Key points of Budget 2016

Key points of Budget 2016

The Minister of Finance, Pravin Gordhan has acknowledged his challenges in creating a workable budget amidst the deterioration in the global economy, declining business confidence and the severity of the drought.

Budget 2016 How will it be spent
National Treasury

The South African economy is expected to grow by just 0.9 % this year. 

Gordhan said the depressed conditions reflect policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints, the impact of the devastating drought and regulatory barriers to investment. 

"Our economy is not growing fast enough to raise employment or improve average incomes. Investment growth must be substantially scaled up," he said.

Gordhan made it clear that the buck stops here.

"We cannot spend money we do not have. If you can afford R1000 to be repaid, borrow R1000, not R2000," he said.

He also announced stringent cost containment measures across all government departments.

These include:

- Restrictions on filling managerial and administrative vacancies, subject to review of human resource plans and elimination of unnecessary positions;

- Reduced transfers for operating budgets of public entities;

- Capital budgeting reforms to align plans with budget allocations while strengthening maintenance procedures;

- Mandatory use of the new e-tender portal, thereby enforcing procurement transparency and accessible reference prices for a wide range of goods and services;

- A national travel and accommodation policy and instructions on conference costs;

- New guidelines to limit the value of vehicle purchases for political office bearers;

- Renegotiation of government leasing contracts;

- New centrally negotiated contracts for banking services, ICT infrastructure and services, health technology, school building and learner support materials. 


Gordhan announced that funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities.

"The Land Bank has set aside a concessionary loan facility to assist farmers in recovering from the impact of the current drought conditions. Over the next three years R15 billion is allocated for land acquisition, farm improvements and expanding agro-processing opportunities," he said.

He added that Water and Sanitation has already reprioritised R502 million to deliver water, protect springs and refurbish boreholes in response to drought conditions. Funds have also been provided for feed and support for livestock farmers, and disaster relief measures. 

"Additional drought response allocations will be made, as required, in the Adjustments Appropriation later this year."

New taxes

Gordhan announced two new taxes. South Africans will in the future pay tax on tyres and on sugar-sweetened beverages.

Tax proposals include the following:

- Personal income tax relief of R5.5 billion, which partially compensates for inflation, focused mainly on lower- and middle-income earners;

- An increase in the monthly medical tax credit allowances;

- An increase of 30 cents a litre in the general fuel levy;

- Introduction of a tyre levy to finance recycling programmes, increases in the incandescent globe tax, the plastic bag levy and the motor vehicle emissions tax;

- Introduction of a tax on sugar-sweetened beverages; and

- Increases of between 6 and 8.5 per cent in the duties on alcoholic beverages and tobacco products. 

South African Airways

Gordhan said South Africa does not need to be invested in four airline businesses. 

"Minister Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline." he said.

Here is a document from the National Treasury, breaking down the important aspects of the 2016 budget:

2016 Budget Tax Proposals
National Treasury

2016 Budget Highlights Card

2016 People's Guide English Budget

Edited by Suné du Toit

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