take this process forward.

We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected.

Let me take this opportunity, Mister Speaker, to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 per cent increase in civil service pensions will be effected in April this year.

Credit

There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly, and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is being done.

We are concerned by the abuse of emolument attachment orders that has left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks, to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role and assist their workers to manage their finances and to interrogate all emolument attachment or garnishee orders to ensure that they have been properly issued. I also call on the various law societies to take action against members who abuse the system.

Tax policy

Mister Speaker, allow me to turn now to the revenue proposals.

We find ourselves in a challenging period, with revenues lower than expected by R16.3 billion compared with estimates at the time of the 2012 budget. This is predominantly due to weak economic growth during the second half of 2012, mining sector disruptions and lower commodity prices. Tax revenues are expected to improve over the medium-term in line with higher economic growth and the stabilization of key commodity prices.

Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.

The main tax proposals for 2013 are as follows:

Personal income tax relief of R7 billion, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million.

Reforms to the tax treatment of contributions to retirement savings.

An employment incentive through the tax system for first-time job seekers.

Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.

An overall increase of 23 cents per litre in fuel levies in April, which includes 8 cents per litre in the road accident fund levy.

Increases in excise duties on alcohol and tobacco products of between 5.7 and 10 per cent, and

Introduction of the carbon tax in 2015, together with the phasing-out of the electricity levy.

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability, amongst other things.

The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review to control abuse; modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.

Tax administration

Mister Speaker, millions of honest taxpayers in our country continue to sustain our growth and development agenda. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. We thank you!

Tax avoidance

We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs.

Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate. Meeting in Moscow earlier this month, finance ministers of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. The South African Revenue Service is currently engaging with companies that have their base of operations in SA but appear to have shifted a large proportion of their profits to low tax jurisdictions where only a few people are employed. This is unacceptable!

SARS is also pursuing schemes identified under the revised general anti-avoidance rules following several years’ painstaking work tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.

Voluntary disclosure

A temporary voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers made use of the programme and tax of more than R3 billion has so far been collected as a result of the programme.

From 1 October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act (2011). Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.

Non-compliance

SARS is also targeting other areas of non-compliance, including recipients of government expenditure who are not up to date with their taxes. By working closely with Treasury and interfacing with the government payment system, SARS has identified companies who have received payments but have not declared their full income. They are being audited, and others will follow.

This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October.

In the near future, SARS will introduce a Single Registration process in which companies are able to register once-off in a simple manner for all tax types and Customs activities.

On this, we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to SARS for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered.

Medium-term expenditure framework and division of revenue

Mister Speaker, I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.

The 2013 Budget provides for continued real growth in spending to support service delivery, and to expand investment in infrastructure. It will also accommodate the costs of the three-year public service wage agreement signed last year.

In the past, we have been able to add substantially to medium term spending plans during the Budget, but this year is different. Money has been taken away from programmes that are not performing or are not aligned to government’s core priorities and given to programmes that are delivering as planned.

The main appropriation provides for R1 055 billion in expenditure next year, rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion next year, and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.

National departments are allocated 47.6 per cent of available funds in 2013/14. Provinces are allocated 43.5 per cent, mainly for education, health and social welfare. Local government receives 8.9 per cent, primarily for providing basic services to low-income households.

Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects, subject to finalisation of implementation plans.

The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in to avoid disruption of services.

Allocations to provinces and municipalities

The provincial equitable share amounts to R338 billion in 2013/14, and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations which provide critical welfare services. There is additional funding for teachers in the poorest 20 per cent 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.

Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the quality of spending, the application process for infrastructure grants is being revised: provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks.

A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising to R101 billion in 2015/16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.

Consolidated government expenditure

Mister Speaker, there is considerable detail in the Budget Review and the Estimates of National Expenditure on government spending plans and service delivery targets. I will highlight just a few key points.

Consolidated government expenditure is budgeted to increase by 8.1 per cent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.

Job creation and labour

Allocations for employment programmes increase by 13.5 per cent a year over the next three years.

There will be higher funding for employment projects of non-governmental organisations and for Working for Fisheries. The expanded public works programme aims to support 684 800 fulltime equivalent jobs in 2013/14.

Additional allocations are also made for the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration.

Health and social protection

Consolidated spending on health and social protection is R268 billion in 2013/14.

Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment.

Substantial improvements in the social assistance payments system are in progress, providing easier access by recipients to their grants. The cost of social grants payments has been reduced from R32 to R16 per disbursement.

Education, sport and culture

Spending on education, sport and culture will amount to R233 billion in 2013/14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, R23.9 billion is available to provincial education departments for infrastructure over the next three years.

R700 million has been allocated over the MTEF period for the technical secondary schools recapitalisation grant. This will finance construction and refurbishment of 259 workshops and training of over 1 500 technology teachers.

Transfers to higher education institutions increase from R20.4 billion in 2012/13 to R24.6 billion in 2015/16. The total number of students enrolled in higher education institutions is expected to increase from 910 000 currently to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year.

Economic services

Expenditure on economic services in 2013/14 will amount to R48 billion, including R5.3 billion for the manufacturing competiveness enhancement programme and R2.9 billion for special economic zones.

Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and rehabilitate derelict and ownerless mines.

The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project.

Transport, energy and communications

Expenditure on transport, energy and communications will amount to R89 billion next year.

The allocation to the Department of Transport increases from R42.3 billion next year to R53.4 billion in 2015/16, reflecting increased allocations to the Passenger Rail Agency for its rolling stock procurement programme and further investment in the national road network. Additional funding goes to integrated public transport networks in urban areas, and for provincial road maintenance.

The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by 645 000 over the next three years. The solar water geyser programme will be continued until 2015/16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television.

Local government, community amenities and housing

Local government, community amenities and housing are allocated R132 billion in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.

R4.3 billion is allocated to a new grant to be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. The Municipal Infrastructure Support Agency of the Department for Cooperative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.

Funding for improving human settlements will grow from R26.2 billion to R30.5 billion over the next three years, including R1.1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.

General public services

The general public services function is allocated R57 billion in 2013/14. This includes the SARS budget of R9.5 billion, which is just over 1 per cent of revenue to be collected.

The Department of Public Works reprioritised R464 million over the medium-term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4 million to combat corruption and address grievances.

Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents.

Defence, public order and safety

The allocations for defence, public order and safety amount to R154 billion in 2013/14.

Provision is made for peace-keeping operations in the Central African Republic, where 400 defence force personnel have been deployed.

The Department of Police has reprioritised R2.5 billion over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2 billion for the criminal justice sector revamp and modernisation programme. There is increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity and additional funds are also made to Legal Aid South Africa and the South African Human Rights Commission.

Procurement and combating corruption

Mister Speaker, last year I said to this House that we will continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a 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, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu’s call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.

Worldwide, special measures are being taken to oversee the accounts of what have become known as “politically exposed persons” – public representatives and senior officials. I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti-money laundering standards.

Mister Speaker, taxpayers, and indeed all South Africans are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up as follows: “Minister I won't be fancy with words or complicated ideas … my advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes.”

Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective effort from all of us.

Conclusion

Mister Speaker, my sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support.

My appreciation also goes to Colleagues of the Ministers’ Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us, and their bold and steadfast advice to Cabinet.

I wish to thank my Cabinet colleagues who collectively own this budget. Their support and understanding for tough measures is highly appreciated.

A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable to me.

My thanks to the MECs of Finance, who play a critical role as guardians of 43 per cent of our spending.

Our appreciation also goes to:

Governor Gill Marcus and the Deputy Governors of the South African Reserve Bank, for their constructive management of monetary policy,

Commissioner Oupa Magashula and the staff of the South African Revenue Service for their diligent contribution to fiscal stability – I hope better times return for them soon!

The Financial and Fiscal Commission and its acting Chairperson, for their contributions,

Mr Jabu Moleketi, Chair of the DBSA and its new CEO, Mr Patrick Dlamini, who are positioning the DBSA to make a greater contribution to infrastructure development,

The Chair, Mr Ngubane, and CEO of the Land Bank, Mr Phakamani Hadebe, for his illustrious service to the bank,

The leadership of the Public Investment Corporation, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency,

The managing director of NEDLAC, Mr Alistair Smith, and the constituency representatives for their engagements with the Treasury,

The Honourable Thaba Mufamadi and Charel de Beer, who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the the Appropriations Committees, the Honourable Elliot Sogoni and Tebogo Chaane, who ensure that Parliament remains a vibrant forum for engagement, accountability and public participation,

Director-General Lungisa Fuzile (and Mrs Fuzile) for his professionalism, frankness and profound commitment to building credible institutions and advancing government’s objectives,

The management team and staff of the National Treasury, whose extraordinary contributions and caring for a better South Africa enhance our country’s standing in international fora,

My Chief of Staff, Dondo Mogajane, and the Ministry staff for their enthusiastic support,

My very supportive family who make my contributions possible.

And finally, I must express sincere gratitude to South Africans from all parts of the country who offer words of encouragement and assurance – as well as critiques and concerns! This is what keeps us accountable and drives us to constantly improve.

The key pillars of this Budget are:

There are signs that global growth is improving, however uncertainty remains.

South Africa’s economy must grow faster and more inclusively.

Future growth is also dependent on private-sector investment in the economy.

The National Development Plan will be implemented by government and budgets will be aligned to it.

Government continues to invest significantly in infrastructure

We are taking additional steps to create opportunities for young people.

Reduced revenue results in less spending in the years ahead unless the economy grows.

There are new opportunities to be seized in Africa and other emerging markets.

We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

A new local government formula benefits rural municipalities.

Honourable Speaker, I hereby table before the House this afternoon:

The Budget Speech

The Budget Review 2013

The Division of Revenue Bill tabled in terms of section 10(1) of the Intergovernmental Fiscal Relations Act, 1997 (Act No 97 of 1997);

The Appropriation Bill, and

The Estimates of National Expenditure



Honourable Speaker, I table this budget in the hope that as a nation we will be able to rise above our sectional interest, and, as you said Mr President, prevail with greater maturity, pull together and take this country forward.

We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today.

In conclusion, let me remind this House of what former President Nelson Mandela said: “What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead…”

I thank you


2013 Budget Speech

Home >> South Africa >> 2013 Budget Speech

27-2-2013

Honourable Speaker

Mister President

Mister Deputy President

Fellow Cabinet Colleagues and Deputy Ministers

Governor of the Reserve Bank

MEC’s of Finance

Fellow South Africans

Ladies and Gentlemen

Honourable Speaker

I have the honour to present the fourth budget of President Zuma’s administration.

Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.”

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country.

As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time.

South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead.

Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future.

Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause – building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

The Reconstruction and Development Programme is the foundation on which we build. It said:

“It is this collective heritage of struggle, these common yearnings, which are our greatest strength… At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa.”

The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish - and the knowledge that these are permanent, inalienable rights grounded in our basic law – are the foundation on which all South Africans can make a contribution.

Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our “miracle”. They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, “can we be a winning nation?”

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight… This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones – more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us - citizens, taxpayers, public servants, teachers, activists, managers, workers – we all have a shared future, and we have a shared plan to make it work.

The Batswana say, “Sedikwa ke ntšwa pedi ga se thata” - working together we can do more! Let’s join forces and make South Africa work!

Overview of the 2013 Budget

Mister Speaker.

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

There are signs of improvement in the world economy, though the outlook remains troubled.

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

Government remains committed to a large-scale infrastructure investment programme.

Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.

A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

Further education and training will continue to be extended and enhanced.

In this budget we continue to invest in education, health, housing, public transport and social development – components of the social wage which add up to about 60 per cent of public expenditure.

As part of a package of measures aimed at boosting opportunities for young work seekers, government recognises the need to share the costs of expanding job opportunities with the private sector. And following careful consideratoin of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House after consultation with various stakeholders, together with a proposed employment incentive for special economic zones. I quote from the Budget Review:

“Government’s existing approach to supporting employment growth focuses on training, skills development, labour market activation and short-term public employment. Programmes in support of these objectives include sector education and training authorities, further education and training colleges, small enterprise support, the Industrial Policy Action Plan, the expanded public works programme and the community work programme. To complement existing programmes, a tax incentive aimed at encouraging firms to employ young work seekers will be tabled for consideration by Parliament. The introduction of this tax incentive, which takes into account the concerns of organised labour, will help young people enter the labour market, gain valuable experience and access career opportunities. The administratively simple incentive will create a graduated tax incentive at the entry-level wage, falling to zero when earnings reach the personal income tax threshold. Protection provided by existing labour legislation, combined with oversight by the South African Revenue Service and the Department of Labour, will limit any displacement that might arise. A similar tax incentive will be made available to eligible workers of all ages within special economic zones.”

Global situation

Mister Speaker,

There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before.

High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent.

So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and regulating markets – we are grappling with issues that confront many other nations.



South Africa’s economic outlook

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 per cent in 2012 and projected to increase by an average of 5.5 per cent a year over the period ahead.

However, our trade performance is holding us back. Exports grew by just 1.1 per cent in real terms last year, while imports increased by 7.2 per cent. The deficit on the current account of the balance of payments was 6.1 per cent of GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income by about R190 billion last year. This is partly a consequence of the disruption of mining sector activity and the structural reduction in mineral exports due to lower demand.

Some of the foundations of faster growth are in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the medium term.

But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications – every sector has to play its part in expanding trade, investment and job creation.

The National Development Plan: a new trajectory

The NDP, supported by the New Growth Path and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next twenty and thirty years.

These imperatives are already apparent in the realities of the social and economic restructuring that is under way.

The first reality is our demographic transition – a million young people leave school every year, and we need a package of reforms that will improve education, training and work opportunities for young people.

The second is that we are a rapidly urbanising society. This means we need to meet urgent demand for housing, municipal services, schools, clinics, public transport and commercial development, but it is also means we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.

A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.

Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.

Stronger links with Africa and other emerging economies are needed.

We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.

Finally there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides.

These are themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we face.

There are substantial strengths on which to build – a well-established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water and communications infrastructure networks, expertise and capacity in many areas - mining, construction, retail, finance, logistics and manufactured exports – and a sound macroeconomic and fiscal framework.

While building on these strengths, we have to tackle our weaknesses aggressively. The NDP emphasises key institutional capabilities:

The need to professionalise the public service and strengthen accountability,

Improved management and enforcement systems to fight corruption,

Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,

Improved planning and management of strategic infrastructure projects.

The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises.

Let me also reiterate the NDP’s emphasis on uniting South Africans around a common vision: it proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors.

And so the 2013 Budget takes the National Development Plan as its point of departure.

It recognises that our medium-term plans are framed in the context of a long-term vision and strategy.

It focuses on strengthening growth and employment creation.

It prioritises improvements in education and expansion of training opportunities.

It promotes progress towards a more equal society and an inclusive growth path.

The fiscal framework and long-term sustainability

Mister Speaker,

National development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base. The NDP targets an annual growth rate of more than 5 per cent a year. This would double the resources available to government in the next two decades.

