presented by: dawie roodt 27 february 2007
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Fiscal Efficiency and the Budget. Presented by: Dawie Roodt 27 February 2007. Dawie Roodt. Chairman and Chief Economist Efficient Group 81 Dely Road Hazelwood 0081 Tel: (012) 460-9580 Cell: 082 456 0204 Email: [email protected]. Through the Eyes of the World. Source: The Economist - PowerPoint PPT PresentationTRANSCRIPT
Presented by: Dawie Roodt27 February 2007
Fiscal Efficiency and the Budget
Chairman and Chief EconomistEfficient Group81 Dely Road
Hazelwood0081
Tel: (012) 460-9580Cell: 082 456 0204
Email: [email protected]
Dawie Roodt
Through the Eyes of the World
Source: The Economist
January 20-26, 2007
Full page advertisements
The Oppositionp. 15
The Home Teamp. 17
Missing Something?
Macedonia South Africa
Taxes Efficiency Competitive labour Access to markets Stability Infrastructure Property rights -
But why say it?
2007:Economic Overview
2006 2007
M3 (end of year) 21.9% 14.1%
PSCE (adj. end of year) 27.6% 17.1%
CPIX (average) 4.6% 4.8%
Prime (full year) 12.5% 12.5%
Current Account: GDP -6.4% -4.9%
R/$ (end of year) 7.04 7.03
GDP (full year) 5.0% 5.0%
Economic Overview
Background
Individual & Corporate Credit Demand
5
10
15
20
25
30
35
Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07
%
Individual Non - Individuals
Consumption Expenditure by Households
Consumption Expenditure by Households to GDP
50
52
54
56
58
60
62
64
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
% GDP
Inflation
CPI & CPIX
0
3
6
9
12
15
18
21
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
Interest Rate
Prime Interest Rate
8
10
12
14
16
18
20
22
24
26
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
%
GDP at Market Prices
GDP market prices, q:q seasonal
-1
0
1
2
3
4
5
6
7
8
1994 1996 1998 2000 2002 2004 2006
%
Fiscal Overview
Background
Revenue & Expenditure:GDP
20
21
22
23
24
25
26
27
28
29
30
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Trevor’s reign!
Gold
Background
Deficit:GDP
-8
-7
-6
-5
-4
-3
-2
-1
0
1
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Background
State Debt:GDP
25
30
35
40
45
50
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
%
Good/Stable
Debt Trap Recovery
FISCAL 2006/07…
Revenue
Revenue Sources (1994)
39%
13% 26%
5%
8%
9%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Revenue Sources (Est. 2006/07)
29%
25%28%
4%
4%
10%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Contribution to Fiscus
2006/07 in Review:Revenue
R bn Budget ’06 Budget ‘07 Expected Diff. (%)
Income Tax 245.8 274.3 274.1 28.3 (11.5%)
Individual 132.5 139.0 140.0 7.5 (5.7%)
Company 95.2 114.7 115.0 19.8 (20.8%)
STC 13.9 15.7* 16.0 2.1 (15.1%)
Other 4.3 4.9* 3.1 -1.2 (-27.9%)
VAT 131.2 134.6 133.6 2.4 (1.8%)
Excise Duty 16.6 16.1 16.9 0.3 (1.8%)
Fuel Levy 21.8 21.8 21.2 -0.6 (-2.8%)
Other 49.1 49.6 52.6 3.5 (7.1%)
Total 446.4 475.8 479.5 33.1 (7.4%)
* Estimated
Quick Tax Burden Calculation
Trevor Manuel appointed as Minister of Finance in April 1996 1996: Revenue (22.5% GDP) 2005: GDP (fiscal): R1,417bn 22.5% of GDP = Revenue (2005): R319bn Actual Revenue: R348bn Difference: R29bn
‘…(w)e have announced over R72bn in tax cuts since 1994…’ - 2004 Budget Speech
Where are the tax cuts?
Quick Calculation
Tax YearRevenue exceeding
22.5%:GDP
(Rbn)
PIT Relieve according to Budget (Rbn)
Total Tax Relieve according to
Budget
(Rbn)
1997 3.5 2.8
1998 5.9 3.7
1999 13.6 3.0
2000 9.8 9.9
2001 1.5 8.3
2002 12.5 15.0
2003 9.9 13.0
2004 12.1 4.0 72.0 (Budget speech)
2005 29.0 6.8
2006 55.6 12.1 (2007: 8.4) 19.1 (One year)
Total 153.4 78.6
Revenue Categories
Personal Income Tax Strong wage increases
Company Tax Commodity cycle Strong demand
VAT Strong demand Credit extension
Total Overrun Mostly company tax
Expenditure
Spending Priorities
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.)
