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South African State Finances
Presented by:Dawie Roodt15 July 2006
Dawie RoodtChairman and
Chief EconomistEfficient Group81 Dely Road
Hazelwood0081
Tel: (012) 460-9580Cell: 082 456 0204
Email: [email protected]
Some Fiscal Background…
Economic Overview
2006 Efficient Budget
Prime (full year) 12.0%
M3 (end of year) 22.3%
PSCE (adj. end of year) 19.1%
CPIX (average) 4.4% 4.5%
Current Account: GDP - 5.1% -4.3%
R/$ (end of year) 7.10 6.27
GDP (full year) 4.1% 4.9%
State Finances
Revenue/Expenditure:GDP
20
21
22
23
24
25
26
27
28
29
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
State Finances
Deficit:GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
State Finances
Government Debt:GDP
25
30
35
40
45
50
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Debt trapRecovery
Normal Normal
Political Overview
President Challenges:
» Poverty» Underdevelopment» Marginalization – emphasis on authorities
Political Overview
ASGISA Sectors identified:
- Business Process Outsourcing- Tourism- Chemicals- Bio-fuels- Metals and metallurgy- Wood, pulp and paper- Agriculture- Creative industries- Clothing and textiles
Particular attention: - Scarce skills- Supply side drivers- Authorities
2005/06 in Review…
Revenue Sources (1994)
39%
13% 26%
5%
8%
9%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Revenue Sources (Est.)
32%
21%28%
4%
5%
10%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Contribution to Fiscus
Expenditure: Functional Classification (1994)
7%
17%
14%
17%2%
21%
8%
4%
10%
43%
Central Gov
Justice and Prot.
Eco. & Infra.
State Debt Cost
Other
Education
Social Dev.
Other Social Serv.
Health
Expenditure: Functional Classification (Est.)
6%
16%
13%
12%1%
19%
17%
5%
11%
52%
Central Gov
Justice and Prot.
Eco. & Infra.
State Debt Cost
Other
Education
Social Dev.
Other Social Serv.
Health
Spending Priorities
Expansion vs. Contraction
Deficit:– Changes in deficit – Contr.– Level – Contr.
Debt– Changes in Debt – Contr.– Level – Contr.
Mix of expenditure and revenue – Very Exp.
Effective Tax Rates
Effective Tax
0
5
10
15
20
25
30
35
40
0 250 500 750 1,000 1,250 1,500 1,750 2,000
'000
%
Individuals Small Companies Large Companies
STC
Minor Revenue Sources, R bn
Tax on retirement 2.4
STC 13.9
Transfer Duties 6.2
Other Property Taxes 2.6
Other Taxes on Goods 0.9
Other Taxes on Int. Transactions 0.4
Stamp Duties 1.0
Non-Tax Revenue 8.6
Other (Nine small fry) 7.5
Total 43.5
RedistributionRand In : Rand Out Ratio 2005/06
32 222 18.40
74 000 3.54
115 000 1.45
155 000 0.73
195 000 0.49
270 000 0.29
1 000 000 0.05
Fiscal Redistribution 2005/06
Redistribution Graph (% Income)
0
20
40
60
80
100
120
140
1000 R32 222 R74 000 R115 000 R155 000 R195 000 R270 000 R1 000 000
%%
0
20
40
60
80
100
120
140
Expenditure: Functional Classification (Est.)
6%
16%
14%
11%1%
18%
16%
7%
11%
51%
Central Gov
Justice and Prot.
Eco. & Infra.
State Debt Cost
Other
Education
Social Dev.
Other Social Serv.
Health
Spending Priorities 2006/07
Should be stopped!
Expenditure Items: The Good , the Bad, and the Dangerous
Good Bad DangerousWorld Cup – R3bnPolice – R5.4bn Municipal infra. – R9.3bnMunicipal Grant –RSC – R24bnNational road/rail – R3.5bnGautrain –R7.1bn
Social sector employment program – R4bnRAF – extra R2.7bn
Denel R2bnChild support grants & Disability grants-Too many dependants
Capital Expenditure
General Government (Dis-) Saving
-30
-25
-20
-15
-10
-5
0
5
10
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
R bn