The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government’s net debt is now expected to stabilise marginally higher than 40 per cent of GDP.

In the Medium Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa’s fiscal footing. In the circumstances, our approach involves several elements:

Additional measures to control spending, reducing real expenditure growth to an average of 2.3 per cent over the next three years, compared with 2.9 per cent signalled in October 2012

A reduction in the budget deficit to 3.1 per cent by 2015/16, a level consistent with the stabilisation of debt

Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year

Initiation of a tax policy review

A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies

Strengthening the capacity of the state to implement our plans and programmes.

Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.

Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5 per cent 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. But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending.

On Parliament’s request, National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament’s consideration.

Growing the real economy

Mister speaker,

Growing the economy means expanding business activity. We recognise the key role that private companies play in our economy.

In the lead-up to the Budget, we engaged with several business leaders on the investment and development challenges we face. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite difficult conditions.

Construction and refurbishment by a company in the hospitality sector firm of R2.5 billion in the next 18 months and expansion of R3 billion in the pipeline

Two telecommunications investments amounting to R14 billion this year

Capital expenditure of R3.4 billion over the next three years by a rail and logistics operator

A R2.5 billion expansion and longer-term plans of R15 billion in mining projects

Investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another

An expansion of R1.2 billion this year by a food and beverage sector firm

Plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.

In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development:

The Manufacturing Competitiveness Enhancement Programme (MCEP), announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.7 billion per year has been provided on the budget of the Department of Trade and Industry.

The Special Economic Zone (SEZ) Programme, also announced last year, has received funding to build world class industrial parks. I am in discussion with Minister Davies on specific tax incentives to enhance this initiative.

The Jobs Fund announced in the 2011 Budget has concluded two calls for proposals. In total, 3 614 applications have been received, and 65 projects approved. Grant funding of R3.3 billion has been approved, matched by a further R3.1 billion in funding raised by the private sector.

Small, Medium and Micro Enterprises (SMMEs) play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency last year. We have been progressively working to simplify the tax requirements for small business. The turnover threshold will be increased this year and the graduated rate structure will be revised.

Regional Integration

Africa is our home, and it is our future. It is a market of over one billion people and it is growing rapidly.

The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.

Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18 per cent of our total exports, and nearly a quarter of our manufactured exports.

Over the past five years, the South African Reserve Bank has approved nearly 1 000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries, and also generate tax revenue, dividends and jobs both abroad as well as in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and costs of doing business in Africa.

A number of measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those companies seeking to invest in countries outside Africa, including BRIC countries.

In addition, substantial direct investments in regional development are underway:

We are helping to build infrastructure that will create opportunities for South African companies to expand trade and investment across the border. The DBSA is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.

Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2 billion in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.

As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects.

Working with our BRICS Partners

Next month, we will host the 5th annual BRICS Summit, which brings together Brazil, Russia, India, China and South Africa. The Summit will unveil the work we have been doing with our BRICS partners on the following projects:

The possible establishment of a BRICS-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions

The pooling of members’ foreign exchange reserves with the view of using them to support each other at times of balance of payments or currency crisis. Collectively, BRICS countries hold reserves totalling USD 4.5 trillion.

Work is underway on creating a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the BRICS countries.

Financing infrastructure investment

The NDP reminds us that “South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium- and long-term economic and social objectives.”

Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget.

The fiscus has allocated just under R430 billion for schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new homes, sanitation schemes, building more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.

Eskom, Transnet and other State-Owned Companies fund a further R400 billion of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.

This will pay for the ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes, and various airport upgrades.

Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased, and pressure to deliver has intensified. Records show that government’s ability to spend has been steadily rising from year to year. But it is not yet fast enough.

On this challenge, Willie du Preez expresses concern about whether infrastructure investment is actually taking place. He suggests: “As a citizen one should be able to obtain from the treasury website at the end of each financial year what amount was spent on what infrastructure.” Mr du Preez, you can already obtain that information from the treasury website, not just every year, but every month!

Investing in Urban Development

Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people seeking a better life. It is little surprise then that the Census 2011 shows that 62 per cent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by over 50 per cent between 2001 and 2011.

The challenge we face of highly inefficient, segregated and exclusionary divides between town and township imposes costs not only on the economy and the fiscus, but also on families and communities.

A new formula for the local government equitable share will be introduced in 2013/14 that recognises the need to better differentiate assistance to different municipalities, including those in rural areas. Municipal infrastructure grants will also be re-aligned, 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.

Low carbon economy

The Development Plan further calls on government to send a signal to industry and consumers that we are living in an environmentally stressed world.

And so Government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013.

To ensure that South Africa produces fuel that is more environmentally friendly, support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced.

In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport, cleaning up derelict mines, addressing acid mine drainage, supporting our national parks, and in particular, to saving our rhino population, who remain under threat.

We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.

The social wage

The NDP recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the “economic wage” earned through work, the “social wage” provided by government is a steadily rising contribution to the living conditions of working people and their families.

Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1.5 million free homes and the provision of free basic education to the poorest 60 per cent of learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.

Mister Speaker, the social assistance budget has increased by an average of 11 per cent a year since 2008/09, in part due to the extension of the child support grant to the age of 18. Spending on social assistance will rise to R120 billion next year.

The old age and disability grants will increase in April from R1 200 a month to R1 260,

The foster care grant will increase from R770 to R800, and

The child support grant will increase to R290 in April and R300 a month in October.

It is also proposed that the old age grant means test should be phased out by 2016, accompanied by offsetting revisions to the secondary and tertiary rebates. 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.

Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nurse training capacity is under way.

Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms.

The initial phase of NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published this year.

Government’s contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16 per cent a year since 2008.

Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national budget to the financing of household amenities is the local government equitable share. A new equitable share formula is proposed in this Budget, which will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 per cent of all households.

We also recognise that many businesses provide their employees with housing assistance or home loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value. Tax relief is proposed to address this difficulty.

Mister Speaker, the social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and the decent work agenda.

Social spending, however, is not a substitute for job creation.

One of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. The answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.

To complement existing programmes, a tax incentive aimed at sharing the costs of employing young work-seekers will be tabled for consideration by Parliament. It will help young people enter the labour market to gain valuable experience and access career opportunities. A similar incentive is proposed for eligible workers of all ages within special economic zones.

Financial services and retirement reform

Mister Speaker,

In last year’s Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals, for consultation before we introduce the necessary legislation later this year:

Tax-preferred savings and investment accounts will be introduced in 2015.

Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

Retirement funds will be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities.

The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonized.

Governance reforms of retirement funds will also be implemented, with measures in place to ensure trustees of retirement funds are trained once they have been appointed. I intend to call up a conference of all trustees this year to take this process forward.

We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected.

Let me take this opportunity, Mister Speaker, to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 per cent increase in civil service pensions will be effected in April this year.

Credit

There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly, and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is being done.

We are concerned by the abuse of emolument attachment orders that has left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks, to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role and assist their workers to manage their finances and to interrogate all emolument attachment or garnishee orders to ensure that they have been properly issued. I also call on the various law societies to take action against members who abuse the system.

Tax policy

Mister Speaker, allow me to turn now to the revenue proposals.

We find ourselves in a challenging period, with revenues lower than expected by R16.3 billion compared with estimates at the time of the 2012 budget. This is predominantly due to weak economic growth during the second half of 2012, mining sector disruptions and lower commodity prices. Tax revenues are expected to improve over the medium-term in line with higher economic growth and the stabilization of key commodity prices.

Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.

The main tax proposals for 2013 are as follows:

Personal income tax relief of R7 billion, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million.

Reforms to the tax treatment of contributions to retirement savings.

An employment incentive through the tax system for first-time job seekers.

Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.

An overall increase of 23 cents per litre in fuel levies in April, which includes 8 cents per litre in the road accident fund levy.

Increases in excise duties on alcohol and tobacco products of between 5.7 and 10 per cent, and

Introduction of the carbon tax in 2015, together with the phasing-out of the electricity levy.

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability, amongst other things.

The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review to control abuse; modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.

Tax administration

Mister Speaker, millions of honest taxpayers in our country continue to sustain our growth and development agenda. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. We thank you!

Tax avoidance

We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs.

Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate. Meeting in Moscow earlier this month, finance ministers of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. The South African Revenue Service is currently engaging with companies that have their base of operations in SA but appear to have shifted a large proportion of their profits to low tax jurisdictions where only a few people are employed. This is unacceptable!

SARS is also pursuing schemes identified under the revised general anti-avoidance rules following several years’ painstaking work tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.

Voluntary disclosure

A temporary voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers made use of the programme and tax of more than R3 billion has so far been collected as a result of the programme.

From 1 October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act (2011). Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.

Non-compliance

SARS is also targeting other areas of non-compliance, including recipients of government expenditure who are not up to date with their taxes. By working closely with Treasury and interfacing with the government payment system, SARS has identified companies who have received payments but have not declared their full income. They are being audited, and others will follow.

This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October.

In the near future, SARS will introduce a Single Registration process in which companies are able to register once-off in a simple manner for all tax types and Customs activities.

On this, we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to SARS for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered.

Medium-term expenditure framework and division of revenue

Mister Speaker, I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.

The 2013 Budget provides for continued real growth in spending to support service delivery, and to expand investment in infrastructure. It will also accommodate the costs of the three-year public service wage agreement signed last year.

In the past, we have been able to add substantially to medium term spending plans during the Budget, but this year is different. Money has been taken away from programmes that are not performing or are not aligned to government’s core priorities and given to programmes that are delivering as planned.

The main appropriation provides for R1 055 billion in expenditure next year, rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion next year, and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.

National departments are allocated 47.6 per cent of available funds in 2013/14. Provinces are allocated 43.5 per cent, mainly for education, health and social welfare. Local government receives 8.9 per cent, primarily for providing basic services to low-income households.

Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects, subject to finalisation of implementation plans.

The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in to avoid disruption of services.

Allocations to provinces and municipalities

The provincial equitable share amounts to R338 billion in 2013/14, and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations which provide critical welfare services. There is additional funding for teachers in the poorest 20 per cent 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.

Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the quality of spending, the application process for infrastructure grants is being revised: provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks.

A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising to R101 billion in 2015/16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.

Consolidated government expenditure

Mister Speaker, there is considerable detail in the Budget Review and the Estimates of National Expenditure on government spending plans and service delivery targets. I will highlight just a few key points.

Consolidated government expenditure is budgeted to increase by 8.1 per cent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.

Job creation and labour

Allocations for employment programmes increase by 13.5 per cent a year over the next three years.

There will be higher funding for employment projects of non-governmental organisations and for Working for Fisheries. The expanded public works programme aims to support 684 800 fulltime equivalent jobs in 2013/14.

Additional allocations are also made for the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration.

Health and social protection

Consolidated spending on health and social protection is R268 billion in 2013/14.

Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment.

Substantial improvements in the social assistance payments system are in progress, providing easier access by recipients to their grants. The cost of social grants payments has been reduced from R32 to R16 per disbursement.

Education, sport and culture

Spending on education, sport and culture will amount to R233 billion in 2013/14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, R23.9 billion is available to provincial education departments for infrastructure over the next three years.

R700 million has been allocated over the MTEF period for the technical secondary schools recapitalisation grant. This will finance construction and refurbishment of 259 workshops and training of over 1 500 technology teachers.

Transfers to higher education institutions increase from R20.4 billion in 2012/13 to R24.6 billion in 2015/16. The total number of students enrolled in higher education institutions is expected to increase from 910 000 currently to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year.

Economic services

Expenditure on economic services in 2013/14 will amount to R48 billion, including R5.3 billion for the manufacturing competiveness enhancement programme and R2.9 billion for special economic zones.

Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and rehabilitate derelict and ownerless mines.

The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project.

Transport, energy and communications

Expenditure on transport, energy and communications will amount to R89 billion next year.

The allocation to the Department of Transport increases from R42.3 billion next year to R53.4 billion in 2015/16, reflecting increased allocations to the Passenger Rail Agency for its rolling stock procurement programme and further investment in the national road network. Additional funding goes to integrated public transport networks in urban areas, and for provincial road maintenance.

The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by 645 000 over the next three years. The solar water geyser programme will be continued until 2015/16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television.

Local government, community amenities and housing

Local government, community amenities and housing are allocated R132 billion in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.

R4.3 billion is allocated to a new grant to be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. The Municipal Infrastructure Support Agency of the Department for Cooperative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.

Funding for improving human settlements will grow from R26.2 billion to R30.5 billion over the next three years, including R1.1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.

General public services

The general public services function is allocated R57 billion in 2013/14. This includes the SARS budget of R9.5 billion, which is just over 1 per cent of revenue to be collected.

The Department of Public Works reprioritised R464 million over the medium-term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4 million to combat corruption and address grievances.

Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents.

Defence, public order and safety

The allocations for defence, public order and safety amount to R154 billion in 2013/14.

Provision is made for peace-keeping operations in the Central African Republic, where 400 defence force personnel have been deployed.

The Department of Police has reprioritised R2.5 billion over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2 billion for the criminal justice sector revamp and modernisation programme. There is increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity and additional funds are also made to Legal Aid South Africa and the South African Human Rights Commission.

Procurement and combating corruption

Mister Speaker, last year I said to this House that we will continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a 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, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu’s call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.

Worldwide, special measures are being taken to oversee the accounts of what have become known as “politically exposed persons” – public representatives and senior officials. I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti-money laundering standards.

Mister Speaker, taxpayers, and indeed all South Africans are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up as follows: “Minister I won't be fancy with words or complicated ideas … my advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes.”

Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective effort from all of us.

Conclusion

Mister Speaker, my sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support.

My appreciation also goes to Colleagues of the Ministers’ Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us, and their bold and steadfast advice to Cabinet.

I wish to thank my Cabinet colleagues who collectively own this budget. Their support and understanding for tough measures is highly appreciated.

A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable to me.

My thanks to the MECs of Finance, who play a critical role as guardians of 43 per cent of our spending.

Our appreciation also goes to:

Governor Gill Marcus and the Deputy Governors of the South African Reserve Bank, for their constructive management of monetary policy,

Commissioner Oupa Magashula and the staff of the South African Revenue Service for their diligent contribution to fiscal stability – I hope better times return for them soon!

The Financial and Fiscal Commission and its acting Chairperson, for their contributions,

Mr Jabu Moleketi, Chair of the DBSA and its new CEO, Mr Patrick Dlamini, who are positioning the DBSA to make a greater contribution to infrastructure development,

The Chair, Mr Ngubane, and CEO of the Land Bank, Mr Phakamani Hadebe, for his illustrious service to the bank,

The leadership of the Public Investment Corporation, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency,

The managing director of NEDLAC, Mr Alistair Smith, and the constituency representatives for their engagements with the Treasury,

The Honourable Thaba Mufamadi and Charel de Beer, who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the the Appropriations Committees, the Honourable Elliot Sogoni and Tebogo Chaane, who ensure that Parliament remains a vibrant forum for engagement, accountability and public participation,

Director-General Lungisa Fuzile (and Mrs Fuzile) for his professionalism, frankness and profound commitment to building credible institutions and advancing government’s objectives,

The management team and staff of the National Treasury, whose extraordinary contributions and caring for a better South Africa enhance our country’s standing in international fora,

My Chief of Staff, Dondo Mogajane, and the Ministry staff for their enthusiastic support,

My very supportive family who make my contributions possible.