7%
16%
13%
12%1%
18%
17%
5%
11%
50%
Central Gov
Justice and Prot.
Eco. & Infra.
State Debt Cost
Other
Education
Social Dev.
Other Social Serv.
Health
2006/07 in Review:Expenditure
R bn Budget ’06 Budget ’07 Expected Diff. (%)
Voted Amounts 263.1* 260.8 262.5 -0.6 (-0.2%)
Central Gov. 34.9 34.9 32.7 -2.2 (-6.3%)
Fin. & Admin. 18.1 21.4 21.2 3.1 (17.1%)
Social Services 90.6 91.2 92.6 2.0 (2.2%)
Justice & Protect. 73.4 71.6 71.7 -1.7 (-2.3%)
Eco. & Infrastruc. 43.1 41.9 44.4 1.3 (3.0%)
State Debt Cost 52.0 52.2 50.5 -1.5 (-2.9%)
Transfer Provinces 150.8 150.8 150.8 0.0 (0.0%)
Other 6.8 6.8 7.0 0.2 (2.9%)
Total 472.7 470.6 470.5 -2.2 (-0.5%)
* Includes: Contingency Reserve (R3.1bn)
Funding
2006/07: Funding
R bn Budget ’06 Budget ’07 Expected Diff.
Extraordinary 1.7 3.3 -0.2 -1.9
TB’s 5.8 5.8 3.5 -2.3
Bonds 8.7 1.4 4.0 -4.7
Foreign Loans 2.4 0.7 3.3 -0.9
Use of balances 7.8 -12.3 -19.2 27.0
Total Funding 26.4 -1.1 -8.6 -35.0
2006/07: Summary
Strong Revenue Continues increase in Expenditure Lower Deficit or surplus Lower Debt Support Consumption Expenditure
Summary 2006/07
R bn Budget ’06 Budget ’07 Expected Difference
Revenue 446.4 475.8 479.5 33.1
Expenditure 472.7 470.6 470.5 -2.2
Deficit/Surplus -26.4 5.2 9.0 35.4
% of GDP -1.5% 0.3% 0.5%
Redistribution
Rand In : Rand Out Ratio 2006/07
32 222 16.96
74 000 3.45
115 000 1.45
155 000 0.73
195 000 0.49
270 000 0.29
1 000 000 0.05
Expansion vs. Contraction
Deficit: Changes in deficit – Contr. Level – Contr.
Debt Changes in Debt – Contr. Level – Contr.
Mix of expenditure and revenue – Very Exp.
2007 Budget Highlights:
Finance: 2006/07 fiscal year to report first surplus in SA’s history 2007/08 surplus budgeted for is 0.6% of GDP Individuals: Pit brackets adjustment Primary rebate up to R7740 Donation tax annual exemption to R100k Donation to PBO’s to 10% Estate Duty exemption up to R3.5m Interest on dividends to R18k (R26 for 65+)
2007 Budget Highlights
Companies: Dividend Tax (from 1 October):
STC reduced to 10% STC to be replace by dividend tax
Threshold for FDI outside Africa lowered to 25%
Other: Retirement fund tax scrap RAF and Fuel levies up by 5c each Wage subsidy and social security tax reform Commercial buildings write-off over 20 years
Fiscal Efficiency:An Expenditure Comparison
Close-up on South Africa
Category 2004 2006
Total population (000) 46.6mil 47.4mil
Annual population growth rate (%) 1.1% -0.4% ?
Population 0-14 years(%) 33% 32%
Rural population (%) 41
Total fertility rate (births per woman) 2.8 2.7
Infant mortality rate (1,000) 53 60
Life expectancy at birth (years) 46 42
HIV rate (%) in adults (15-49 years) 15.6 20.0%
Poverty (% of pop. on less than $2 a day) 34
GDP per capita (PPP) US$ 11 192 12 760
GDP growth rate (%) 4.5% 5.0%
Children of primary school-age who are out-of-school (%) 7
Source: Unesco and World Bank Development Indicators
Where does the money go?
