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 (NDP) 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. As we pointed out in the 2012/13 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.
We have opened channels of communication and built cohesion among key stakeholders. We have taken steps to create the conditions for higher levels of confidence in our economy and society. Now we are ready to implement the NDP.
South Africans have a rich history of acting together for a better future.
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.
But people ask 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 in reconstructing and developing South Africa.
Can we be a winning nation? Of course we can!
The imperatives of change are not just challenges to the 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. Measured year by year, district by district, there will be advances and setbacks. But in each five-year term of government we must demonstrate that we can meet more demanding milestones – jobs, enterprises, technological innovation, better housing, progress in education and health.
Overview
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.
The 2013 Budget takes the NDP as its point of departure. The strategic plans of government and the medium-term expenditure plans will be aligned to realise our objectives.
Spending plans have been reduced by R10.4 billion through reprioritisation, savings and a draw-down on the contingency reserve.
The 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 percent of gross domestic product (GDP). The budget deficit will fall from 5.2 percent of GDP in 2012/13 to 3.1 percent 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 R7bn is granted.
A new local government equitable share formula is proposed, providing a subsidy for free basic services designed to reach 59 percent of households.
Further education and training will be extended and enhanced. And following careful consideration of inputs from various stakeholders, a revised youth employment incentive will be tabled in Parliament, together with a proposed employment incentive for special economic zones.
Home and abroad
There are signs of improvement in the world economy, though the outlook remains troubled. 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.
The economy has grown, but at a slower rate than projected at the time of the 2012 Budget. GDP growth reached 2.5 percent in 2012 and is expected to reach 2.7 percent in 2013, rising to 3.8 percent in 2015. Inflation has remained moderate, with consumer prices rising by 5.7 percent in 2012 and projected to rise an average of 5.5 percent a year.
However, our trade performance is holding us back. Exports grew by just 1.1 percent in real terms last year, while imports added 7.2 percent. The deficit on the current account of the balance of payments was 6.1 percent of GDP. This means, in simple terms, that expenditure in the economy exceeded the value of production and income by R190bn last year. This is partly a consequence of the disruption of mining and the structural cut in mineral exports due to lower demand.
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.
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 to expand.
New NDP trajectory
The NDP, supported by the New Growth Path and other programmes, invites us to look beyond present constraints to the transformation imperatives of the next 30 years.
n The first reality is our demographic transition – a million young people leave school every year, and we need a package of reforms to improve education, training and work opportunities for young people.
n 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.
n A third imperative is economic competitiveness. We need to invest in infrastructure, raise productivity and diversify our economy.
n Improving the quality of education is an essential foundation of a more productive and inclusive growth path.
n Stronger links with Africa and other emerging economies are needed.
n We have to adapt to a low-carbon economy, including mobilisation of our renewable energy potential.
n 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.
While building on our strengths, we have to tackle our weaknesses aggressively. The NDP emphasises transformation of key institutional capabilities:
n The need to professionalise the public service and strengthen accountability,
n Improved management and enforcement systems to fight corruption,
n Reinforcement of the education accountability chain, with lines of responsibility from state to classroom,
n Improved planning and management of strategic infrastructure projects.
The NDP also highlights the need to lower the cost of living for households, and reduce the cost of doing business for small and emerging enterprises.
Framework
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 percent a year. This would double the resources available to the government in the next two decades.
The 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 of R16.3bn. The deficit is now estimated to be 5.2 percent of GDP in 2012/13. The growth outlook for the next three years has weakened, and the government’s net debt is now expected to stabilise marginally higher than 40 percent of GDP.
In the circumstances, our approach involves several elements:
n More measures to control spending, reducing real expenditure growth to an average of 2.3 percent over the next three years, compared with 2.9 percent signalled in October 2012,
n A reduction in the budget deficit to 3.1 percent of GDP by 2015/16, a level consistent with the stabilisation of debt,
n Steps to reinforce growth, building on the competitiveness enhancement programme introduced last year,
n A tax policy review,
n A comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies,
n Strengthening the capacity of the state to implement our plans. The 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.
On Parliament’s request, the 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.
