South Africa: National Budget 2009/2010 Budgeting during a global credit and economic crisis Kevin Lings Economist 12 February 2009
US monthly payroll changes 000 s 600 500 400 300 200 100 0-100 -200-300 -400-500 -600-700 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
US consumer credit $ billion, month-on-month 24 21 18 15 12 9 6 3 0-3 -6-9 -12 00 01 02 03 04 05 06 07 08 09
US households have lost $6.6 trillion in assets over the last year Property 28.8% Mutual funds 12.3% Listed shares 37.0% Pension funds 21.9%
UK consumer confidence Index 11 8 5 2-1 -4-7 -10-13 -16-19 -22-25 -28-31 -34-37 -40 35 year average 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Euro-area retail sales %y/y, 3-month ave 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5 05 06 07 08
2008 2007 2006 Japan exports %y/y. Exports declined by 35.5%y/y in December 50 45 40 35 30 25 20 15 10 5 0-5 -10-15 -20-25 -30-35 -40
China exports % y/y, 3mnth ave 50 40 Export 30 20 10 0-10 2003 2004 2005 2006 2007 2008 2009
Euro-area, US, Japan and UK official interest rates % 6 UK 5 4 3 2 Euroland US 1 Japan 0 01 02 03 04 05 06 07 08 09
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 US Federal Budget $bn, 12-month running total 250 150 50-50 -150-250 -350-450 -550-650 -750-850 -950
Open Budget Index 2008 Index out of 100 UK South Africa France New Zealand US Norway Sweden Brazil South Korea Czech Republic Germany Botswana India Russia Kenya Argentina Mexico Ghana Zambia Turkey Thailand Malaysia Malawi Morocco Nigeria China Vietnam Angla Saudi Arabia 0 20 40 60 80 100
SA GDP growth (government estimate) % 6 5 4 3 2 1 0-1 -1.2 0.0 2.1 4.2 2.4-0.3-1.0-2.1 1.2 3.2 3.1 4.3 2.7 0.5 2.4 4.2 2.7 3.7 3.1 4.9 5.0 5.3 5.1 3.1 1.2 3.0 4.0-2 -3 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Fixed Investment Growth (government estimate) % 17 14 11 8 5 2 8.3 10.7 9.0 5.7 4.8 4.3 3.5 3.7 9.1 8.9 10.2 13.2 16.3 11.5 3.7 5.7 9.0-1 -4-2.3-7.4-5.3-0.6-7.6-7 -10 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Current account (government estimate) % of GDP 7 6 5 4 3 2 1 0-1 -2-3 -4-5 -6-7 -8-9 4 4.2 5.9 2.7 1.5 1.4 1.1 1.5 2.1 0-1.7-1.2-0.5-0.1 0-0.6-1.5-1.1-1.7-3.2-4 -6.5-7.2-8.1-6.3-6.9-6.9 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Inflation (CPIX/CPI) (government estimate) % 20 18 16 14 12 CPI 10 19.5 8 6 4 2 16.1 17.2 17.4 16.6 15.6 14.9 14.1 11.7 9.8 8 6.6 8.7 7.1 6.9 7.7 6.6 9.3 6.8 6.5 4.3 4.6 3.9 11.6 5.8 5.3 4.7 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
SA government s budget 2009/2010 main indicators 2008/2009 2009/2010 % change R billion R billion Revenue 611.1 643.0 5.2% Expenditure 633.9 738.6 16.5% Budget deficit -22.8-95.6 Deficit as % of GDP -1.0% -3.9%
11/12 10/11 09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 97/98 96/97 95/96 94/95 SA budget deficit as % of GDP % Fiscal years 2 1 0-1 -2-3 -5.1-4.5-4.6-3.8-2.3-2.0-1.9-1.4-1.1-2.3-1.4-0.3 0.6 0.9-1.0-3.9-3.1-2.3-4 -5-6
09/10 08/09 07/08 06/07 05/06 Government expenditure & revenue as % of GDP % Fiscal years 35 Huge increase in expenditure 34 33 Expenditure as % of GDP 32 31 30 29 Revenue as % of GDP 28
'2009/10 '2008/09 2007/08 2006/07 2005/06 2004/05 2003/04 2002/03 2001/02 2000/01 1999/00 1998/99 Government running a primary deficit Rbn Fiscal years 75 65 Primary deficit estimated at 1.6% of GDP 55 45 35 25 15 5-5 -15-25 -35-45
Breakdown of tax revenue (2009/10) Transfer Duty 0.8% SDL 1.2% Customs 3.7% Excise duties 3.6% Other 2.3% Individuals 31.2% STC 2.9% Fuel levy 4.5% VAT 25.4% Companies 24.1%
2008/09 2007/08 2006/07 2005/06 2004/05 2003/04 2002/03 2001/02 2000/01 1999/00 1998/99 Government budget revenue overruns Rbn 50 45 40 35 30 25 20 15 10 5 0-5 -10-15 -20 8.2 6.5 5.2 14.9 13.3-5.1 20.9 41.2 29.5 13.4-14.5
Revenue: Initial budget vs actual (2008/2009) Tax revenue Budget 10 13 Individuals Actual 13 18 Companies 11 16 Customs duties -10 17 Excise duties 4 13 Fuel levy 3 10 VAT 3 14-15 -10-5 0 5 10 15 20
Main tax proposals 2009/2010 Personal income tax Personal income tax adjustment Adjustment in monetary thresholds (savings, medical scheme contributions) Business tax Industrial policy Indirect taxes Increase in fuel levy Increase in excise duties Electricity levy Incandescent light bulb levy Air Passenger departure tax Plastic bag levy Diamond export levy LOSS ON TAX PROPOSALS Additions Rm 9 975 4 890 2 100 2 780 20 120 15 50 Subtractions Rm -13 550-13 000-550 -1 000-1 000-4 575