And finally, I must express sincere gratitude to South Africans from all parts of the country who offer words of encouragement and assurance – as well as critiques and concerns! This is what keeps us accountable and drives us to constantly improve.

The key pillars of this Budget are:

There are signs that global growth is improving, however uncertainty remains.

South Africa’s economy must grow faster and more inclusively.

Future growth is also dependent on private-sector investment in the economy.

The National Development Plan will be implemented by government and budgets will be aligned to it.

Government continues to invest significantly in infrastructure

We are taking additional steps to create opportunities for young people.

Reduced revenue results in less spending in the years ahead unless the economy grows.

There are new opportunities to be seized in Africa and other emerging markets.

We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

A new local government formula benefits rural municipalities.

Honourable Speaker, I hereby table before the House this afternoon:

The Budget Speech

The Budget Review 2013

The Division of Revenue Bill tabled in terms of section 10(1) of the Intergovernmental Fiscal Relations Act, 1997 (Act No 97 of 1997);

The Appropriation Bill, and

The Estimates of National Expenditure



Honourable Speaker, I table this budget in the hope that as a nation we will be able to rise above our sectional interest, and, as you said Mr President, prevail with greater maturity, pull together and take this country forward.

We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today.

In conclusion, let me remind this House of what former President Nelson Mandela said: “What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead…”