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. We wish to encourage businesses to keep investing in our economy, and seize the opportunities around us. We therefore reinforce several initiatives that support business development:
n The Manufacturing Competitiveness Enhancement Programme, announced in 2012, has received a total of 215 applications with requests for grants totalling R2.3bn mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1.5bn a year has been provided on the budget of the Department of Trade and Industry.
n The Special Economic Zone programme has received funding to build world-class industrial parks. I am in discussion with Trade and Industry Minister Rob Davies on tax incentives to enhance this.
n 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 R3.3bn has been approved, matched by a further R3.1bn in funding by the private sector.
n Small, medium and micro enterprises (SMMEs) play a key role in the development of the economy and 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 1 billion people and it is growing rapidly.
The NDP acknowledges the global shift of economic power from West to East, and highlights the rise of Africa. We have already begun to see our trade patterns shift from traditional partners in Europe and the US to new markets in Asia and Africa. Africa accounts for about 18 percent of our total exports, and nearly a quarter of our manufactured exports.
Over the past five years, the SA 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. I will announce simpler rules that will reduce the time and costs of doing business in Africa.
Measures are proposed to relax cross-border financial regulations and tax requirements on companies, making it easier for banks 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 firms seeking to invest in countries outside Africa.
In addition, substantial direct investments in regional development are under way:
n We are helping to build infrastructure that will create opportunities for companies to expand trade and investment across the border. The Development Bank of Southern Africa 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.
n Investment by the Industrial Development Corporation in 41 projects across 17 countries totalled R6.2bn in 2012. The bulk of those projects are in mining, industrial infrastructure, agro-processing and tourism.
n As part of its long-term strategy to help secure energy supply, Eskom is considering options for investment in several regional generation and transmission projects.
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 done together on the following projects:
n The possible establishment of a Brics-led bank is intended to mobilise domestic savings and co-fund infrastructure in developing regions.
n The pooling of members’ forex 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 of $4.5 trillion.
n Work is under way 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.
Infrastructure
Over the next three years, R827bn is 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 R430bn 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 R400bn of projects. This will be financed both through own resources and additional borrowing over the next three years, supported by Treasury guarantees.
Records show the government’s ability to spend has steadily risen from year to year. But it is not yet fast enough.
Urban growth
Our urban areas make a vital contribution to the national economy. It is little surprise then that the 2011 census shows that 62 percent of South Africans are now living in our cities and towns. And that the population of some municipalities grew by 50 percent 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 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.
The development plan calls on the government to send a signal to industry and consumers that we are living in an environmentally stressed world.
And so the government proposes to price carbon by way of a carbon tax at the rate of R120 a ton of carbon dioxide equivalent, effective from 2015. To soften the impact, a tax-free exemption threshold of 60 percent will be set, with additional allowances for emissions intensive and trade-exposed industries. An updated carbon tax policy paper will be published next month.
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.
The 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.
We also encourage the private sector and smaller public entities to 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 R300m.
Social wage
Reducing the cost of living is essential for broadening economic participation and eliminating poverty.
Substantial growth in social spending over the past decade has financed a threefold rise 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 percent 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 percent 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 R120bn next year.
n The old age and disability grants will increase in April from R1 200 a month to R1 260,
n The foster care grant will increase from R770 to R800, and
n 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.
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/Aids and tuberculosis programmes, and an expansion in medical and nurse training capacity is under way.
Pilot National Health Insurance (NHI) projects have been initiated this year in 10 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 co-ordinating 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 percent 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 percent 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.
But social spending 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.
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:
n Tax-preferred savings and investment accounts will be introduced in 2015.
n Retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve pensions when changing jobs.
n 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.
n The tax treatment of pension, provident and retirement annuity funds will be simplified and harmonised.
n 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.
The Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. A 6 percent 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
We find ourselves in a challenging period, with revenues lower than expected by R16.3bn 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 stabilisation 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:
n Personal income tax relief of R7bn, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350m.
n Reforms to the tax treatment of contributions to retirement savings.
n An employment incentive through the tax system for first-time job seekers.
n Further tax relief for small businesses, including an increase in the monetary tax thresholds applicable for small business corporations.
n An overall increase of 23c per litre in fuel levies in April, which includes 8 cents per litre in the Road Accident Fund levy.
n Increases in excise duties on alcohol and tobacco products of between 5.7 percent and 10 percent, and
n The 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 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 that sell e-books, music and other digital goods and services should be required to register as VAT vendors, in line with regulations adopted by the EU and other jurisdictions.
