SOCIAL GRANT INCREASES:

2015/16
2016/17
STATE OLD AGE GRANT
R1 415
R1 505
STATE OLD AGED GRANT, OVER 75s
R1 435
R1 525
WAR VETERANS GRANT
R1 435
R1 525
DISABILITY GRANT
R1 415
R1 505
FOSTER CARE GRANT
R860
R890
CARE DEPENDENCY GRANT
R1 415
R1 505
CHILD SUPPORT GRANT
R300
R350

REVENUE AND EXPENDITURE:

Following on from earlier commitments to fiscal consolidation, government
will, over the next three years, government lower the expenditure ceiling
to R1.46-trillion, bolster tax revenues, actively manage fiscal risks
emanating from state-owned companies and sharply restrict the growth of
compensation budgets.
As a result of these measures, the budget deficit is likely to close more
rapidly than previously announced to 3.2% in 2016/17, 2.8% in 2017/18,
and 2.4% in the following year, finance minister Pravin Gordhan
announced during his 2016 National Budget speech, in Parliament,
yesterday.
In 2016/17, for the first time since the 2009 recession, government will
achieve a consolidated primary surplus, in which revenue will exceed noninterest spending.

Net national debt is projected to stabilise at 46.2% of gross domestic

product (GDP) in 2017/18, and to decline after that, Gordhan told
policymakers.
To achieve its fiscal goals, government proposes to increase revenue
through tax policy measures that raise an additional R18.1 billion in
2016/17, and R15 billion in each of the subsequent two years.
This will lift overall revenue to R1.32 trillion in 2016/17, comprising 30.2%
of GDP.
The fiscal consolidation will see gross tax revenue increase by 1.5
percentage points of GDP and main budget non-interest expenditure,
excluding the Eskom appropriation, fall by 0.5 percentage points of GDP
between 2015/16 and 2018/19.
Treasury plans to further lower the expenditure ceiling by R10 billion in
2017/18 and R15 billion in 2018/19 by reducing compensation budgets,
complemented by measures to restrict hiring.
Further belt-tightening will emerge in the form of reduced transfers for the
operating budgets of public entities, capital budgeting reforms to align
plans with budget allocations, and a new national travel, accommodation
and conference cost policy for government.
Stringent cost-containment measureswill also include the mandatory
use of the e-tender portal, thereby enforcing procurement transparency
and accessible reference prices for a wide range of goods and services,
said the minister.
New government guidelines would also limit the value of vehicle
purchases for political office-bearers.

Treasury has also committed to reprioritising R31.8 billion over the next
three years to meet new spending needs, such as higher education,
drought relief and contributions to the New Development bank
Head: Govt to halt new hires, review big SOC contracts
As part of a money-saving drive aimed at narrowing the countrys
increasing budget deficit, National Treasury has announced a freeze on
appointments to administrative and managerial positions in government
from April.
[New appointments] will be blocked on governments payroll system
starting in April. The National Treasury, working with provincial treasuries
and the Department of Public Service and Administration, will consider
authorising appointments only after departments have submitted clear
human resource plans aligned with reduced compensation budgets and
greater efficiency, read the 2016 National Budget, released yesterday.
Treasury further outlined that these plans would trim the employment of
non-critical personnel, eliminate supernumerary positions and
establish a sustainable level of authorised, funded posts that would be
closely monitored in the years ahead.
Teachers, nurses, doctors, police officers and other posts deemed critical
would be excluded from the lock.
Treasury, meanwhile, announced yesterday that it was currently reviewing
all contracts across government valued at over R10 million to ensure
value for money, reduce wastage and identify irregular procurement.
The primary focus of this review is on all state-owned companies (SOCs)
such as Prasa, Eskom, Transnet, SABC and SAA, it said in a statement.

Gordhan further pointed to the planned renegotiation of government

leasing contracts and the introduction of new centrally-negotiated
contract system for banking services, information communication
technology infrastructure and services, health technology, school
construction and learner support materials.
Government aimed to cap its overall expenditure ceiling to R1.4-trillion in
2016/17.
Head: Gordhan alludes to privatisation of Socs
Noting challenges in the governance, mandates, financing and operations
of state-owned companies (Socs), finance minister Pravin Gordhan has
committed to rehauling the structure of government entities that remain a
drain on the fiscus, suggesting that some state entities would fare better
in private hands.
With an asset base of over R1 trillion - equivalent to about 27% of GDP the minister noted that the mandate of some Socs overlapped, while
others operated in markets that required more competitive transparency.
Some were also no longer relevant to the countrys development
agenda.
As President Zuma has indicated, entities that are no longer necessary
should
be phased out. The resources raised or saved will be redirected to the
balance
sheets of SOCs that should grow.
Secondly, where entities have overlapping mandates, rationalisation
options will be
pursuedthere are also assets with potential for growth in independent

hands, he told Parliament during his 2016 National Budget speech

yesterday.
He added that it had become clear that government did not need to be
invested in four airline businesses, and would thus explore the possible
merger of SAA
and SA Express under a strengthened board, with a view to engaging with
a
potential minority equity partner.
He added that the government would accelerate co-funding partnerships
with private sector investors the bolster the balance sheets of several
entities with extensive infrastructure investment responsibilities, which
were are now stretched to their limits.
Transfers to public entities constituted 9.9% of government expenditure,
or R123.4 billion, in 2015/16 and are expected to increase to R155.3
billion in 2018/19.
PORTFOLIO BREAKDOWNS:
Economic affairs:
Increasing its share of the budget pie, economic affairs will receive
R211.96 billion in 2016/17, boosting allocations to industrial development
and trade; employment, labour affairs and social security funds; economic
infrastructure and economic regulation; and science, technology,
innovation and the environment.
Activities funded through the economic affairs function support the
national development plan (NDP) objectives of growing the economy and
employment, and shifting to a low-carbon economy.