Personal tax relief in previous tax years Tax relief for individuals: 1998/1999 R4bn 1999/2000 R5bn 2000/2001 R10bn 2001/2002 R8bn 2002/2003 R15bn 2003/2004 R13bn 2004/2005 R4bn 2005/2006 R6.8bn 2006/2007 R13.5bn 2007/2008 R8.4bn 2008/2009 R7.2bn 2009/2010 R13.0bn
Tax reduction for individuals <65 Taxable income (rands). Tax relief of R13.6billion in 2009/2010 54200 55000 60000 65000 70000 75000 80000 85000 90000 100000 120000 150000 200000 250000 300000 400000 500000 750000 1000000 1476 1476 1476 1476 1476 1476 1476 1476 1476 1476 1476 2176 2426 2926 3926 4526 5026 5526 5526 0 1000 2000 3000 4000 5000 6000
Budget revenue increases 2009/2010-10 -5 0 5 10 15 20 25 STC -5.0 Companies -1.2 Customs duties Individuals TAX REVENUE Transfer duties Skills development levy 3.6 4.2 5.1 6.0 6.8 VAT 9.0 Excise duties 12.7 Fuel levy 22.9 After tax proposals
Breakdown of expenditure (including interest) State debt cost 7.2% Other 7.1% Defense 4.4% Public Order and Safety 9.9% Economic Affairs 19.0% Education 18.3% Housing and community 7.7% Health 11.0% Social Protection 15.4%
2008/09 2007/08 2006/07 2005/06 2004/05 2003/04 2002/03 2001/02 2000/01 1999/00 1998/99 Government budget non-interest expenditure overruns Rbn 25 20 15 10 19.8 5 9.4 8.2 0 1.4 1.9 0.7 3.8 0.4 2.7 3.1 0.2
Budget Expenditure increases in 2009/10 Total 13.8 Other -0.7 State Debt 1.8 Health 7.4 Housing 8.0 Education 10.1 Public Order & Safety 11.4 Social Welfare 12.0 Defence 14.9 Economic services 44.3 Consolidated national and provincial expenditure -10 0 10 20 30 40 50 %
Key expenditure items % of total 1990/91 05/06 06/07 07/08 08/09 09/10 Defence 13.7 5.7 5.1 4.7 4.4 4.4 Police, courts, prisons 5.6 10.9 10.5 10.5 10.1 9.9 Education Health Social security Economic services 20.9 10.1 10.8 19.6 11.2 16.6 11.2 19.1 11.3 16.4 12.5 18.5 11.3 15.9 13.8 19.0 11.6 15.7 14.9 18.3 11.0 15.4 19.0 Includes water schemes, transport, communication etc
2011/12 2010/11 2009/10 2008/09 2007/08 2006/07 2005/06 Public sector infrastructural spending Rbn 350 300 R787bn, or 9.7% of GDP 250 200 150 100 4.5% of GDP 190.6 237.9 259.4 290.1 50 70.7 83.6 130.2 0
Social grant beneficiary numbers Number of people obtaining a social grant April 2000 2 946 618 April 2003 5 808 494 April 2004 7 941 562 April 2005 9 406 829 April 2006 10 918 263 April 2007 11 983 141 April 2008 12 374 770 Social grants represent spending of R80.38bn which is 3.5% of GDP April 2009 13 386278 9 061 711 in the form of child support There has been a 18.3% average annual growth in the number of people obtaining a social grant from 2003 to 2009
09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 97/98 96/97 95/96 94/95 93/94 92/93 91/92 90/91 Customs union payments by SA govt Rbn 30 25 20 15 10 25.2 24.7 28.9 27.9 5 0 1.8 2.8 3.0 3.1 3.2 3.9 4.4 5.2 5.6 7.2 8.4 8.2 8.3 9.7 13.3 14.1
11/12 10/11 09/10 08/09 07/08 06/07 05/06 Public sector borrowing requirement Rbn 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10-10 0-20 Fiscal years Eskom: Gov to provide R60bn over 3 years Gov to underwrite R26bn of existing debt Gov to underwrite R150bn in new debt
11/12 10/11 09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 97/98 96/97 95/96 94/95 93/94 92/93 91/92 90/91 89/90 Government net domestic long-term bonds issued Rbn Fiscal years 70 60 50 40 30 20 10 0-10 -20-30 -40
11/12 10/11 09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 97/98 Government net foreign funding Rbn 35 30 25 20 15 10 5 0-5 -10 Fiscal years
Government debt as % of GDP % 55 50 45 Domestic debt Foreign debt 40 35 30 25 20 15 10 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Government debt (gross) as % of GDP (2008) % Japan Italy Germany France US Canada UK South Africa 0 20 40 60 80 100 120 140 160 180 200
09/10 08/09 07/08 06/07 05/06 04/05 03/04 02/03 01/02 00/01 99/00 98/99 97/98 96/97 95/96 94/95 93/94 92/93 91/92 90/91 89/90 Debt servicing as % of total spending % Fiscal years 23 21 19 17 15 13 11 9 7 5
Evaluate the budget Aims Budget should be guide to govt's intentions Budget deficit contained Spending - efficiency Revenue - no ad hoc measures - efficiency of collection Positive impact on the economy - Growth - Inflation - Rand Exchange control relaxation Encouraging private sector investment Unemployment and Job creation Law & Order, Crime and Violence Poverty relief Encourage savings Encourage small business Innovation Negative No No No No No No Positive Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
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