Main Budget Expenditure:
Functional, National by Vote
Rand (Rbn)
2006/07
Percentage (%)
Central Government Admin 35.4 7.5%
Financial and Admin Services 18.8 4.0%
Social Services 91.9 19.4%
Justice and Protection Services 72.8 15.4%
Economic Services and Infrastructure 47.3 10.0%
State Debt Costs 52.6 11.1%
Provincial Equitable Share 150.8 31.8%
Other 9.7 2.0%
Main Budget Expenditure 474.2 100.0%
Social Services Expenditure
Social Services Expenditure
Budget 2006/07 Budget 2007/08
Functional allocation R260.9bn R296.6bn
% of Total Expenditure 59.2% 59.0%
% of GDP 14.6% 15.4%
Expected Overrun R2.5bn
Social Services Expenditure as % of Total Expenditure
Social Services Expenditure
40
44
48
52
56
60
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% Expenditure
Source: Various Budgets and own calculation
Human Poverty Index (HPI): Developing Countries (HPI-1),2004
Human Poverty Index, Developing Countries (High value = High Poverty)
0
10
20
30
40
50
60
70
0 20 40 60 80 100Countries
Value
South Africa
Cuba
Mali
Average: 30
Median: 27
Source: Human Development Report, 2006 (undp.org)
South Africa(1998)
South Africans (0-14) with One or Both Parents Dead
South Africans (0-14) Orphaned by One or Both Parents
12
13
14
15
16
17
1995 1996 1997 1998 2001 2002 2003 2004 2005
% Pop
Source: StatsSA: Trends in the percentage of children who are orphaned in South Africa: 1995–2005
Grants
2001/02 to 2005/06 fiscal years: Foster care grants increase from R364m to R2,044m (5.6 times) All social grants increase 2.5 times
April 2001 to April 2005: Recipients of foster care grants from 86k to 256k (3 times)
(Source: SA, Department of Treasury) 2009/10: Foster care grant recipients to 472k
(Source: SA, Department of Social Development)
Summary
Average (developing) level of poverty Appear to deteriorate Assist almost 30% of population! 11m receive some form of social assistance (2006)
7m children (child support grant) 2m old age pension
Increasing number of orphans Aggravated by health problem (HIV/Tuberculosis) Contributes to lawlessness
Increasing dependency on state
Edducayshion
Bas(e)ing the Outcome…
Budget 2006/07 Budget 2007/08
Functional allocation R92.0bn R104.7bn
% of Total Expenditure 19.5% 20.8%
% of GDP 5.2% 5.4%
Expected Overrun R1.5bn
2007 Budget: R8.1bn more for additional teachers
Education Spending as % GDP
Education : GDP
4
5
6
7
8
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% GDP
Source: Various Budgets
Pass Rate of SCE and Education Spending
Pass Rate and Education Spending
40
45
50
55
60
65
70
75
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
%
5
6
7
8
% GDP
Pass Rates Education Spending
Source: HSRC
Learners and Educators in Ordinary Schools
Learners and Educators
11.6
11.8
12.0
12.2
12.4
2001 2002 2003 2004 2005
Number (mil)
350
360
370
380
390Number ('000)
Learners Educators
Source: 2001-2005 SNAP Survey (www.education.gov.za)
Number of Schools and Educators in Ordinary Schools
Number of Schools and Educators
26.0
26.5
27.0
27.5
28.0
2001 2002 2003 2004 2005
Number ('000)
350
360
370
380
390
Number('000)
Schools Educators
Source: 2001-2005 SNAP Survey (www.education.gov.za)
Pass Rate of SCE and Matriculation Exemption
Pass Rate vs Matric Exemption
8.0 8.26.2 6.4 6.4
8.19.3
11.713.9 12.9 11.6
16.6
0
20
40
60
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
%
Pass Rates Matriculation Exemption
Source: HSRC
53.4 54.4
47.4 49.3 48.9
61.7
68.9 70.773.368.3
57.9
66.7
Learners Presenting For Standard and Higher Grade Exams
Subject Year SG HG HG as % Tot
Accounting 2002 100199 41216 29.1
2003 106621 39548 27.1
2004 112948 43442 27.7
2005 120129 42727 26.2
Biology2002 200608 98468 32.9
2003 199432 86813 30.3
2004 204073 96081 32.0
2005 219838 111619 33.6
English (Second language)2002 22408 362534 94.2
2003 18535 355965 95.1
Source: HSRCSource: HSRC / Department of Education
Learners Presenting For Standard and Higher Grade Exams
Subject Year SG HG HG as % Tot
Mathematics2002 226295 35518 13.6
2003 223156 35994 13.9
2004 236155 39939 14.5
2005 259099 44053 14.5
Physical Science2002 103044 51047 33.1
2003 100166 52215 34.3
2004 105245 55969 34.7
2005 119491 62337 34.3
Source: HSRC / Department of Education
Case Study: Flow of Pupils from Grade 1 to Grade 12
Flow Through for 1991 Pupils
100.0 99.095.5
88.8 89.4
80.678.0
85.8
75.9
69.3
58.8
40.3
30
40
50
60
70
80
90
100
1991Gr1
1992Gr2
1993Gr3
1994Gr4
1995Gr5
1996Gr6
1997Gr7
1998Gr8
1999Gr9
2000Gr10
2001Gr11
2002Gr12
Source: HSRC Note: Repeaters and drop outs not indicated
1 207 066 learners
486 786 learners
Home Schooling?