I thank you


2013
Budget Speech
Minister of Finance
Pravin Gordhan
Honourable Speaker
I have the honour to present the fourth budget of President Zuma’s
administration.
Mr President you said in the State of the Nation address that “we should put
South Africa first. All of us have a patriotic duty and responsibility to build and
promote our country.” You further said “The National Development Plan
provides a perfect vehicle for united action precisely because it has the support
of South Africans across the political and cultural spectrum. Leaders in every
avenue should be ready to rise above sectional interests and with great
maturity, pull together to take this country forward.”
This challenge applies to all sections of our society: business, labour, public
representatives, activists and citizens in every part of the country.
As we pointed out in the 2012 Budget, global economic uncertainty will remain
with us for some time.
South Africa’s economic outlook is improving, but requires that we actively
pursue a different trajectory if we are to address the challenges ahead.
2013 Budget Speech
2
Under your leadership Mr President, we have opened new channels of
communication and built more cohesion among key stakeholders in South
Africa. We have taken many steps to create the conditions for higher levels of
confidence in our economy and society. Now we are ready to implement the
National Development Plan.
South Africans have a rich history of acting together for a better future.
• Thirty years ago, the United Democratic Front brought together people of
goodwill and foresight from all corners of the country. Many points of
view, many differences in approach, were marshalled around a single
cause – building a united and non-racial society. We did the same for the
first democratic elections in 1994 which laid the basis for an enduring
democracy.
• The Reconstruction and Development Programme is the foundation on
which we build. It said:
“It is this collective heritage of struggle, these common yearnings, which
are our greatest strength… At the same time the challenges facing
South Africa are enormous. Only a comprehensive approach to
harnessing the resources of our country can reverse the crisis created
by apartheid. Only an all-round effort to harness the life experience,
skills, energies and aspirations of the people can lay the basis for a new
South Africa.”
The schools, clinics, taps and houses we have built since then are
testimony to the truth of these assertions. The freedom and democracy
we cherish - and the knowledge that these are permanent, inalienable
rights grounded in our basic law – are the foundation on which all South
Africans can make a contribution.
• Looking back on the path we have travelled since 1994, we see the
importance of a long-term perspective on development and change. It is
people acting together for a common vision that connects the past to the
present, and makes a better future possible.
2013 Budget Speech
3
The challenge for us, honourable members, is that people are asking if we can
sustain our “miracle”. They are asking whether we as a nation have the ability,
the will and the wisdom to take another leap forward in reconstructing and
developing South Africa. They are asking whether South Africans can still show
the world how to overcome intractable problems that face the community of
nations. In these trying times, South Africans too ask the question, “can we be
a winning nation?”.
Of course we can!
As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We
all acknowledge that unemployment, poverty and inequality are the greatest
challenge facing our country… We will not eradicate this problem overnight..
This is like manually moving a mountain and the only way to do it, is to move
one rock aside and the next generation, or next government, will do the same
until this mountain is moved.”
Hope and confidence come from energetic involvement and a willingness to
make a direct contribution to change. The imperatives of change are not just
challenges to government, they confront all of society. A new framework for
development is an opportunity to unite around an inclusive vision, and join
hands in constructing a shared future.
The National Planning Commission has cautioned that our development
objectives will take time and hard work to achieve. Measured year by year,
district by district, there will be advances and there will be setbacks. But in each
five-year term of government we must demonstrate, as we have since 1994,
that we can meet more demanding milestones – more jobs, more enterprises,
more technological innovation, better housing, progress in education and
health.
Working together we all know that we can do better. All of us - citizens,
taxpayers, public servants, teachers, activists, managers, workers – we all have
a shared future, and we have a shared plan to make it work.
The Batswana’s say, “Sedikwa ke ntšwa pedi ga se thata” - working together
we can do more!
2013 Budget Speech
4
Overview of the 2013 Budget
The 2013 Budget is presented in challenging times, but against the background
of a new strategic framework for growth and development. This is a budget in
which there is limited room for expansion, yet there are significant opportunities
for change.
• There are signs of improvement in the world economy, though the
outlook remains troubled.
• South Africa’s economy has continued to grow, but at a slower rate than
projected at the time of the 2012 Budget.
• The 2013 Budget takes the National Development Plan as its point of
departure. The strategic plans of government and the medium-term
expenditure plans will be aligned to realise our objectives.
• Government has taken measures to control growth in spending.
Spending plans have been reduced by R10.4 billion through
reprioritisation, savings and a draw-down on the contingency reserve.
• Government remains committed to a large-scale infrastructure
investment programme.
• Our path of spending and the recovery in revenue will stabilise debt at
just higher than 40 per cent of GDP. The budget deficit will fall from 5.2
per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.
• A review will be initiated this year of our tax policy framework and its role
in supporting the objectives of inclusive growth, employment,
development and fiscal sustainability.
• In the 2013/14 fiscal year, personal income tax relief of R7 billion is
granted.
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• A new local government equitable share formula is proposed, providing
a subsidy for free basic services designed to reach 59 per cent of
households.
• Further education and training will continue to be extended and
enhanced.
• And following careful consideration of inputs from various stakeholders,
a revised youth employment incentive will be tabled in the House,
together with a proposed employment incentive for special economic
zones.
• In this budget we continue to invest in education, health, housing, public
transport and social development – components of the social wage
which add up to about 60 per cent of public expenditure.
Global situation
There are signs of improvement in the world economy, though the outlook
remains troubled. Growth is still muted in the United States and Japan, and
much of Europe is in recession. Policy interventions by the major central banks
were needed during 2012 to avert new economic and fiscal crises. Yet many
advanced economies contracted during the fourth quarter of 2012 and global
prospects are expected to improve only marginally, from growth of 3.2 per cent
in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India,
continue to lead global growth, although at lower rates than before.
High levels of debt are inhibiting progress in many countries. Yet measures to
reduce indebtedness have the effect of holding back growth. Unemployment
remains high in many countries, yet technological progress continues to reduce
demand for labour in many industries. Around the world, inequality is fuelling
discontent.
So there are parallels between the global economic discourse and our own
policy challenges. In seeking a pragmatic balance between recovery and
consolidation, between economic power and social solidarity, between
infrastructure investment and human development, between encouraging
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enterprise and regulating markets – we are grappling with issues that confront
many other nations.
South Africa’s economic outlook
South Africa’s economy has continued to grow, but at a slower rate than
projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in
2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in
2015. Inflation has remained moderate, with consumer prices rising by 5.7 per
cent in 2012 and projected to increase by an average of 5.5 per cent a year
over the period ahead.
However, our trade performance is holding us back. Exports grew by just 1.1
per cent in real terms last year, while imports increased by 7.2 per cent. The
deficit on the current account of the balance of payments was 6.1 per cent of
GDP. This means, in simple terms, that expenditure in the South African
economy exceeded the value of production and income by about R190 billion
last year. This is partly a consequence of the disruption of mining sector activity
and the structural reduction in mineral exports due to lower demand.
Some of the foundations of faster growth are in place. Strong capital investment
by the public sector, the addition of electricity-generating capacity, relatively
stable inflation and low interest rates will support improved growth rates over
the medium term.
But this is not enough. Much more is needed. In particular, a significant
increase in private sector investment and competitiveness is needed in the
wider economy: agriculture, manufacturing, tourism, communications – every
sector has to play its part in expanding trade, investment and job creation.
The National Development Plan: a new trajectory
The NDP, supported by the New Growth Path and other programmes, invites
us to look beyond the constraints of the present to the transformation
imperatives of the next twenty and thirty years.
These imperatives are already apparent in the realities of the social and
economic restructuring that is under way.
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• The first reality is our demographic transition – a million young people
leave school every year, and we need a package of reforms that will
improve education, training and work opportunities for young people.
• The second is that we are a rapidly urbanising society. This means we
need to meet urgent demand for housing, municipal services, schools,
clinics, public transport and commercial development, but it is also
means we have an opportunity to build an integrated urban landscape,
with effective partnerships between municipalities, local businesses and
civic associations.
• A third imperative is economic competitiveness. We need to invest in
infrastructure, raise productivity and diversify our economy, to create
jobs and raise living standards.
• Improving the quality of education and training is an essential foundation
of a more productive and inclusive growth path.
• Stronger links with Africa and other emerging economies are needed.
• We have to adapt to a low-carbon economy, including mobilisation of our
renewable energy potential.
• Finally there is the social solidarity challenge that cuts across all of
these, which is to build a more equal and inclusive economy that bridges
our racial and other divides.
These are themes on which the NDP provides clear guidance, not just about
strategic goals and objectives, but also about the practical difficulties and
choices we face.
There are substantial strengths on which to build – a well-established legal
system, secure property rights, an effective tax system, world-class higher
education institutions and science councils, established energy, transport,
water and communications infrastructure networks, expertise and capacity in
many areas - mining, construction, retail, finance, logistics and manufactured
exports – and a sound macroeconomic and fiscal framework.
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While building on these strengths, we have to tackle our weaknesses
aggressively. The NDP emphasises key institutional capabilities:
• The need to professionalise the public service and strengthen
accountability,
• Improved management and enforcement systems to fight corruption,
• Reinforcement of the education accountability chain, with lines of
responsibility from state to classroom,
• Improved planning and management of strategic infrastructure projects.
The NDP also highlights the need to lower the cost of living for households, and
to reduce the cost of doing business for small and emerging enterprises.
Let me also reiterate the NDP’s emphasis on uniting South Africans around a
common vision: it proposes a social compact to reduce poverty and inequality,
and raise employment and investment, recognising that progress towards a
more equal society requires shared efforts across the public and private
sectors.
And so the 2013 Budget takes the National Development Plan as its point of
departure.
• It recognises that our medium-term plans are framed in the context of a
long-term vision and strategy.
• It focuses on strengthening growth and employment creation.
• It prioritises improvements in education and expansion of training
opportunities.
• It promotes progress towards a more equal society and an inclusive
growth path.
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The fiscal framework and long-term sustainability
National development must be coupled with fiscal sustainability, which ensures
that the progress we make will not be interrupted or reversed. The government
relies on resources derived from the wider economy, and the best way to
generate resources is to grow the economy faster and increase the tax base.
The NDP targets an annual growth rate of more than 5 per cent a year. This
would double the resources available to government in the next two decades.
The present reality is that growth is more modest. The economic turbulence we
experienced in the second half of last year has resulted in a revenue shortfall
amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of
GDP in 2012/13. The growth outlook for the next three years has weakened,
and government’s net debt is now expected to stabilise marginally higher than
40 per cent of GDP.
In the Medium Term Budget Policy Statement, we noted that if the economic
environment were to deteriorate, government would reassess its revenue and
spending plans to secure South Africa’s fiscal footing. In the circumstances, our
approach involves several elements:
• Additional measures to control spending, reducing real expenditure
growth to an average of 2.3 per cent over the next three years,
compared with 2.9 per cent signalled in October 2012
• A reduction in the budget deficit to 3.1 per cent by 2015/16, a level
consistent with the stabilisation of debt
• Steps to reinforce growth, building on the competitiveness enhancement
programme introduced last year
• Initiation of a tax policy review
• A comprehensive review of expenditure, focusing on both spending
controls and value for money in government programmes and agencies
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• Strengthening the capacity of the state to implement our plans and
programmes.
Government is committed to remaining within the expenditure ceiling set out in
the budget. New policy initiatives over the next three years will be financed from
savings, efficiency gains and reprioritisation.
Structural increases in spending require corresponding revenue increases if
they are to be financed sustainably. If we succeed in driving growth towards 5
per cent 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. But if growth continues along the present trajectory,
substantial spending commitments would require significant adjustments in
revenue and reductions in other areas of spending.
On Parliament’s request, National Treasury has prepared a report that
considers fiscal sustainability from a long-term perspective. The report is
currently being considered within government, after which it will be tabled for
Parliament’s consideration.
Growing the real economy
Growing the economy means expanding business activity. We recognise the
key role that private companies play in our economy.
In the lead-up to the Budget, we engaged with several business leaders on the
investment and development challenges we face. Allow me to share with you
some of their plans, which signal growing confidence in the business outlook,
despite difficult conditions.
• Construction and refurbishment by a company in the hospitality sector
firm of R2.5 billion in the next 18 months and expansion of R3 billion in
the pipeline
• Two telecommunications investments amounting to R14 billion this year
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• Capital expenditure of R3.4 billion over the next three years by a rail and
logistics operator
• A R2.5 billion expansion and longer-term plans of R15 billion in mining
projects
• Investment of R1.4 billion this year by a leading retailer, and plans to
open 100 new stores by another
• An expansion of R1.2 billion this year by a food and beverage sector
firm
• Plans for R28.5 billion in long-term infrastructure investment by a leading
industrial company, which will create 10 000 temporary and 4 000
permanent jobs.
In recent times, the world has become a more uncertain place for businesses,
causing some to build cash reserves rather than invest in new or expanding
operations. As government, we wish to encourage businesses to keep investing
in our economy, and seize the opportunities around us. We are therefore
reinforcing several initiatives that support business development:
• The Manufacturing Competitiveness Enhancement Programme (MCEP),
announced in 2012, has received a total of 215 applications with
requests for grants totalling R2.3 billion mainly from the chemicals,
metals and agro-processing sectors. Applications are expected to
increase over the period ahead and funding of R1.5 billion per year has
been provided on the budget of the Department of Trade and Industry.
• The Special Economic Zone (SEZ) Programme, also announced last
year, has received funding to build world class industrial parks. I am in
discussion with Minister Davies on specific tax incentives to enhance this
initiative.
• The Jobs Fund announced in the 2011 Budget has concluded two calls
for proposals. In total, 3 614 applications have been received, and 65
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projects approved. Grant funding of R3.3 billion has been approved,
matched by a further R3.1 billion in funding raised by the private sector.
• Small, Medium and Micro Enterprises (SMMEs) play a key role in the
development of the economy and are a significant generator of
employment. Financing of SMMEs has been simplified with the creation
of the Small Enterprise Finance Agency last year. We have been
progressively working to simplify the tax requirements for small business.
The turnover threshold will be increased this year and the graduated rate
structure will be revised.
Regional Integration
Africa is our home, and it is our future. It is a market of over one billion people
and it is growing rapidly.
The National Development Plan acknowledges the global shift of economic
power from West to East, and highlights the rise of Africa.
Indeed, we have already begun to see our trade patterns shift from traditional
partners in Europe and the United States to new markets in Asia and Africa.
Africa now accounts for about 18 per cent of our total exports, and nearly a
quarter of our manufactured exports.
Over the past five years, the South African Reserve Bank has approved nearly
1 000 large investments into 36 African countries. These are mutually
beneficial, as they support development in those countries, and also generate
tax revenue, dividends and jobs both abroad as well as in South Africa. To
further support the private sector in expanding operations in Africa, I will
announce simpler rules that will reduce the time and costs of doing business in
Africa.
A number of measures are proposed to relax cross-border financial regulations
and tax requirements on companies, making it easier for banks and other
financial institutions to invest and operate in other countries. Similar measures
will apply to foreign companies wanting to invest in African countries using
South Africa as their regional headquarters. The outward investment reforms
that apply as part of the Gateway to Africa reforms will also pertain to those
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companies seeking to invest in countries outside Africa, including BRIC
countries.
In addition, substantial direct investments in regional development are
underway:
• We are helping to build infrastructure that will create opportunities for
South African companies to expand trade and investment across the
border. The DBSA is accelerating investment into the SADC region. We
are supporting infrastructure projects in multiple countries, particularly in
the key areas of electricity generation and transmission, and in
strengthening road links in the region.
• Investment by the Industrial Development Corporation in 41 projects
across 17 countries totalled R6.2 billion in 2012. The bulk of those
projects are in mining, industrial infrastructure, agro-processing and
tourism.
• As part of its long-term strategy to help secure energy supply for South
Africa and the region, Eskom is considering options for investment in
several regional generation and transmission projects.
Working with our BRICS Partners
Next month, we will host the 5th annual BRICS Summit, which brings together
Brazil, Russia, India, China and South Africa. The Summit will unveil the work
we have been doing with our BRICS partners on the following projects:
• The possible establishment of a BRICS-led bank is intended to mobilise
domestic savings and co-fund infrastructure in developing regions
• The pooling of members’ foreign exchange reserves with the view of
using them to support each other at times of balance of payments or
currency crisis. Collectively, BRICS countries hold reserves totalling
USD 4.5 trillion.
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• Work is underway on creating a trade and development insurance risk
pool. The aim is to establish a sustainable and alternative insurance and
reinsurance network for the BRICS countries.
Financing infrastructure investment
The NDP reminds us that “South Africa needs to invest in a strong network of
economic infrastructure designed to support the country’s medium- and longterm
economic and social objectives.”
Over the next three years, R827 billion is planned to be spent by the fiscus and
state-owned companies to build infrastructure. The financing for these projects
is in place, and is not affected by the spending cuts in the budget.
The fiscus has allocated just under R430 billion for schools, hospitals, clinics,
dams, water and electricity distribution networks, electrification of over a million
new homes, sanitation schemes, building more courtrooms and prisons, and
improved bus, commuter rail and road links. Most of the spending falls under
provinces and municipalities.
Eskom, Transnet and other State-Owned Companies fund a further R400 billion
of projects. This will be financed both through own resources and additional
borrowing over the next three years, supported by Treasury guarantees.
This will pay for the ongoing building of power generation plants and new
transmission lines, investment in rail, ports and pipelines, large new water
transfer schemes, and various airport upgrades.
Of course, we are well aware that there are parts of government that struggle to
spend their full infrastructure budgets. It is important to bear in mind that
spending programmes have become more ambitious, funding levels have
increased, and pressure to deliver has intensified. Records show that
government’s ability to spend has been steadily rising from year to year. But it
is not yet fast enough.
On this challenge, Willie du Preez expresses concern about whether
infrastructure investment is actually taking place. He suggests: “As a citizen
one should be able to obtain from the treasury website at the end of each
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financial year what amount was spent on what infrastructure.” Mr du Preez, you
can already obtain that information from the treasury website, not just every
year, but every month!
Investing in Urban Development
Our urban areas make a vital contribution to the national economy, hosting
factories and offices and many work opportunities, and will always be attractive
to young people seeking a better life. It is little surprise then that the Census
2011 shows that 62 per cent of South Africans are now living in our cities and
towns. And that the population of some municipalities grew by over 50 per cent
between 2001 and 2011.
The challenge we face of highly inefficient, segregated and exclusionary divides
between town and township imposes costs not only on the economy and the
fiscus, but also on families and communities.
A new formula for the local government equitable share will be introduced in
2013/14 that recognises the need to better differentiate assistance to different
municipalities, including those in rural areas. Municipal infrastructure grants will
also be re-aligned, 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.
Low carbon economy
The Development Plan further calls on government to send a signal to industry
and consumers that we are living in an environmentally stressed world.
And so Government proposes to price carbon by way of a carbon tax at the rate
of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften
the impact, a tax-free exemption threshold of 60 per cent will be set, with
additional allowances for emissions intensive and trade-exposed industries. An
updated carbon tax policy paper will be published for further consultation by the
end of March 2013.
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To ensure that South Africa produces fuel that is more environmentally friendly,
support mechanisms for both biofuel production and the upgrade of oil
refineries to cleaner fuel standards will be introduced.
In addition, government continues to direct spending towards environmental
programmes, such as installing solar water geysers, procuring renewable
energy, low carbon public transport, cleaning up derelict mines, addressing acid
mine drainage, supporting our national parks, and in particular, to saving our
rhino population, who remain under threat.
We are also encouraging the private sector and smaller public entities to be
creative and develop low-carbon projects through the Green Fund. In the first
call for proposals, 590 applications were received. The R800 million that was
previously allocated is to be topped up with an additional R300 million.
The social wage
The NDP recognises that reducing the cost of living is essential for broadening
economic participation and eliminating poverty. Alongside the “economic wage”
earned through work, the “social wage” provided by government is a steadily
rising contribution to the living conditions of working people and their families.
Substantial growth in social spending over the past decade has financed a
threefold increase in the number of people receiving social grants, a doubling in
per capita health spending, construction of 1.5 million free homes and the
provision of free basic education to the poorest 60 per cent of learners. The
impact is evident in improved living standards, expanded access to basic
services and the changing landscape of both urban and rural areas.
The social assistance budget has increased by an average of 11 per cent a
year since 2008/09, in part due to the extension of the child support grant to the
age of 18. Spending on social assistance will rise to R120 billion next year.
• The old age and disability grants will increase in April from R1 200 a
month to R1 260,
• The foster care grant will increase from R770 to R800, and
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• The child support grant will increase to R290 in April and R300 a month
in October.
It is also proposed that the old age grant means test should be phased out by
2016, accompanied by offsetting revisions to the secondary and tertiary
rebates. 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.
Alongside social assistance, access to health care is a vital element in the
social wage. There has been progress in reducing mortality and improving our
HIV and TB programmes, and an expansion in medical and nurse training
capacity is under way.
Pilot national health insurance projects have been initiated this year in ten
districts, and will include improvements to health facilities, contracting with
general practitioners and financial management reforms. A new conditional
grant is introduced this year to enable the national Department of Health to play
a greater role in coordinating these reforms.
The initial phase of NHI development will not place new revenue demands on
the fiscus. Over the longer term, however, it is anticipated that a tax increase
will be needed. The National Treasury is working with the Department of Health
to examine the funding arrangements and system reforms required for NHI. A
discussion paper inviting public comment on various options will be published
this year.
Government’s contribution to housing and basic municipal services is a
substantial component of the social wage. The budget for housing and
community amenities has increased by over 16 per cent a year since 2008.
Progress continues to be made in extending access to housing, electricity,
water, sanitation and refuse removal services. The main contribution of the
national budget to the financing of household amenities is the local government
equitable share. A new equitable share formula is proposed in this Budget,
which will provide a subsidy of R275 for every household with a monthly
income less than R2 300, or about 59 per cent of all households.
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We also recognise that many businesses provide their employees with housing
assistance or home loans. However, the current fringe benefit tax is unduly
burdensome in cases where an employer transfers a house to a low-income
worker at a price below market value. Tax relief is proposed to address this
difficulty.
The social wage complements employment earnings and contributes to a more
equitable and inclusive economic growth path. National health insurance and