Over the medium-term, spending will focus on infrastructure

development, job creation and industrial development.
R10.2 billion has been allocated over the medium-term to manufacturing
development incentives and R3.4 billion to the special economic zones
programme, largely for bulk infrastructure.
Spending on water resources and bulk infrastructure is expected to
increase to R36.4 billion over the medium-term, at an average annual rate
of 16.1%.
Communication:
Communication has been allocated R1.3 trillion in 2016/17, with R480
million allocated over the medium term to subsidise set-top boxes for 766
242 poor households.
A total of R1.6 billion will be spent over the medium term to extend
broadband access to 3 158 government institutions and 4 408 schools
over the medium term.
Municipal elections: No information available possibly in 2015/16
budget?
Agriculture, Rural development and land reform:
Drawing from the mandate of the NDP, which recognises the importance
of building an inclusive, rural economy to contribute to growing the
economy and employment, spending on agriculture, rural development
and land reform will increase to R26.4 billion in 2016/17 and R29.1 billion
in 2018/19 - an average annual rate of 4.9%.
This accounts for 2% of total government spending over the MTEF period.

About 31% of the department of rural development and land reforms

budget, or R10 billion, is allocated for settling land restitution claims,
which are set to increase over the next three years.
Meanwhile, agriculture has been allocated R1.5 billion in the coming fiscal
year, with an additional R3.6 billion channelled towards farmer support
and development.
R2.8 billion is allocated over the medium-term to Fetsa Tlala, a food
security initiative.
Executive and legislative organs:
Executive and legislative organs have been allocated R13.4 billion in
2016/17, with an additional R300 million allocated to the Department of
Planning, Monitoring and Evaluation receives over the medium term.
The funds will be used to add 118 posts to strengthen the capacity to fill
current and new mandates for planning and monitoring.
State-owned companies:
Over the MTEF period, state-owned companies project capital expenditure
of R311.7 billion, with Eskom, Transnet and Sanral accounting for 94% of
this amount.
Capital investment grew the asset base of state-owned companies from
R639.7 billion in 2010/11 to R1.04 trillion at the end of 2014/15.
OTHER ANNOUNCEMENTS (POSSIBLE INFO BOXES?):
Unemployment Insurance Fund (UIF):

As a result of an imbalance between contributions, the Unemployment

Insurance Fund (UIF) has accumulated a significant reserve, leaving it
with a positive balance sheet of R123.1 billion at the end of 2015/16.
Over the medium-term the fund expects to pay R35.6 billion in benefits,
while the draft Unemployment Insurance Bill proposes to improve
maternity, illness and death benefits for eligible contributors.
The fund will also use its investment portfolio to support job creation,
allocating about R1.6 billion to support the training of 15 000 in artisan
and related skills.
Sanral:
The South African National Roads Agency (Sanral) has been allocated
R27.4 billion over the medium term to strengthen and improve the
national
non-toll road network.
At present, over 75% of this network is beyond its 25-year design life and
is in need of refurbishment.
The upgrade of the R573 Moloto Road has been allocated R3.7 billion over
the MTEF period, and work to address immediate safety concerns, such as
potholes, has begun.
Upgrades over the MTEF period include improving lane configuration and
introducing centre barriers to reduce the risk of head-on collisions.
Nuclear deal:
The budget has reprioritised funds to appoint a transactional advisor to
assist the department of energy with the call for proposals for the nuclear
build programme. An amount of R200 million has been set aside to
support preparatory work for nuclear procurement.

The New Development Bank:

The New Development Bank is a multilateral lending institution operated
by the Brics (Brazil, Russia, India, China and South Africa) states.
Launched last year to promote greater financial and development
cooperation among developing nations, each of the five founding
members makes a capital contribution of
$2 billion, which forms their initial subscription.
South Africas contributions have been scheduled over seven years. The
first instalment of $150 million was paid in December, with funds raised
through the special appropriation bill from the sale of governments stake
in telecommunications group Vodacom.
The second instalment of $250 million will be paid in 2016/17, followed by
a third tranche of $300 million the following year.
Reduction in number of municipalities:
In the most significant boundary change since 2000 and with the goal
of making affected municipalities more sustainable, the number of
municipalities will this year be reduced from 278 to 257 and their
boundaries redrawn.
A total of R409.3 million has been allocated to the municipal
demarcation transition grant in 2016/17 and 2017/18 to fund the costs
of these changes in affected municipalities.
The mergers are expected to reduce administration costs and free
resources for service delivery. Boundary changes will come into effect
on the date of the 2016 local government elections.