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!
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 Group of 20 countries were united in supporting an overhaul of international company tax rules to address this issue.
The SA Revenue Service (Sars) is engaging with companies that have their base of operations in South Africa 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.
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 R3bn has so far been collected as a result of the programme.
From October 2012, a permanent voluntary disclosure programme became effective as part of the Tax Administration Act of 2011. Some 700 taxpayers have already come forward. Tax of more than R200m will be collected before the end of March 2013.
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.
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.
Division of revenue
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 the government’s core priorities and given to programmes that are delivering as planned.
The main appropriation provides for R1 055bn in expenditure next year, rising to R1 226bn in 2015/16. Debt-service costs will come to R100bn next year, and R4bn is set aside as a contingency reserve. This leaves R951bn to be divided between the national, provincial and local spheres.
National departments are allocated 47.6 percent of available funds in 2013/14. Provinces are allocated 43.5 percent, mainly for education, health and social welfare. Local government receives 8.9 percent, primarily for providing basic services to low-income households.
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.
The provincial equitable share amounts to R338bn in 2013/14, and conditional grants to provinces will total R77bn. 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 percent 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 tuberculosis diagnosis system.
Infrastructure transfers to provinces have increased sharply in recent years, growing from R4.8bn in 2005/06 to R39.7bn 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 R85bn is allocated for transfer to municipalities in 2013/14, rising to R101bn in 2015/16.
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 percent a year, from R1.1 trillion in 2012/13 to R1.3 trillion in 2015/16.
Jobs, labour
Allocations for employment programmes increase by 13.5 percent a year over the next three years. 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
Consolidated spending on health and social protection is R268bn 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
Spending on education, sport and culture will amount to R233bn 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, R23.9bn is available to provincial education departments for infrastructure over the next three years. R700m has been allocated over the medium-term expenditure framework (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 R20.4bn in 2012/13 to R24.6bn 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.
Economic services
Expenditure on economic services in 2013/14 will amount to R48bn, including R5.3bn for the manufacturing competitiveness enhancement programme and R2.9bn for special economic zones.
Additional allocations include R450m 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. The allocation to the Department of Science and Technology includes R2bn to support the Square Kilometre Array project.
Expenditure on transport, energy and communications will amount to R89bn next year.
The allocation to the Department of Transport increases from R42.3bn next year to R53.4bn in 2015/16, reflecting increased allocations to the Passenger Rail Agency of SA 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 R599m over the medium term for the migration from analogue to digital terrestrial television.
Local government, community amenities and housing are allocated R132bn in 2013/14. The largest increases go to bulk water, water treatment and water distribution projects, and allocations to the local government equitable share.
A sum of R4.3bn 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 R820m to provide technical assistance to rural and low-capacity municipalities.
Funding for improving human settlements will grow from R26.2bn to R30.5bn over the next three years, including R1.1bn to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685m.
The general public services function is allocated R57bn in 2013/14. This includes the Sars budget of R9.5bn, which is just over 1 percent of revenue to be collected.
The Department of Public Works reprioritised R464m over the medium term to fund its turnaround strategy, which focuses on lease and property management portfolios. The Public Service Commission receives R71.4m to combat corruption and address grievances.
Over the MTEF period, the Department of Home Affairs will spend R1bn on its information systems modernisation programme.
Defence, safety
The allocations for defence, public order and safety amount to R154bn 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 R2.5bn over the MTEF to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1.2bn 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 SA Human Rights Commission.
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.
The process for setting up the Chief Procurement Office (CPO) in the Treasury has begun in earnest. 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. National Treasury is currently scrutinising 76 business entities with contracts worth R8.4bn which we believe have infringed the procurement rules, while Sars is auditing 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10bn. So far 216 cases have been finalised resulting in assessments amounting to over R480m being raised.
The Financial Intelligence Centre (FIC) has referred over R6.5bn for investigation linked to corrupt activities.
I fully support Public Service and Administration Minister Lindiwe Sisulu’s call for appropriate curbs on officials doing business with government. 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. Rooting out corruption requires collective effort from all of us.
We have said that South Africa is changing. Let us work together to ensure that really, tomorrow, will be better than today.
This is an edited version of the speech.