further steps in social security reform will also reinforce social solidarity and the
decent work agenda.
Social spending, however, is not a substitute for job creation.
One of our most pressing development challenges is to expand work
opportunities for young people. There has been extensive debate on how this
should be done. The answer is that a wide range of measures are needed,
including further education, training, public employment opportunities and
support for job creation in the private sector.
To complement existing programmes, a tax incentive aimed at sharing the
costs of employing young work-seekers will be tabled for consideration by
Parliament. It will help young people enter the labour market to gain valuable
experience and access career opportunities. A similar incentive is proposed for
eligible workers of all ages within special economic zones.
Financial services and retirement reform
In last year’s Budget, I indicated the need for South African households to save
more. I am now able to announce the following proposals, for consultation
before we introduce the necessary legislation later this year:
• Tax-preferred savings and investment accounts will be introduced in
2015.
• Retirement funds will be required to identify appropriate preservation
funds for exiting members, who will be encouraged to preserve when
changing jobs.
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• Retirement funds will be required to guide their members through the
process of converting savings into a regular income after retirement, and
to choose or establish default annuity products that meet appropriate
principles and standards. More competition will be promoted by allowing
providers other than life offices to sell living annuities.
• The tax treatment of pension, provident and retirement annuity funds will
be simplified and harmonized.
• Governance reforms of retirement funds will also be implemented, with
measures in place to ensure trustees of retirement funds are trained
once they have been appointed. I intend to call up a conference of all
trustees this year to take this process forward.
We are also considering how to encourage all employers to provide appropriate
retirement mechanisms for their employees, as part of the broader social
security reforms. In implementing these reforms, the vested rights of current
members of retirement funds will be protected.
Let me take this opportunity, to confirm that the Government Employees
Pension Fund has remained fully funded despite the turmoil in financial markets
in recent years. A 6 per cent increase in civil service pensions will be effected in
April this year.
Credit
There has been rapid growth in unsecured credit in recent years. The share of
new mortgage lending has fallen rapidly, and is now less than or almost equal
to both new vehicle credit and new personal loans. We will engage with the
banking sector to explore how to increase the level and share of new mortgage
loans. Small business financing must also be supported to a far greater extent
than is being done.
We are concerned by the abuse of emolument attachment orders that has left
many workers without money to live on after they have serviced their debts
every month. We are in discussion with the National Credit Regulator, the
Department of Justice and banks, to ensure that the lending market remedies
its behaviour. In the meanwhile, all employers, including the public sector, can
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play a role and assist their workers to manage their finances and to interrogate
all emolument attachment or garnishee orders to ensure that they have been
properly issued. I also call on the various law societies to take action against
members who abuse the system.
Tax policy
Allow me to turn now to the revenue proposals.
We find ourselves in a challenging period, with revenues lower than expected
by R16.3 billion compared with estimates at the time of the 2012 budget. This is
predominantly due to weak economic growth during the second half of 2012,
mining sector disruptions and lower commodity prices. Tax revenues are
expected to improve over the medium-term in line with higher economic growth
and the stabilization of key commodity prices.
Over the past decade, we have steadily broadened the tax base, both through
policy reforms and improved revenue administration. This has made substantial
tax relief possible, contributing both to household disposable income and a
lower cost of doing business.
The main tax proposals for 2013 are as follows:
• Personal income tax relief of R7 billion, together with adjustments to the
medical tax credit and other monetary thresholds, amounting to about
R350 million.
• Reforms to the tax treatment of contributions to retirement savings.
• An employment incentive through the tax system for first-time job
seekers.
• Further tax relief for small businesses, including an increase in the
monetary tax thresholds applicable for small business corporations.
• An overall increase of 23 cents per litre in fuel levies in April, which
includes 8 cents per litre in the road accident fund levy.
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• Increases in excise duties on alcohol and tobacco products of between
5.7 and 10 per cent, and
• Introduction of the carbon tax in 2015, together with the phasing-out of
the electricity levy.
A tax review will be initiated this year to assess our tax policy framework and its
role in supporting the objectives of inclusive growth, employment, development
and fiscal sustainability, amongst other things.
The Budget Review outlines various measures proposed to protect the tax base
and limit the scope for tax leakage and avoidance. The taxation of trusts will
come under review to control abuse; modifications are proposed to the tax
treatment of employment share schemes and disability or income-protection
policies; outstanding difficulties in the distinction between debt and equity will
be addressed; and it is proposed that foreign businesses which sell e-books,
music and other digital goods and services should be required to register as
VAT vendors, in line with regulations which have been adopted by the
European Union and other jurisdictions.
Tax administration
Millions of honest taxpayers in our country continue to sustain our growth and
development agenda. To them we owe a debt of gratitude and, more
importantly, a commitment to spend that money wisely, efficiently and
effectively. We thank you!
Tax avoidance
We also owe it to our taxpayers to ensure they are not carrying the burden of
those who benefit from our country’s infrastructure and resources without
paying their fair share of the costs.
Around the world, taxpayers and their governments are challenging large
multinational companies that pay little or no tax in the countries in which they
operate. Meeting in Moscow earlier this month, finance ministers of the G20
countries were united in supporting an overhaul of international company tax
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rules to address this issue. The South African Revenue Service is currently
engaging with companies that have their base of operations in SA but appear to
have shifted a large proportion of their profits to low tax jurisdictions where only
a few people are employed. This is unacceptable!
SARS is also pursuing schemes identified under the revised general antiavoidance
rules following several years’ painstaking work tracing transactions
through multiple jurisdictions and entities. These benefits typically accrue to
advisors and pre-existing shareholders, rather than new shareholders who
were introduced as the ostensible beneficiaries of the transactions.
Voluntary disclosure
A temporary voluntary disclosure programme was implemented under
legislation enacted in 2010 which allowed taxpayers in default to regularise
their tax affairs. More than 18 000 taxpayers made use of the programme and
tax of more than R3 billion has so far been collected as a result of the
programme.
From 1 October 2012, a permanent voluntary disclosure programme became
effective as part of the Tax Administration Act (2011). Some 700 taxpayers
have already come forward. Tax of more than R200 million will be collected
before the end of March 2013.
Non-compliance
SARS is also targeting other areas of non-compliance, including recipients of
government expenditure who are not up to date with their taxes. By working
closely with Treasury and interfacing with the government payment system,
SARS has identified companies who have received payments but have not
declared their full income. They are being audited, and others will follow.
This intervention will be further underpinned by the reform of the Tax Clearance
Certificate process which I announced in October.
In the near future, SARS will introduce a Single Registration process in which
companies are able to register once-off in a simple manner for all tax types and
Customs activities.
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On this, we can perhaps consider adding the suggestion by Amanda Hayes,
who runs a small business in Cape Town. She proposes that a single database
of suppliers to government be created out of all the companies that apply to
SARS for tax clearance certificates. In addition to reducing the burden on small
businesses, Amanda says this database will help reduce corruption because of
the tighter national oversight over companies who are registered.
Medium-term expenditure framework and division of revenue
I have indicated many of the specific programmes and activities of government
that contribute to our growth and social development objectives. Allow me to
summarise the framework within which these allocations are made.
The 2013 Budget provides for continued real growth in spending to support
service delivery, and to expand investment in infrastructure. It will also
accommodate the costs of the three-year public service wage agreement
signed last year.
In the past, we have been able to add substantially to medium term spending
plans during the Budget, but this year is different. Money has been taken away
from programmes that are not performing or are not aligned to government’s
core priorities and given to programmes that are delivering as planned.
The main appropriation provides for R1 055 billion in expenditure next year,
rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion
next year, and R4 billion is set aside as a contingency reserve. This leaves
R951 billion to be divided between the national, provincial and local spheres.
National departments are allocated 47.6 per cent of available funds in 2013/14.
Provinces are allocated 43.5 per cent, mainly for education, health and social
welfare. Local government receives 8.9 per cent, primarily for providing basic
services to low-income households.
Allocations from the contingency reserve will be made later in the year, mainly
for unforeseeable and unavoidable expenditure. Work is in progress to
determine funding requirements for reconstruction and rehabilitation following
flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An
allocation will also be made in the adjustments appropriation for the Dinaledi
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schools connectivity programme and other broadband infrastructure projects,
subject to finalisation of implementation plans.
The equitable division of revenue between provinces and municipalities takes
into account the 2011 Census, which shows substantial shifts in the distribution
and age structure of the population since 2001. The changes to provincial and
municipal allocations will be phased in to avoid disruption of services.
Allocations to provinces and municipalities
The provincial equitable share amounts to R338 billion in 2013/14, and
conditional grants to provinces will total R77 billion. Additional allocations have
been made to increase employment of social workers and to provide additional
support to non-governmental organisations which provide critical welfare
services. There is additional funding for teachers in the poorest 20 per cent 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.
Infrastructure transfers to provinces have increased sharply in recent years,
growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the
quality of spending, the application process for infrastructure grants is being
revised: provinces will be required to submit building plans two years ahead of
implementation and will only receive allocations if plans meet certain
benchmarks.
A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising
to R101 billion in 2015/16. Additional allocations are made for municipal water
infrastructure, public transport and integrated city development.
Consolidated government expenditure
There is considerable detail in the Budget Review and the Estimates of
National Expenditure on government spending plans and service delivery
targets. I will highlight just a few key points.
Consolidated government expenditure is budgeted to increase by 8.1 per cent a
year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.
2013 Budget Speech
25
Job creation and labour
Allocations for employment programmes increase by 13.5 per cent a year over
the next three years.
There will be higher funding for employment projects of non-governmental
organisations and for Working for Fisheries. The expanded public works
programme aims to support 684 800 fulltime equivalent jobs in 2013/14.
Additional allocations are also made for the sheltered employment factories of
the Department of Labour, and to support the work of the Commission for
Conciliation, Mediation and Arbitration.
Health and social protection
Consolidated spending on health and social protection is R268 billion in
2013/14.
Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities
and 49 nursing colleges were in different stages of planning, construction and
refurbishment.
Substantial improvements in the social assistance payments system are in
progress, providing easier access by recipients to their grants. The cost of
social grants payments has been reduced from R32 to R16 per disbursement.
Education, sport and culture
Spending on education, sport and culture will amount to R233 billion in
2013/14. Over the period ahead, the basic education sector will focus on
improving numeracy and literacy, expanding enrolment in grade R and reducing
school infrastructure backlogs. Together with the broader education
infrastructure grant, R23.9 billion is available to provincial education
departments for infrastructure over the next three years.
R700 million has been allocated over the MTEF period for the technical
secondary schools recapitalisation grant. This will finance construction and
2013 Budget Speech
26
refurbishment of 259 workshops and training of over 1 500 technology
teachers.
Transfers to higher education institutions increase from R20.4 billion in 2012/13
to R24.6 billion in 2015/16. The total number of students enrolled in higher
education institutions is expected to increase from 910 000 currently to 990 000
in 2015. Funding has been allocated for the construction of new universities in
the Northern Cape and Mpumalanga to commence this year.
Economic services
Expenditure on economic services in 2013/14 will amount to R48 billion,
including R5.3 billion for the manufacturing competiveness enhancement
programme and R2.9 billion for special economic zones.
Additional allocations include R450 million over three years to the Economic
Development Department for the Small Enterprise Finance Agency. The
Department of Agriculture, Forestry and Fisheries will continue its support for
smallholder farmers. Additional funding goes to the Department of Mineral
Resources to support beneficiation and rehabilitate derelict and ownerless
mines.
The allocation to the Department of Science and Technology includes R2 billion
to support the Square Kilometre Array project.
Transport, energy and communications
Expenditure on transport, energy and communications will amount to
R89 billion next year.
The allocation to the Department of Transport increases from R42.3 billion next
year to R53.4 billion in 2015/16, reflecting increased allocations to the
Passenger Rail Agency for its rolling stock procurement programme and further
investment in the national road network. Additional funding goes to integrated
public transport networks in urban areas, and for provincial road maintenance.
The integrated national electrification grant is allocated additional funding to
increase the number of new electricity connections by 645 000 over the next
2013 Budget Speech
27
three years. The solar water geyser programme will be continued until 2015/16
and Sentech will receive R599 million over the medium term for the migration
from analogue to digital terrestrial television.
Local government, community amenities and housing
Local government, community amenities and housing are allocated R132 billion
in 2013/14. The largest increases go to bulk water, water treatment and water
distribution projects, and allocations to the local government equitable share.
R4.3 billion is allocated to a new grant to be administered by the Department of
Water Affairs, providing for water treatment, distribution, demand management
and support for rural municipalities. The Municipal Infrastructure Support
Agency of the Department for Cooperative Governance receives R820 million
to provide technical assistance to rural and low-capacity municipalities.
Funding for improving human settlements will grow from R26.2 billion to
R30.5 billion over the next three years, including R1.1 billion to support the
informal settlement upgrading programme in mining towns. Social housing
receives an additional allocation of R685 million.
General public services
The general public services function is allocated R57 billion in 2013/14. This
includes the SARS budget of R9.5 billion, which is just over 1 per cent of
revenue to be collected.
The Department of Public Works reprioritised R464 million over the mediumterm
to fund its turnaround strategy, which focuses on lease and property
management portfolios. The Public Service Commission receives R71.4 million
to combat corruption and address grievances.
Over the MTEF period, the Department of Home Affairs will spend R1 billion on
its information systems modernisation programme, which has already led to
substantial reductions in the time required to produce official documents.
2013 Budget Speech
28
The allocations for defence, public order and safety amount to R154 billion in
2013/14.
Provision is made for peace-keeping operations in the Central African Republic,
where 400 defence force personnel have been deployed.
The Department of Police has reprioritised R2.5 billion over the MTEF to
improve detective and forensic capability. The Department of Justice and
Constitutional Development receives R1.2 billion for the criminal justice sector
revamp and modernisation programme. There is increased funding allocated to
the National Prosecuting Authority for the Thuthuzela Care Centres. The Public
Protector of South Africa receives funding to increase its investigative capacity
and additional funds are also made to Legal Aid South Africa and the South
African Human Rights Commission.
Procurement and combating corruption
Last year I said to this House that we will continually endeavour to increase the
value which government receives for the money it spends.
Let me be frank. This is a difficult task with too many points of resistance!
However, we have registered some progress. In the present system,
procurement transactions take place at too many localities and the contracts
are short term. Consequently there are hundreds of thousands of transactions
from a multitude of centres. There is very little visibility of all these transactions.
While our ablest civil servants have had great difficulty in optimising
procurement, it has yielded rich pickings for those who seek to exploit it. There
are also too many people who have a stake in keeping the system the way it is.
Our solutions, hitherto, have not matched the size and complexity of the
challenge. As much as I want, I cannot simply wave a magic wand to make
these problems disappear. This is going to take a special effort from all of us in
Government, assisted by people in business and broader society. And it will
take time. But we are determined to make progress.
The process for setting up the Chief Procurement Office in the National
Treasury has begun in earnest and I shall soon be able to announce the name
of a 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, improving the current system, standardising the
Defence, public order and safety
2013 Budget Speech
29
procurement of critical items across all government and the long-term
modernisation of the entire system.
Among the first initiatives of the CPO will be to enhance the existing system of
price referencing. This will set fair value prices for certain goods and services.
Secondly, it will pilot procurement transformation programmes in the
Departments of Health and Public Works, nationally and in the provinces.
National Treasury is currently scrutinising 76 business entities with contracts
worth R8.4 billion which we believe have infringed the procurement rules, while
SARS is currently auditing more than 300 business entities and scrutinising
another 700 entities. The value of these contracts is estimated at over
R10 billion. So far 216 cases have been finalised resulting in assessments
amounting to over R480 million being raised. The Financial Intelligence Centre
has referred over R6.5 billion for investigation linked to corrupt activities.
I fully support Minister Sisulu’s call for appropriate curbs on officials doing
business with government. I will complement her initiative by aligning the Public
Finance Management Act with the provisions of the Public Service Act.
Worldwide, special measures are being taken to oversee the accounts of what
have become known as “politically exposed persons” – public representatives
and senior officials. I have asked that the FIC should explore how we might
bring South Africa into line with these international anti-corruption and antimoney
laundering standards.
Taxpayers, and indeed all South Africans are understandably impatient for
tangible change. A recurring theme in the tips sent to me for this Budget was to
ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up
as follows: “Minister I won't be fancy with words or complicated ideas … my
advice for a healthy and sustainable fiscus is to brutally eradicate corruption,
then we will be honoured to pay taxes.”
Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective
effort from all of us.
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30
Conclusion
My sincere appreciation goes to President Zuma and Deputy President
Motlanthe for their guidance and support.
My appreciation also goes to Colleagues of the Ministers’ Committee on the
Budget, for their continuous and vigorous engagement with the challenges that
face us, and their bold and steadfast advice to Cabinet.
I wish to thank my Cabinet colleagues who collectively own this budget. Their
support and understanding for tough measures is highly appreciated.
A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and
sound advice is invaluable to me.
My thanks to the MECs of Finance, who play a critical role as guardians of
43 per cent of our spending.
Our appreciation also goes to:
• Governor Gill Marcus and the Deputy Governor of the South African
Reserve Bank, for their constructive management of monetary policy,
• Commissioner Oupa Magashula and the staff of the South African
Revenue Service for their diligent contribution to fiscal stability – I hope
better times return for them soon!
• The Financial and Fiscal Commission and its acting Chairperson, for
their contributions,
• Mr Jabu Moleketi, Chair of the DBSA and its new CEO, Mr Patrick
Dlamini, who are positioning the DBSA to make a greater contribution to
infrastructure development,
• The Chair of the Land Bank, Mr Ngubane, and CEO Mr Phakamani
Hadebe, for their illustrious service to the bank,
2013 Budget Speech
31
• The leadership of the Public Investment Corporation, the Financial
Services Board, the Financial Intelligence Centre and the Government
Pension Administration Agency,
• The managing director of NEDLAC, Mr Alistair Smith, and the
constituency representatives for their engagements with the Treasury,
• The Honourable Thaba Mufamadi and Charel de Beer, who chair the
Standing and Select Committees on Finance respectively, and the
chairpersons of the the Appropriations Committees, the Honourable
Elliot Sogoni and Tebogo Chaane, who ensure that Parliament remains
a vibrant forum for engagement, accountability and public participation,
• Director-General Lungisa Fuzile (and Mrs Fuzile) for his professionalism,
frankness and profound commitment to building credible institutions and
advancing government’s objectives,
• The management team and staff of the National Treasury, whose
extraordinary contributions and caring for a better South Africa enhance
our country’s standing in international fora,
• My Chief of Staff, Dondo Mogajane, and the Ministry staff for their
enthusiastic support,
• My very supportive family who make my contributions possible.
And finally, I must express sincere gratitude to South Africans from all parts of
the country who offer words of encouragement – as well as critiques and
concerns! This is what keeps us accountable and drives us to constantly
improve.
The key pillars of this Budget are:
• Global growth is improving, though uncertainty remains.
• South Africa’s economy must grow faster and more inclusively.
2013 Budget Speech
32
• Future growth is also dependent on private-sector investment in the
economy.
• The National Development Plan will be implemented by government and
budgets will be aligned to it.
• Government continues to invest significantly in infrastructure
• We are taking additional steps to create opportunities for young people.
• Reduced revenue results in less spending in the years ahead unless the
economy grows.
• There are new opportunities to be seized in Africa and other emerging
markets.
• We have committed to reviewing and assessing our tax policy framework
and its role in supporting the objectives of inclusive growth, employment,
development and fiscal sustainability.
• A new local government formula benefits rural municipalities.
Honourable Speaker, I table this budget in the hope that as a nation we will be
able to rise above our sectional interest, and, as you said Mr President, prevail
with greater maturity, pull together and take this country forward.
We have said that South Africa is changing. Let us work together to ensure that
really, tomorrow, will be better than today.
In conclusion, let me remind this House of what former President Nelson
Mandela said: “What counts in life is not the mere fact that we have lived. It is
what difference we have made to the lives of others that will determine the
significance of the life we lead…”
I thank you
2013 Budget Speech
33
Summary of the national budget
2012/13 2013/14 2014/15 2015/16
Budget Revised Budget Medium-term estimates
estimate estimate estimate
R million
REVENUE
Estimate of revenue before tax proposals 875 378
Budget 2013/14 proposals:
Taxes on individuals and companies -8 242
Personal income tax -7 382
Adjustment in personal tax rate structure -7 032
Adjustment in monetary thresholds -350
Business income tax -860
Employment tax incentive -500
Small business corporations -360
Indirect Taxes 5 830
Increase in general fuel levy 3 270
Increase in excise duties on tobacco products 855
Increase in alcoholic beverages 1 210
Increase in incandescent bulb levy 50
Increase in plastic bag levy 90
Increase in CO 2 vehicle emission tax 355
Estimate of revenue after tax proposals 799 341 782 474 872 966 967 923 1 070 727
Percentage change from previous year 11.6% 10.9% 10.6%
EXPENDITURE
Direct charges against the National Revenue Fund 419 926 424 615 462 363 4 95 591 530 698
Debt-service costs 89 388 88 325 99 741 1 08 718 118 163
Provincial equitable share 309 057 313 016 337 572 3 59 924 383 697
General fuel levy sharing with metros 9 040 9 040 9 613 10 190 10 659
Skills development levy and Setas 9 606 11 400 12 403 1 3 544 14 817
Other 1) 2 835 2 835 3 032 3 214 3 362
Appropriated by vote 543 630 542 352 588 682 6 35 890 685 029
Current payments 155 803 158 366 168 867 1 79 234 188 386
Transfers and subsidies 371 010 369 489 402 652 4 35 813 476 102
Payments for capital assets 15 176 13 045 14 258 1 7 590 17 517
Payments for financial assets 1 641 1 451 2 905 3 252 3 024
Plus:
Unallocated funds 30 – 3 0 – –
Contingency reserve 5 780 – 4 000 6 500 10 000
Estimate of national expenditure 969 365 966 967 1 055 075 1 137 981 1 225 727
Percentage change from previous year 9.1% 7.9% 7.7%
2012 Budget estimate of expenditure 969 365 1 053 830 1 139 579
Increase / decrease (-) -2 398 1 245 -1 598
Gross domestic product 3 301 374 3 209 142 3 520 268 3 880 406 4 270 848
1) Consists mainly of salaries of Members of Parliament, judges and magistrates.
2013 Budget Speech
34
Summary of the consolidated budget
2012/13 2013/14 2014/15 2015/16
Budget Revised Budget Medium-term estimates
estimate estimate estimate
R million
National budget revenue 1) 799 341 782 474 872 966 967 923 1 070 727
105 489 105 375 114 273 124 613 130 368
– - -1 521 -1 430 -1 340
Consolidated budget revenue 3) 904 830 887 849 985 719 1 091 105 1 199 755
National budget expenditure 1) 969 365 966 967 1 055 075 1 137 981 1 225 727
88 956 88 924 94 315 106 359 108 384
Consolidated budget expenditure 3) 1 058 321 1 055 891 1 149 390 1 244 340 1 334 111
Consolidated budget balance -153 491 -168 043 -163 671 -153 234 -134 357
Percentage of GDP -4.6% -5.2% -4.6% -3.9% -3.1%
Extraordinary payments -24 -2 584 -930 - -
Extraordinary receipts 1 200 10 780 4 992 2 900 3 100
Consolidated borrowing requirement (net) -152 315 -159 847 -159 609 -150 334 -131 257
FINANCING
Domestic loans (net) 151 137 148 060 169 837 1 64 523 167 386
Foreign loans (net) -7 673 -8 079 -3 318 3 062 8 854
Change in cash and other balances 8 851 19 866 -6 910 -17 251 -44 983
Total financing (net) 152 315 159 847 159 609 150 334 131 257
1) Transfers to provinces, social security funds and public entities presented as part of the national budget
2) Repayment of Gautrain loan, repaid by the Gauteng province to the National Revenue Fund, netted out in consolidation
3) Flows between national, provincial, social security funds and public entities are netted out
Revenue of provinces, social security funds and public entities
Expenditure of provinces, social security funds and public entities
Repayment of Gautrain loan 2)
2013 Budget Speech
35
2013 Budget Speech


