Arthur Kamp, Sanlam Investment Management’s economist, believes it is unlikely that Finance Minister Pravin Gordhan will raise corporate tax rates in the current climate.
“It is a most unlikely development in my view,” he said. His colleague Candice Paine, Sanlam Investment Management’s head of retail, says individual taxpayers have been given significant relief in the last 10 years. Individual taxpayers were shouldering about 45 percent of the tax burden in 2000 but this had now dropped to about 31 percent.
There was the potential that the top marginal rate would be increased from 40 percent to 42 percent for people who earn in the region of R1 million a year, but this would only contribute about an extra R10 billion to the budget cake.
Paine quoted Jean-Baptiste Colbert, a French politician (1619 to 1683), who said the art of taxation “consists of plucking the goose so as to obtain the most feathers with the least hissing”.
Gordhan may turn his attention to the top individual earners in today’s budget. Paine points out that there are just 102 050 taxpayers earning more than R1m a year. Their contribution to the fiscus is R71bn. The middle range income earner – who earns about R260 000 to R1m contributes the bulk of the individual taxes – R129bn. There are 1.57 million of them.
The 2.7 million earning between R160 000 to R260 000 pay R75bn while 1.79 million taxpayers earning less than R160 000 pay R11bn.
Kamp pointed out that the state was dis-saving, it would fall to the rest – such as the private sector, corporates and individuals to save. But Paine pointed out that there was not much leeway for saving in household budgets.
Of the survivalists earning about R1 654 a household after tax, they could save about R5 a month. Of the 67 000 who earned the biggest incomes – an average of nearly R70 000 a month after tax – they only had room for savings of about R3 400 a month.
Farming
The Department of Labour hasn’t got a great reputation for efficiency. Indeed, along with the Department of Agriculture, it has a reputation for being borderline dysfunctional.
So what is going to happen tomorrow and Friday when it receives all the applications for exemptions from the obligation to pay the higher minimum wages that are expected to be filed by farmers. There is of course a chance that the farmers won’t be applying in large volumes but this doesn’t seem likely given their vociferous claims that they cannot afford a hike to R105 a day.
According to the Department of Labour, “some farming organisations” are in the process of filing boxes of applications for their members. There’s no indication of how large the boxes are or whether they will hold tens, hundreds or thousands of applications. But, given its history, it is likely that anything more than a few hundred will see the Department of Labour’s administrative capacity grind to a halt. And while it struggles to process the applications, the applicant is not required to implement the increase.
The resulting uncertainty will put considerable pressure on farmworkers, many of whom will only have learnt recently of the pay hike that is coming their way. That they even heard about the pay hike was more likely due to the activities of some or other community group rather than any action by the department. This uncertainty is likely to lead to increased tensions between workers and their bosses.
On the upside is the possibility that at some stage in the future the government will have a reasonably good indication of just how wealthy – or not – the farming community is. If accurately processed, the information generated by the exemptions should provide useful insights into an extremely important sector of the economy.
Distell
Expansion into African markets is paying off for wine and spirits conglomerate Distell at a time when belts are being tightened in most of Europe.
So is its increased production of cider and ready-to-drink brands whose popularity is increasing, particularly at a time when high excise duties in South Africa and some other countries are pushing up the price of wine and spirits.
According to group financial director Merwe Botha, demand for these cheaper drinks is increasing across all regions and resulted in a rise of 9.9 percent in domestic revenue in the six months to December on sales that were 6.7 percent higher, and helped to lift revenue by 9.3 percent to R8.7 billion. As a result, the interim dividend is R1.52, a rise of 6.3 percent, compared with last year. Although operating costs rose by 10 percent, operating profits increased by 5.3 percent.
Botha said the company had invested heavily in building up its markets in sub-Saharan Africa including Angola, Ghana, Kenya and Nigeria, where demand remained high. The region had contributed 64.4 percent to export revenues.
Distell, like wine producers in Australia and Europe, is eyeing the huge potential of China as a market and acquired 60 percent of a Chinese distribution company, CJ Wines and Spirits, in September last year.
Stressing that it was a keenly competitive market, Botha said that French brandy was particularly popular in south China and there was scope for the Bisquit brand, which Distell bought several years ago and produces in a castle in the Cognac district, to do well there.
Despite the difficult conditions in most of Europe, Distell’s Nederburg wine portfolio had outperformed the rest of the South African bottled wine category in export markets, increasing its total share by volume to 27 percent. Its Amarula liqueur was ranked in a global survey as one of the most frequently ordered drinks.
Edited by Peter DeIonno. With contributions from Donwald Pressly, Ann Crotty and Audrey D’Angelo.