All in this together

2008-02-21 00:00

SINCE Finance Minister Trevor Manuel addressed Parliament last October at the time of the medium term budget review, the global economy has been buffeted by the sub-prime mortage crisis in the United States, rising oil prices and lowered growth prospects. In South Africa since then the Eskom meltdown has dented international confidence while consumers have been hard hit by both higher interest rates and higher inflation.

In his Budget speech yesterday, the minister spent some time in pointing out that the underlying principle throughout the history of Eskom has been that electricity users should bear the costs of its supply, with capital financed through retained earnings and debt on market-related terms. However, the power utility has an urgent and major investment programme to finance and the government is accordingly prepared to put up R60 billion to support its stressed budget. Manuel was at pains, however, to point out that this was not a grant.

People who have invested, or will invest, in generators, however, will be disappointed that there was no tax relief offered on such expenditure, although money was set aside to support programmes aimed at encouraging the more efficient use of electricity and generation from renewable sources. On the opposite side of the coin, Manuel announced a new levy of two cents a kilowatt-hour on electricity generated from non-renewable sources, but estimated that households and businesses that reduced their consumption by 10% or more would not be affected by it.

Once again the minister has moved the tax bands upwards to eliminate the inflation-driven effects of fiscal drag on personal income tax and has offered a small incentive towards savings by stipulating slightly larger tax exemptions on interest. He has also made life easier for small businesses with measures which will significantly reduce the amount of red tape involved in paying VAT.

Similarly welcome are social grant increases. Old age pensions rise to R940 per month in April and child support grants to R220 per month. These will also be extended to a child’s 15th birthday. The qualifying age for the pension for men will be reduced progressively from 65 to 60 (as for women now) by 2010.

Further allocations to the police and judicial system and to education are, likewise, welcome. Not so, however, an increased tax of 11 cents per litre on petrol and diesel in April. Given the already high costs of fuel, over which the government has no control, it seems to be adding insult to injury for it to choose to impose an additional tax upon so essential a commodity.

There are the usual increases in the so-called “sin taxes” — excise duties on tobacco and alcohol — but at least one can attempt to avoid them by not smoking or drinking in a way that one cannot avoid the use of fuel.

As Manuel observed, economic trends do not stop at border posts and carry no passports, yet they have the potential to wreak havoc. His mantra that, as South Africans, “we are all in this together” and, consequently, all need to pull together, can hardly be faulted. He himself has done his bit to point the direction in which we should be heading.

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