a) Social security benefits and tier I railroad retirement benefits
Benefits payable under the old-age, survivors, and disability insurance program established under title II of the Social Security Act (42 U.S.C. 401 et seq.), and benefits payable under section [1] 231b(a), 231b(f)(2), 231c(a), and 231c(f) of title 45, shall be exempt from reduction under any order issued under this subchapter.
(b) Veterans programs
The following programs shall be exempt from reduction under any order issued under this subchapter:
All programs administered by the Department of Veterans Affairs.
Special benefits for certain World War II veterans (28–0401–0–1–701).
(c) Net interest
No reduction of payments for net interest (all of major functional category 900) shall be made under any order issued under this subchapter.
(d) Refundable income tax credits
Payments to individuals made pursuant to provisions of title 26 establishing refundable tax credits shall be exempt from reduction under any order issued under this subchapter.
(e) Non-defense unobligated balances
Unobligated balances of budget authority carried over from prior fiscal years, except balances in the defense category, shall be exempt from reduction under any order issued under this subchapter.
(f) Optional exemption of military personnel
(1) In general
The President may, with respect to any military personnel account, exempt that account from sequestration or provide for a lower uniform percentage reduction than would otherwise apply.
(2) Limitation
The President may not use the authority provided by paragraph (1) unless the President notifies the Congress of the manner in which such authority will be exercised on or before the date specified in section 904 (a) of this title for the budget year.
(g) Other programs and activities
(1)
(A) The following budget accounts and activities shall be exempt from reduction under any order issued under this subchapter:
Activities resulting from private donations, bequests, or voluntary contributions to the Government.
Activities financed by voluntary payments to the Government for goods or services to be provided for such payments.
Administration of Territories, Northern Mariana Islands Covenant grants (14–0412–0–1–808).
Advances to the Unemployment Trust Fund and Other Funds (16–0327–0–1–600).
Black Lung Disability Trust Fund Refinancing (16–0329–0–1–601).
Bonneville Power Administration Fund and borrowing authority established pursuant to section 13 ofPublic Law 93–454 (1974), as amended [16 U.S.C. 838k] (89–4045–0–3–271).
Claims, Judgments, and Relief Acts (20–1895–0–1–808).
Compact of Free Association (14–0415–0–1–808).
Compensation of the President (11–0209–01–1–802).
Comptroller of the Currency, Assessment Funds (20–8413–0–8–373).
Continuing Fund, Southeastern Power Administration (89–5653–0–2–271).
Continuing Fund, Southwestern Power Administration (89–5649–0–2–271).
Dual Benefits Payments Account (60–0111–0–1–601).
Emergency Fund, Western Area Power Administration (89–5069–0–2–271).
Exchange Stabilization Fund (20–4444–0–3–155).
Farm Credit Administration Operating Expenses Fund (78–4131–0–3–351).
Farm Credit System Insurance Corporation, Farm Credit Insurance Fund (78–4171–0–3–351).
Federal Deposit Insurance Corporation, Deposit Insurance Fund (51–4596–0–4–373).
Federal Deposit Insurance Corporation, FSLIC Resolution Fund (51–4065–0–3–373).
Federal Deposit Insurance Corporation, Noninterest Bearing Transaction Account Guarantee (51–4458–0–3–373).
Federal Deposit Insurance Corporation, Senior Unsecured Debt Guarantee (51–4457–0–3–373).
Federal Home Loan Mortgage Corporation (Freddie Mac).
Federal Housing Finance Agency, Administrative Expenses (95–5532–0–2–371).
Federal National Mortgage Corporation (Fannie Mae).
Federal Payment to the District of Columbia Judicial Retirement and Survivors Annuity Fund (20–1713–0–1–752).
Federal Payment to the District of Columbia Pension Fund (20–1714–0–1–601).
Federal Payments to the Railroad Retirement Accounts (60–0113–0–1–601).
Federal Reserve Bank Reimbursement Fund (20–1884–0–1–803).
Financial Agent Services (20–1802–0–1–803).
Foreign Military Sales Trust Fund (11–8242–0–7–155).
Hazardous Waste Management, Conservation Reserve Program (12–4336–0–3–999).
Host Nation Support Fund for Relocation (97–8337–0–7–051).
Internal Revenue Collections for Puerto Rico (20–5737–0–2–806).
Intragovernmental funds, including those from which the outlays are derived primarily from resources paid in from other government accounts, except to the extent such funds are augmented by direct appropriations for the fiscal year during which an order is in effect.
Medical Facilities Guarantee and Loan Fund (75–9931–0–3–551).
National Credit Union Administration, Central Liquidity Facility (25–4470–0–3–373).
National Credit Union Administration, Corporate Credit Union Share Guarantee Program (25–4476–0–3–376).
National Credit Union Administration, Credit Union Homeowners Affordability Relief Program (25–4473–0–3–371).
National Credit Union Administration, Credit Union Share Insurance Fund (25–4468–0–3–373).
National Credit Union Administration, Credit Union System Investment Program (25–4474–0–3–376).
National Credit Union Administration, Operating fund (25–4056–0–3–373).
National Credit Union Administration, Share Insurance Fund Corporate Debt Guarantee Program (25–4469–0–3–376).
National Credit Union Administration, U.S. Central Federal Credit Union Capital Program (25–4475–0–3–376).
Office of Thrift Supervision (20–4108–0–3–373).
Panama Canal Commission Compensation Fund (16–5155–0–2–602).
Payment of Vietnam and USS Pueblo prisoner-of-war claims within the Salaries and Expenses, Foreign Claims Settlement account (15–0100–0–1–153).
Payment to Civil Service Retirement and Disability Fund (24–0200–0–1–805).
Payment to Department of Defense Medicare-Eligible Retiree Health Care Fund (97–0850–0–1–054).
Payment to Judiciary Trust Funds (10–0941–0–1–752).
Payment to Military Retirement Fund (97–0040–0–1–054).
Payment to the Foreign Service Retirement and Disability Fund (19–0540–0–1–153).
Payments to Copyright Owners (03–5175–0–2–376).
Payments to Health Care Trust Funds (75–0580–0–1–571).
Payment to Radiation Exposure Compensation Trust Fund (15–0333–0–1–054).
Payments to Social Security Trust Funds (28–0404–0–1–651).
Payments to the United States Territories, Fiscal Assistance (14–0418–0–1–806).
Payments to trust funds from excise taxes or other receipts properly creditable to such trust funds.
Payments to widows and heirs of deceased Members of Congress (00–0215–0–1–801).
Postal Service Fund (18–4020–0–3–372).
Radiation Exposure Compensation Trust Fund (15–8116–0–1–054).
Reimbursement to Federal Reserve Banks (20–0562–0–1–803).
Salaries of Article III judges.
Soldiers and Airmen’s Home, payment of claims (84–8930–0–7–705).
Tennessee Valley Authority Fund, except nonpower programs and activities (64–4110–0–3–999).
Tribal and Indian trust accounts within the Department of the Interior which fund prior legal obligations of the Government or which are established pursuant to Acts of Congress regarding Federal management of tribal real property or other fiduciary responsibilities, including but not limited to Tribal Special Fund (14–5265–0–2–452), Tribal Trust Fund (14–8030–0–7–452), White Earth Settlement (14–2204–0–1–452), and Indian Water Rights and Habitat Acquisition (14–5505–0–2–303).
United Mine Workers of America 1992 Benefit Plan (95–8260–0–7–551).
United Mine Workers of America 1993 Benefit Plan (95–8535–0–7–551).
United Mine Workers of America Combined Benefit Fund (95–8295–0–7–551).
United States Enrichment Corporation Fund (95–4054–0–3–271).
Universal Service Fund (27–5183–0–2–376).
Vaccine Injury Compensation (75–0320–0–1–551).
Vaccine Injury Compensation Program Trust Fund (20–8175–0–7–551).
(B) The following Federal retirement and disability accounts and activities shall be exempt from reduction under any order issued under this subchapter:
Black Lung Disability Trust Fund (20–8144–0–7–601).
Central Intelligence Agency Retirement and Disability System Fund (56–3400–0–1–054).
Civil Service Retirement and Disability Fund (24–8135–0–7–602).
Comptrollers general retirement system (05–0107–0–1–801).
Contributions to U.S. Park Police annuity benefits, Other Permanent Appropriations (14–9924–0–2–303).
Court of Appeals for Veterans Claims Retirement Fund (95–8290–0–7–705).
Department of Defense Medicare-Eligible Retiree Health Care Fund (97–5472–0–2–551).
District of Columbia Federal Pension Fund (20–5511–0–2–601).
District of Columbia Judicial Retirement and Survivors Annuity Fund (20–8212–0–7–602).
Energy Employees Occupational Illness Compensation Fund (16–1523–0–1–053).
Foreign National Employees Separation Pay (97–8165–0–7–051).
Foreign Service National Defined Contributions Retirement Fund (19–5497–0–2–602).
Foreign Service National Separation Liability Trust Fund (19–8340–0–7–602).
Foreign Service Retirement and Disability Fund (19–8186–0–7–602).
Government Payment for Annuitants, Employees Health Benefits (24–0206–0–1–551).
Government Payment for Annuitants, Employee Life Insurance (24–0500–0–1–602).
Judicial Officers’ Retirement Fund (10–8122–0–7–602).
Judicial Survivors’ Annuities Fund (10–8110–0–7–602).
Military Retirement Fund (97–8097–0–7–602).
National Railroad Retirement Investment Trust (60–8118–0–7–601).
National Oceanic and Atmospheric Administration retirement (13–1450–0–1–306).
Pensions for former Presidents (47–0105–0–1–802).
Postal Service Retiree Health Benefits Fund (24–5391–0–2–551).
Public Safety Officer Benefits (15–0403–0–1–754).
Rail Industry Pension Fund (60–8011–0–7–601).
Retired Pay, Coast Guard (70–0602–0–1–403).
Retirement Pay and Medical Benefits for Commissioned Officers, Public Health Service (75–0379–0–1–551).
Special Benefits for Disabled Coal Miners (16–0169–0–1–601).
Special Benefits, Federal Employees’ Compensation Act (16–1521–0–1–600).
Special Workers Compensation Expenses (16–9971–0–7–601).
Tax Court Judges Survivors Annuity Fund (23–8115–0–7–602).
United States Court of Federal Claims Judges’ Retirement Fund (10–8124–0–7–602).
United States Secret Service, DC Annuity (70–0400–0–1–751).
Voluntary Separation Incentive Fund (97–8335–0–7–051).
(2) Prior legal obligations of the Government in the following budget accounts and activities shall be exempt from any order issued under this subchapter:
Biomass Energy Development (20–0114–0–1–271).
Check Forgery Insurance Fund (20–4109–0–3–803).
Credit liquidating accounts.
Credit reestimates.
Employees Life Insurance Fund (24–8424–0–8–602).
Federal Aviation Insurance Revolving Fund (69–4120–0–3–402).
Federal Crop Insurance Corporation Fund (12–4085–0–3–351).
Federal Emergency Management Agency, National Flood Insurance Fund (58–4236–0–3–453).
Geothermal resources development fund (89–0206–0–1–271).
Low-Rent Public Housing—Loans and Other Expenses (86–4098–0–3–604).
Maritime Administration, War Risk Insurance Revolving Fund (69–4302–0–3–403).
Natural Resource Damage Assessment Fund (14–1618–0–1–302).
Overseas Private Investment Corporation, Noncredit Account (71–4184–0–3–151).
Pension Benefit Guaranty Corporation Fund (16–4204–0–3–601).
San Joaquin Restoration Fund (14–5537–0–2–301).
Servicemembers’ Group Life Insurance Fund (36–4009–0–3–701).
Terrorism Insurance Program (20–0123–0–1–376).
(h) Low-income programs
The following programs shall be exempt from reduction under any order issued under this subchapter:
Academic Competitiveness/Smart Grant Program (91–0205–0–1–502).
Child Care Entitlement to States (75–1550–0–1–609).
Child Enrollment Contingency Fund (75–5551–0–2–551).
Child Nutrition Programs (with the exception of special milk programs) (12–3539–0–1–605).
Children’s Health Insurance Fund (75–0515–0–1–551).
Commodity Supplemental Food Program (12–3507–0–1–605).
Contingency Fund (75–1522–0–1–609).
Family Support Programs (75–1501–0–1–609).
Federal Pell Grants under section 1070a [2] of title 20.
Grants to States for Medicaid (75–0512–0–1–551).
Payments for Foster Care and Permanency (75–1545–0–1–609).
Supplemental Nutrition Assistance Program (12–3505–0–1–605).
Supplemental Security Income Program (28–0406–0–1–609).
Temporary Assistance for Needy Families (75–1552–0–1–609).
(i) Economic recovery programs
The following programs shall be exempt from reduction under any order issued under this subchapter:
GSE Preferred Stock Purchase Agreements (20–0125–0–1–371).
Office of Financial Stability (20–0128–0–1–376).
Special Inspector General for the Troubled Asset Relief Program (20–0133–0–1–376).
(j) 3 Split treatment programs Each of the following programs shall be exempt from any order under this subchapter to the extent that the budgetary resources of such programs are subject to obligation limitations in appropriations bills:
Federal-Aid Highways (69–8083–0–7–401).
Highway Traffic Safety Grants (69–8020–0–7–401).
Operations and Research NHTSA and National Driver Register (69–8016–0–7–401).
Motor Carrier Safety Operations and Programs (69–8159–0–7–401).
Motor Carrier Safety Grants (69–8158–0–7–401).
Formula and Bus Grants (69–8350–0–7–401).
Grants-In-Aid for Airports (69–8106–0–7–402).
(j) 3 Identification of programs
For purposes of subsections (b), (g), and (h) of this section, each account is identified by the designated budget account identification code number set forth in the Budget of the United States Government 2010–Appendix, and an activity within an account is designated by the name of the activity and the identification code number of the account.