The map below highlights in red the new municipalities that will be
created through the merger of existing municipalities.

Presidents salary:
The Presidential salary is set to increase from R3.1 million a year in
2015/16 to R3.3 million in 2016/17, R3.4 million in 2017/18 and R3.6
million in 2018/19, representing an annual average growth rate of 5.4%,
the 2016 National Budget has revealed.
Plastic Bag Levy:
Governments plastic bag levy, which has been in place for ten years and
which aims to counter the dispersion of plastic bags, has been increased
from 6c to 8c a bag, effective April 1. This is the first increase since 2013.
Sugar Tax:

Government has proposed the introduction of a sugar tax from April 1,

2017, to reduce what it describes as excessive intake of sugar by South
Africans.
It noted in 2016 National Budget papers that the issue of obesity in South
Africa has grown over the last 30 years, leading to the worst obesity
ranking in sub-Saharan Africa.
Fiscal interventions, such as taxes, are increasingly recognised as
complementary tools to help tackle this epidemic, with countries such as
Denmark, Finland, France, Hungary, Ireland, Mexico and Norway having
levied taxes on sugar-sweetened beverages.
Carbon Tax:
The long-debated carbon tax remains in its draft stages and will not be
levied in 2016/17, the 2016 National Budget has revealed.
The draft Carbon Tax Bill was published in November 2015, with 90
comments received to date. The draft bill will be revised, taking into
account public comments and further consultation, it read.
The main aim of the carbon tax is to put a price on the environmental
and economic damages caused by excessive emissions of greenhouse
gases. A secondary aim is to change the behaviour of firms and
consumers, encouraging them to use cleaner technology.
Given the economic outlook, the carbon tax has been designed to
ensure that its overall impact will be revenue-neutral up to 2020.
DOMESTIC ECONOMIC OUTLOOK:
Head: Average South African becoming poorer, says govt
A fall in the growth of the countrys GDP behind the rate of population

growth has narrowed per capita income and hobbled the buying power
of the ordinary South African.
In other words, the average South African is becoming poorer, the
2016 National Budget read.
Lower rates of economic growth reduce government revenue,
undermining the states ability to sustain spending on core social and
economic programmes.
While global factors play a strong role, Treasury outlined that growth in
South Africa continues to diverge from the world average.
Governments projected GDP growth has been revised down to 0.9%
for 2016, as low commodity prices, heightened financial market
volatility, and diminished consumer and business confidence weigh on
the countrys economic outlook.
Moreover, the most severe drought in 20 years has resulted in
declining agricultural output and food price inflation, raising the
prospect of increased hunger and poverty across Southern Africa.
Constrained electricity supply also continues to limit growth and deter
fixed investment, said Treasury.
It added that deterioration in the credit-rating outlook towards the end
of 2015 was followed by changes in the finance portfolio, catching
investors off-guard and raising questions around fiscal probity.
Treasury expects South Africas GDP growth rate to gradually recover
over the medium-term, as electricity availability improves and
confidence returns.

It cautions however that, without action to restore confidence in fiscal

sustainability, the recovery risks being cut short by a vicious cycle of
lower growth, declining incomes, rising inflation, capital outflows,
further currency depreciation, rising interest rates, and falling
investment and consumption.
The 2016 Budget proposals are designed to avoid such an outcome.
Some of these measures will entail short-term economic discomfort,
but the alternatives are far worse, it held.
INFRASTRUCTURE PROJECTS:
Head: R130bn worth of infrastructure projects underway, says
Gordhan
Around 90 integrated land development projects valued at more than
R130 billion are currently underway around the country, finance
minister Pravin Gordhan has revealed.
Among the most significant of these public-private partnerships, the
Corridors of Freedom project, in Johannesburg, which connects
Soweto, Alexandra, Sandton and the Johannesburg central business
district, remains under development, and will usher in improvements
to public transport and social amenities, while adjusting settlement
densities.
In eThekwini, the Cornubia node comprises 25 000 housing units, while
an inner-city regeneration programme is also underway, including
projects at Bridge City, Centrum, the Point and the interconnecting
corridor, the minister told Parliament yesterday.
In the Tembisa corridor, in Ekurhuleni, R6.5 billion in public investment
is expected to leverage R8 billion in private sector investment to
deliver housing, commercial and office facilities.

To the south, the N2 Gateway housing programme, in Cape Town, is

continuing alongside the redevelopment of the Voortrekker Road
Corridor, Conradie Hospital,
the Athlone Power Station and other sites.
In Tshwane, investments are focused on the Mabopane Station Hub,
which
is considered the gateway to the north for more than 150 000
passengers a day and has an informal market accommodating some 2
500 traders.
In Bloemfontein, the R2.6 billion mixed-use Airport Development Node
remains under construction, while an inner-city residential
development is planned.
The citys Vista Park and Brandkop projects are expected to yield over
8 500 housing units at a total development cost of over R1.9 billion, he
noted during his 2016 National Budget speech.
ENDS.