Protection built into budget for good reason
The task of government to “see through the challenges of economic vulnerability” is reflected in the significant protection built into Finance Minister Trevor Manuel's budget speech proposals, announced on 11 February 2009.
“Manuel’s proposals clearly set out to meet “the enduring guiding principles”, among which are to protect the poor, sustain employment growth, build economic capacity and maintain a sustainable debt level,” says Johan Pyper (pictured), the Plexus Group’s head of research. “He has also taken into account the global recession, and structured the budget to assist South Africans through the difficult times with the least amount of pain.”
The poor have been granted the greatest personal income tax cuts and stand to benefit through additional assistance in the form of social grants, schooling, job creation and other interventions. Those over 65 qualify for higher grants and enjoy increased tax-free interest income.
“To sustain employment growth, additional benefits focus on assisting small companies and entrepreneurs,” says Pyper. “To encourage job creation, various stimuli are in place for companies that make use of labour.”
“The fact that company tax has not been reduced means there is no new incentive for foreign companies to invest in South Africa,” says Pyper. “In keeping company tax unchanged, Manuel has reduced the potential for direct competition to local companies.”
“For the first time in years Manuel has not reduced exchange control limits, in spite of expectations in the 2008 budget to abolish exchange control completely,” says Pyper. “Manuel wants capital to stay and work in South Africa for the benefit of all. He has taken notice of the trade deficit and, by maintaining the status quo, aims to protect the South African trade balance.”
“We believe Manuel’s budget is likely to provide economic stability and sustainable economic growth,” says Pyper. “This is highly desirable in a country like ours that is not immune to disruptions in the world economy.”