are This:

National Budget Speech delivered by Minister of Finance Pravin Gordhan

Honourable Speaker

I have the honour to present the fourth budget of President Zuma’s administration.

Mr President you said in the State of the Nation address that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.” You further said “The National Development Plan provides a perfect vehicle for united action precisely because it has the support of South Africans across the political and cultural spectrum. Leaders in every avenue should be ready to rise above sectional interests and with great maturity, pull together to take this country forward.”

This challenge applies to all sections of our society: business, labour, public representatives, activists and citizens in every part of the country.

As we pointed out in the 2012 Budget, global economic uncertainty will remain with us for some time.

South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead.

Under your leadership Mr President, we have opened new channels of communication and built more cohesion among key stakeholders in South Africa. We have taken many steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the National Development Plan.

South Africans have a rich history of acting together for a better future.

Thirty years ago, the United Democratic Front brought together people of goodwill and foresight from all corners of the country. Many points of view, many differences in approach, were marshalled around a single cause – building a united and non-racial society. We did the same for the first democratic elections in 1994 which laid the basis for an enduring democracy.

The Reconstruction and Development Programme is the foundation on which we build. It said: “It is this collective heritage of struggle, these common yearnings, which are our greatest strength… At the same time the challenges facing South Africa are enormous. Only a comprehensive approach to harnessing the resources of our country can reverse the crisis created by apartheid. Only an all-round effort to harness the life experience, skills, energies and aspirations of the people can lay the basis for a new South Africa.” The schools, clinics, taps and houses we have built since then are testimony to the truth of these assertions. The freedom and democracy we cherish – and the knowledge that these are permanent, inalienable rights grounded in our basic law – are the foundation on which all South Africans can make a contribution.

Looking back on the path we have travelled since 1994, we see the importance of a long-term perspective on development and change. It is people acting together for a common vision that connects the past to the present, and makes a better future possible.

The challenge for us, honourable members, is that people are asking if we can sustain our “miracle”. They are asking whether we as a nation have the ability, the will and the wisdom to take another leap forward in reconstructing and developing South Africa. They are asking whether South Africans can still show the world how to overcome intractable problems that face the community of nations. In these trying times, South Africans too ask the question, “can we be a winning nation?”.

Of course we can!

As Benedict Mongalo, a young man from Johannesburg, writes in his tip: “We all acknowledge that unemployment, poverty and inequality are the greatest challenge facing our country… We will not eradicate this problem overnight.. This is like manually moving a mountain and the only way to do it, is to move one rock aside and the next generation, or next government, will do the same until this mountain is moved.”

Hope and confidence come from energetic involvement and a willingness to make a direct contribution to change. The imperatives of change are not just challenges to government, they confront all of society. A new framework for development is an opportunity to unite around an inclusive vision, and join hands in constructing a shared future.

The National Planning Commission has cautioned that our development objectives will take time and hard work to achieve. Measured year by year, district by district, there will be advances and there will be setbacks. But in each five-year term of government we must demonstrate, as we have since 1994, that we can meet more demanding milestones – more jobs, more enterprises, more technological innovation, better housing, progress in education and health.

Working together we all know that we can do better. All of us – citizens, taxpayers, public servants, teachers, activists, managers, workers – we all have a shared future, and we have a shared plan to make it work.

The Batswana’s say, “Sedikwa ke ntšwa pedi ga se thata” – working together we can do more!

Overview of the 2013 Budget

The 2013 Budget is presented in challenging times, but against the background of a new strategic framework for growth and development. This is a budget in which there is limited room for expansion, yet there are significant opportunities for change.

There are signs of improvement in the world economy, though the outlook remains troubled.

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget.

The 2013 Budget takes the National Development Plan as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.

Government has taken measures to control growth in spending. Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.

Government remains committed to a large-scale infrastructure investment programme.

Our path of spending and the recovery in revenue will stabilise debt at just higher than 40 per cent of GDP. The budget deficit will fall from 5.2 per cent of GDP in 2012/13 to 3.1 per cent in 2015/16.

A review will be initiated this year of our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

In the 2013/14 fiscal year, personal income tax relief of R7 billion is granted.

A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 per cent of households.

Further education and training will continue to be extended and enhanced.

And following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in the House, together with a proposed employment incentive for special economic zones.

In this budget we continue to invest in education, health, housing, public transport and social development – components of the social wage which add up to about 60 per cent of public expenditure. Global situation There are signs of improvement in the world economy, though the outlook remains troubled. Growth is still muted in the United States and Japan, and much of Europe is in recession. Policy interventions by the major central banks were needed during 2012 to avert new economic and fiscal crises. Yet many advanced economies contracted during the fourth quarter of 2012 and global prospects are expected to improve only marginally, from growth of 3.2 per cent in 2012 to 3.5 per cent in 2013. Emerging markets, particularly China and India, continue to lead global growth, although at lower rates than before. High levels of debt are inhibiting progress in many countries. Yet measures to reduce indebtedness have the effect of holding back growth. Unemployment remains high in many countries, yet technological progress continues to reduce demand for labour in many industries. Around the world, inequality is fuelling discontent. So there are parallels between the global economic discourse and our own policy challenges. In seeking a pragmatic balance between recovery and consolidation, between economic power and social solidarity, between infrastructure investment and human development, between encouraging enterprise and regulating markets – we are grappling with issues that confront many other nations.

South Africa’s economic outlook

South Africa’s economy has continued to grow, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 per cent in 2012 and is expected to grow at 2.7 per cent in 2013, rising to 3.8 per cent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 per cent in 2012 and projected to increase by an average of 5.5 per cent a year over the period ahead.

However, our trade performance is holding us back. Exports grew by just 1.1 per cent in real terms last year, while imports increased by 7.2 per cent. The deficit on the current account of the balance of payments was 6.1 per cent of GDP. This means, in simple terms, that expenditure in the South African economy exceeded the value of production and income by about R190 billion last year. This is partly a consequence of the disruption of mining sector activity and the structural reduction in mineral exports due to lower demand.

Some of the foundations of faster growth are in place. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates will support improved growth rates over the medium term.

But this is not enough. Much more is needed. In particular, a significant increase in private sector investment and competitiveness is needed in the wider economy: agriculture, manufacturing, tourism, communications – every sector has to play its part in expanding trade, investment and job creation.

The National Development Plan: a new trajectory

The NDP, supported by the New Growth Path and other programmes, invites us to look beyond the constraints of the present to the transformation imperatives of the next twenty and thirty years.

These imperatives are already apparent in the realities of the social and economic restructuring that is under way.

The first reality is our demographic transition – a million young people leave school every year, and we need a package of reforms that will improve education, training and work opportunities for young people.

The second is that we are a rapidly urbanising society. This means we need to meet urgent demand for housing, municipal services, schools, clinics, public transport and commercial development, but it is also means we have an opportunity to build an integrated urban landscape, with effective partnerships between municipalities, local businesses and civic associations.

A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy, to create jobs and raise living standards.

Improving the quality of education and training is an essential foundation of a more productive and inclusive growth path.

Stronger links with Africa and other emerging economies are needed.

We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.

Finally there is the social solidarity challenge that cuts across all of these, which is to build a more equal and inclusive economy that bridges our racial and other divides. These are themes on which the NDP provides clear guidance, not just about strategic goals and objectives, but also about the practical difficulties and choices we face. There are substantial strengths on which to build – a well-established legal system, secure property rights, an effective tax system, world-class higher education institutions and science councils, established energy, transport, water and communications infrastructure networks, expertise and capacity in many areas – mining, construction, retail, finance, logistics and manufactured exports – and a sound macroeconomic and fiscal framework.

While building on these strengths, we have to tackle our weaknesses aggressively. The NDP emphasises key institutional capabilities:

The need to professionalise the public service and strengthen accountability,

Improved management and enforcement systems to fight corruption,

Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,

Improved planning and management of strategic infrastructure projects. The NDP also highlights the need to lower the cost of living for households, and to reduce the cost of doing business for small and emerging enterprises. Let me also reiterate the NDP’s emphasis on uniting South Africans around a common vision: it proposes a social compact to reduce poverty and inequality, and raise employment and investment, recognising that progress towards a more equal society requires shared efforts across the public and private sectors. And so the 2013 Budget takes the National Development Plan as its point of departure.

It recognises that our medium-term plans are framed in the context of a long-term vision and strategy.

It focuses on strengthening growth and employment creation.

It prioritises improvements in education and expansion of training opportunities.

It promotes progress towards a more equal society and an inclusive growth path.

The fiscal framework and long-term sustainability

National development must be coupled with fiscal sustainability, which ensures that the progress we make will not be interrupted or reversed. The government relies on resources derived from the wider economy, and the best way to generate resources is to grow the economy faster and increase the tax base. The NDP targets an annual growth rate of more than 5 per cent a year. This would double the resources available to government in the next two decades.

The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall amounting to R16.3 billion. The deficit is now estimated to be 5.2 per cent of GDP in 2012/13. The growth outlook for the next three years has weakened, and government’s net debt is now expected to stabilise marginally higher than 40 per cent of GDP.

In the Medium Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa’s fiscal footing. In the circumstances, our approach involves several elements:

Additional measures to control spending, reducing real expenditure growth to an average of 2.3 per cent over the next three years, compared with 2.9 per cent signalled in October 2012

A reduction in the budget deficit to 3.1 per cent by 2015/16, a level consistent with the stabilisation of debt

Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year

Initiation of a tax policy review

A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies

Strengthening the capacity of the state to implement our plans and programmes.

Government is committed to remaining within the expenditure ceiling set out in the budget. New policy initiatives over the next three years will be financed from savings, efficiency gains and reprioritisation.

Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5 per cent 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. But if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending.

On Parliament’s request, National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament’s consideration.

Growing the real economy

Growing the economy means expanding business activity. We recognise the key role that private companies play in our economy.

In the lead-up to the Budget, we engaged with several business leaders on the investment and development challenges we face. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite difficult conditions.

Construction and refurbishment by a company in the hospitality sector firm of R2.5 billion in the next 18 months and expansion of R3 billion in the pipeline

Two telecommunications investments amounting to R14 billion this year

Capital expenditure of R3.4 billion over the next three years by a rail and logistics operator

A R2.5 billion expansion and longer-term plans of R15 billion in mining projects

Investment of R1.4 billion this year by a leading retailer, and plans to open 100 new stores by another

An expansion of R1.2 billion this year by a food and beverage sector firm

Plans for R28.5 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.

In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves rather than invest in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development:

The Manufacturing Competitiveness Enhancement Programme (MCEP), announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.5 billion per year has been provided on the budget of the Department of Trade and Industry.

The Special Economic Zone (SEZ) Programme, also announced last year, has received funding to build world class industrial parks. I am in discussion with Minister Davies on specific tax incentives to enhance this initiative.

The Jobs Fund announced in the 2011 Budget has concluded two calls for proposals. In total, 3 614 applications have been received, and 65 projects approved. Grant funding of R3.3 billion has been approved, matched by a further R3.1 billion in funding raised by the private sector.

Small, Medium and Micro Enterprises (SMMEs) play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency last year. We have been progressively working to simplify the tax requirements for small business. The turnover threshold will be increased this year and the graduated rate structure will be revised.

Regional Integration

Africa is our home, and it is our future. It is a market of over one billion people and it is growing rapidly.

The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.

Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18 per cent of our total exports, and nearly a quarter of our manufactured exports.

Over the past five years, the South African Reserve Bank has approved nearly 1000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries, and also generate tax revenue, dividends and jobs both abroad as well as in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and costs of doing business in Africa.

A number of measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those

companies seeking to invest in countries outside Africa, including BRIC countries.

In addition, substantial direct investments in regional development are underway:

We are helping to build infrastructure that will create opportunities for South African companies to expand trade and investment across the border. The DBSA is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.

Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2 billion in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.

As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects. Working with our BRICS Partners Next month, we will host the 5th annual BRICS Summit, which brings together Brazil, Russia, India, China and South Africa. The Summit will unveil the work we have been doing with our BRICS partners on the following projects:

The possible establishment of a BRICS-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions

The pooling of members’ foreign exchange reserves with the view of using them to support each other at times of balance of payments or currency crisis. Collectively, BRICS countries hold reserves totalling USD 4.5 trillion.

Work is underway on creating a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the BRICS countries.

Financing infrastructure investment

The NDP reminds us that “South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium- and long- term economic and social objectives.”

Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the budget.

The fiscus has allocated just under R430 billion for schools, hospitals, clinics, dams, water and electricity distribution networks, electrification of over a million new homes, sanitation schemes, building more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.

Eskom, Transnet and other State-Owned Companies fund a further R400 billion of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.

This will pay for the ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes, and various airport upgrades.

Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased, and pressure to deliver has intensified. Records show that government’s ability to spend has been steadily rising from year to year. But it is not yet fast enough.

On this challenge, Willie du Preez expresses concern about whether infrastructure investment is actually taking place. He suggests: “As a citizen one should be able to obtain from the treasury website at the end of each

financial year what amount was spent on what infrastructure.” Mr du Preez, you can already obtain that information from the treasury website, not just every year, but every month!

Investing in Urban Development

Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people seeking a better life. It is little surprise then that the Census 2011 shows that 62 per cent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by over 50 per cent between 2001 and 2011.

The challenge we face of highly inefficient, segregated and exclusionary divides between town and township imposes costs not only on the economy and the fiscus, but also on families and communities.

A new formula for the local government equitable share will be introduced in 2013/14 that recognises the need to better differentiate assistance to different municipalities, including those in rural areas. Municipal infrastructure grants will also be re-aligned, 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.

Low carbon economy

The Development Plan further calls on government to send a signal to industry and consumers that we are living in an environmentally stressed world.

And so Government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalent, effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013.

To ensure that South Africa produces fuel that is more environmentally friendly, support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced.

In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport, cleaning up derelict mines, addressing acid mine drainage, supporting our national parks, and in particular, to saving our rhino population, who remain under threat.

We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.

The social wage

The NDP recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the “economic wage” earned through work, the “social wage” provided by government is a steadily rising contribution to the living conditions of working people and their families.

Substantial growth in social spending over the past decade has financed a threefold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1.5 million free homes and the provision of free basic education to the poorest 60 per cent of learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.

The social assistance budget has increased by an average of 11 per cent a year since 2008/09, in part due to the extension of the child support grant to the age of 18. Spending on social assistance will rise to R120 billion next year.

The old age and disability grants will increase in April from R1 200 a month to R1 260,

The foster care grant will increase from R770 to R800, and

The child support grant will increase to R290 in April and R300 a month in October.

It is also proposed that the old age grant means test should be phased out by 2016, accompanied by offsetting revisions to the secondary and tertiary rebates. 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.

Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nurse training capacity is under way.

Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms.

The initial phase of NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published this year.

Government’s contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16 per cent a year since 2008.

Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national budget to the financing of household amenities is the local government equitable share. A new equitable share formula is proposed in this Budget, which will provide a subsidy of R275 for every household with a monthly income less than R2 300, or about 59 per cent of all households.

We also recognise that many businesses provide their employees with housing assistance or home loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low-income worker at a price below market value. Tax relief is proposed to address this difficulty.

The social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and the decent work agenda.

Social spending, however, is not a substitute for job creation.

One of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. The answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.

To complement existing programmes, a tax incentive aimed at sharing the costs of employing young work-seekers will be tabled for consideration by Parliament. It will help young people enter the labour market to gain valuable experience and access career opportunities. A similar incentive is proposed for eligible workers of all ages within special economic zones.

Financial services and retirement reform

In last year’s Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals, for consultation before we introduce the necessary legislation later this year:

Tax-preferred savings and investment accounts will be introduced in 2015.

Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

Retirement funds will be required to guide their members through the process of converting savings into a regular income after retirement, and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities.

The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonized.

Governance reforms of retirement funds will also be implemented, with measures in place to ensure trustees of retirement funds are trained once they have been appointed. I intend to call up a conference of all trustees this year to take this process forward. We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees, as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected. Let me take this opportunity, to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 per cent increase in civil service pensions will be effected in April this year. Credit There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly, and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is being done. We are concerned by the abuse of emolument attachment orders that has left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks, to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role and assist their workers to manage their finances and to interrogate all emolument attachment or garnishee orders to ensure that they have been properly issued. I also call on the various law societies to take action against members who abuse the system.

Tax policy

Allow me to turn now to the revenue proposals.

We find ourselves in a challenging period, with revenues lower than expected by R16.3 billion compared with estimates at the time of the 2012 budget. This is predominantly due to weak economic growth during the second half of 2012, mining sector disruptions and lower commodity prices. Tax revenues are expected to improve over the medium-term in line with higher economic growth and the stabilization of key commodity prices.

Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible, contributing both to household disposable income and a lower cost of doing business.

The main tax proposals for 2013 are as follows:

Personal income tax relief of R7 billion, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million.

Reforms to the tax treatment of contributions to retirement savings.

An employment incentive through the tax system for first-time job seekers.

Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.

An overall increase of 23 cents per litre in fuel levies in April, which includes 8 cents per litre in the road accident fund levy.

Increases in excise duties on alcohol and tobacco products of between 5.7 and 10 per cent, and

Introduction of the carbon tax in 2015, together with the phasing-out of the electricity levy.

A tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability, amongst other things.

The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review to control abuse; modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses which sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations which have been adopted by the European Union and other jurisdictions.

Tax administration

Millions of honest taxpayers in our country continue to sustain our growth and development agenda. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. We thank you!

Tax avoidance

We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs.

Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate. Meeting in Moscow earlier this month, finance ministers of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. The South African Revenue Service is currently engaging with companies that have their base of operations in SA but appear to have shifted a large proportion of their profits to low tax jurisdictions where only a few people are employed. This is unacceptable!

SARS is also pursuing schemes identified under the revised general anti- avoidance rules following several years’ painstaking work tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisors and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of the transactions.

Voluntary disclosure

A temporary voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers made use of the programme and tax of more than R3 billion has so far been collected as a result of the programme.

From 1 October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act (2011). Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.

Non-compliance

SARS is also targeting other areas of non-compliance, including recipients of government expenditure who are not up to date with their taxes. By working closely with Treasury and interfacing with the government payment system, SARS has identified companies who have received payments but have not declared their full income. They are being audited, and others will follow.

This intervention will be further underpinned by the reform of the Tax Clearance Certificate process which I announced in October.

In the near future, SARS will introduce a Single Registration process in which companies are able to register once-off in a simple manner for all tax types and Customs activities.

On this, we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to SARS for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered.

Medium-term expenditure framework and division of revenue

I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.

The 2013 Budget provides for continued real growth in spending to support service delivery, and to expand investment in infrastructure. It will also accommodate the costs of the three-year public service wage agreement signed last year.

In the past, we have been able to add substantially to medium term spending plans during the Budget, but this year is different. Money has been taken away from programmes that are not performing or are not aligned to government’s core priorities and given to programmes that are delivering as planned.

The main appropriation provides for R1 055 billion in expenditure next year, rising to R1 226 billion in 2015/16. Debt-service costs will come to R100 billion next year, and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.

National departments are allocated 47.6 per cent of available funds in 2013/14. Provinces are allocated 43.5 per cent, mainly for education, health and social welfare. Local government receives 8.9 per cent, primarily for providing basic services to low-income households.

Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damage in Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools connectivity programme and other broadband infrastructure projects, subject to finalisation of implementation plans.

The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in to avoid disruption of services.

Allocations to provinces and municipalities

The provincial equitable share amounts to R338 billion in 2013/14, and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase employment of social workers and to provide additional support to non-governmental organisations which provide critical welfare services. There is additional funding for teachers in the poorest 20 per cent 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.

Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8 billion in 2005/06 to R39.7 billion in 2012/13. To improve the quality of spending, the application process for infrastructure grants is being revised: provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks.

A total of R85 billion is allocated for transfer to municipalities in 2013/14, rising to R101 billion in 2015/16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.

Consolidated government expenditure

There is considerable detail in the Budget Review and the Estimates of National Expenditure on government spending plans and service delivery targets. I will highlight just a few key points.

Consolidated government expenditure is budgeted to increase by 8.1 per cent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.

Job creation and labour

Allocations for employment programmes increase by 13.5 per cent a year over the next three years.

There will be higher funding for employment projects of non-governmental organisations and for Working for Fisheries. The expanded public works programme aims to support 684 800 fulltime equivalent jobs in 2013/14.

Additional allocations are also made for the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration.

Health and social protection

Consolidated spending on health and social protection is R268billion in 2013/14.

Health infrastructure remains a priority. In 2012, a total of 1 967 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment.

Substantial improvements in the social assistance payments system are in progress, providing easier access by recipients to their grants. The cost of social grants payments has been reduced from R32 to R16 per disbursement.

Education, sport and culture

Spending on education, sport and culture will amount to R233 billion in 2013/14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, R23.9billion is available to provincial education departments for infrastructure over the next three years.

R700 million has been allocated over the MTEF period for the technical secondary schools recapitalisation grant. This will finance construction and refurbishment of 259 workshops and training of over 1500 technology teachers.

Transfers to higher education institutions increase from R20.4 billion in 2012/13 to R24.6 billion in 2015/16. The total number of students enrolled in higher education institutions is expected to increase from 910 000 currently to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga to commence this year.

Economic services

Expenditure on economic services in 2013/14 will amount to R48 billion, including R5.3billion for the manufacturing competiveness enhancement programme and R2.9 billion for special economic zones.

Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and rehabilitate derelict and ownerless mines.

The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project.

Transport, energy and communications

Expenditure on transport, energy and communications will amount to R89 billion next year.

The allocation to the Department of Transport increases from R42.3 billion next year to R53.4billion in 2015/16, reflecting increased allocations to the Passenger Rail Agency for its rolling stock procurement programme and further investment in the national road network. Additional funding goes to integrated public transport networks in urban areas, and for provincial road maintenance.

The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by 645 000 over the next

three years. The solar water geyser programme will be continued until 2015/16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television.

Local government, community amenities and housing

Local government, community amenities and housing are allocated R132 billion in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.

R4.3 billion is allocated to a new grant to be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. The Municipal Infrastructure Support Agency of the Department for Cooperative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.

Funding for improving human settlements will grow from R26.2 billion to R30.5 billion over the next three years, including R1.1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.

General public services

The general public services function is allocated R57 billion in 2013/14. This includes the SARS budget of R9.5 billion, which is just over 1 per cent of revenue to be collected.

The Department of Public Works reprioritised R464 million over the medium- term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4 million to combat corruption and address grievances.

Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents.

Defence, public order and safety

The allocations for defence, public order and safety amount to R154 billion in 2013/14.

Provision is made for peace-keeping operations in the Central African Republic, where 400 defence force personnel have been deployed.

The Department of Police has reprioritised R2.5 billion over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2 billion for the criminal justice sector revamp and modernisation programme. There is increased funding allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity and additional funds are also made to Legal Aid South Africa and the South African Human Rights Commission.

Procurement and combating corruption

Last year I said to this House that we will continually endeavour to increase the value which government receives for the money it spends.

Let me be frank. This is a difficult task with too many points of resistance! However, we have registered some progress. In the present system, procurement transactions take place at too many localities and the contracts are short term. Consequently there are hundreds of thousands of transactions from a multitude of centres. There is very little visibility of all these transactions. While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in Government, assisted by people in business and broader society. And it will take time. But we are determined to make progress.

The process for setting up the Chief Procurement Office in the National Treasury has begun in earnest and I shall soon be able to announce the name of a 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, improving the current system, standardising the procurement of critical items across all government and the long-term modernisation of the entire system.

Among the first initiatives of the CPO will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Secondly, it will pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

National Treasury is currently scrutinising 76 business entities with contracts worth R8.4 billion which we believe have infringed the procurement rules, while SARS is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. So far 216 cases have been finalised resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre has referred over R6.5 billion for investigation linked to corrupt activities.

I fully support Minister Sisulu’s call for appropriate curbs on officials doing business with government. I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.

Worldwide, special measures are being taken to oversee the accounts of what have become known as “politically exposed persons” – public representatives and senior officials. I have asked that the FIC should explore how we might bring South Africa into line with these international anti-corruption and anti- money laundering standards.

Taxpayers, and indeed all South Africans are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, summed it up as follows: “Minister I won’t be fancy with words or complicated ideas … my advice for a healthy and sustainable fiscus is to brutally eradicate corruption, then we will be honoured to pay taxes.”

Mr Maibelo, I couldn’t agree more. Rooting out corruption requires collective effort from all of us.

Conclusion

My sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support.

My appreciation also goes to Colleagues of the Ministers’ Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us, and their bold and steadfast advice to Cabinet.

I wish to thank my Cabinet colleagues who collectively own this budget. Their support and understanding for tough measures is highly appreciated.

A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable to me.

My thanks to the MECs of Finance, who play a critical role as guardians of 43 per cent of our spending.

Our appreciation also goes to:

Governor Gill Marcus and the Deputy Governor of the South African Reserve Bank, for their constructive management of monetary policy,

Commissioner Oupa Magashula and the staff of the South African Revenue Service for their diligent contribution to fiscal stability – I hope better times return for them soon!

The Financial and Fiscal Commission and its acting Chairperson, for their contributions,

Mr Jabu Moleketi, Chair of the DBSA and its new CEO, Mr Patrick Dlamini, who are positioning the DBSA to make a greater contribution to infrastructure development,

The Chair of the Land Bank, Mr Ngubane, and CEO Mr Phakamani Hadebe, for their illustrious service to the bank,

The leadership of the Public Investment Corporation, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency,

The managing director of NEDLAC, Mr Alistair Smith, and the constituency representatives for their engagements with the Treasury,

The Honourable Thaba Mufamadi and Charel de Beer, who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the the Appropriations Committees, the Honourable Elliot Sogoni and Tebogo Chaane, who ensure that Parliament remains a vibrant forum for engagement, accountability and public participation,

Director-General Lungisa Fuzile (and Mrs Fuzile) for his professionalism, frankness and profound commitment to building credible institutions and advancing government’s objectives,

The management team and staff of the National Treasury, whose extraordinary contributions and caring for a better South Africa enhance our country’s standing in international fora,

My Chief of Staff, Dondo Mogajane, and the Ministry staff for their enthusiastic support,

My very supportive family who make my contributions possible. And finally, I must express sincere gratitude to South Africans from all parts of the country who offer words of encouragement – as well as critiques and concerns! This is what keeps us accountable and drives us to constantly improve. The key pillars of this Budget are:

Global growth is improving, though uncertainty remains.

South Africa’s economy must grow faster and more inclusively.

Future growth is also dependent on private-sector investment in the economy.

The National Development Plan will be implemented by government and budgets will be aligned to it.

Government continues to invest significantly in infrastructure

We are taking additional steps to create opportunities for young people.

Reduced revenue results in less spending in the years ahead unless the economy grows.

There are new opportunities to be seized in Africa and other emerging markets.

We have committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.

A new local government formula benefits rural municipalities. Honourable Speaker, I table this budget in the hope that as a nation we will be able to rise above our sectional interest, and, as you said Mr President, prevail with greater maturity, pull together and take this country forward. We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today. In conclusion, let me remind this House of what former President Nelson Mandela said: “What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead…


Morning everyone! Happy Tuesday to you! Joining us today we have:

Mike Barnicle, Steve Rattner, Katty Kay, John Harris, Robert Gibbs, Eugene Robinson, Chuck Todd, Sen. Tim Kaine (D-VA), Rep. Jack Kingston (R-GA), Ray Kelly, Joe Daniels, Jesse Tyler Ferguson and Brian Shactman

We hope you'll join us too!


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