1995 to 2006: 31.7%31.7
Flow in Secondary Schools
Flow of Pupils in Secondary Schools
500
600
700
800
900
1000
1100
2002 (Gr 7) 2003 (Gr 8) 2004 (Gr 9) 2005 (Gr 10) 2006 (Gr 12)
Number ('000)
Source: Dept Education
1.3%
- 6.4% 17.0%
Repeaters?
- 49.3%
Grade 1 and Grade 2 Pupils
Grade 1 and Grade 2 Pupils
900
950
1000
1050
1100
1150
1200
1250
1300
2002 2003 2004 2005
Number ('000)
Grade 1 Grade 2
Source: Department of Education
- 9.4%- 15.1%- 13.1%- 21.3%
Education expenditure comparison (2002-2004 as available)
Expenditure on education as % GDP
0
1
2
3
4
5
6
7
8
9
10
0 20 40 60 80 100 120
Countries
% G
DP
Source: Human Development Report, 2006 (undp.org)
South Africa (’06 & ’07)
Equatorial Guinea
Lesotho
Average: 4.7
Zimbabwe
Adult Literacy Rate (2005)
Adult Literacy Rate
10
20
30
40
50
60
70
80
90
100
0 20 40 60 80 100Countries
% o
f P
op
ula
tio
n
Source: Human Development Report, 2006 (undp.org)
South Africa: 82.2
Mali
Estonia
Average: 79.5
Median: 87.4
South Africa (1991): 82.1
Pupils-Teacher Ratio in Primary Education (Newest data available)
Pupils-Teacher Ratio
0
10
20
30
40
50
60
70
80
0 20 40 60 80 100 120 140 160
Countries
Ave
rag
e n
um
ber
of
pu
pils
Source: UNESCO
South Africa
Central African Republic
Libya
Average: 26.7
Median: 23.0
South Africa (2006)
Home Schooling
1999: Between 6 000-10 000 parents giving home schooling 2001: 15 000 parents Reason:
• “Quality of education in public schools is low”• “Implementation of outcome based education”• “Marks ‘adjusted’ for better results“
Research conclusions: Gr.4 pupils in home schooling perform better than above average pupils in public schools
Source: Tydskrif vir Geestenswetenskappe
Higher Output
Research outputs at Wits: 1998: 1 100 2005: 700
Source: Dept Education
Summary
Above average spending on education Below average teacher : pupil ratio Ordinary schools, change between 2001-2005:
Learners: 4.1% Educators: 7.9% Schools: -3.2%
Weaker higher grade enrollment Low critical subject enrollment Obvious efficiency problem but improving
Health
Healthy Spending…?
Budget 2006/07 Budget 2007/08
Functional allocation R53.5bn R60.3bn
% of Total Expenditure 12.1% 12.0%
% of GDP 3.0% 3.1%
Expected Overrun R0.1bn
2007 Budget: R7.2bn more for HIV-Aids, hospitals and salaries of health workers
Health Spending as % GDP
Health Spending from 1995
2
3
4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% GDP
Source: Various Budgets
Public Expenditure on Health Comparison (2003-04)
Public Health Expenditure as % GDP
0
1
2
3
4
5
6
7
8
9
0 20 40 60 80 100 120 140 160Countries
% GDP
Source: Human Development Report, 2006 (undp.org)
South Africa (‘04&’06)
Myanmar
Iceland
Average: 3.5
Median: 3.0
CubaMalawi
South Africa (’07)
Life Expectancy at Birth (years)Most Recent 2000-05
Life Expectancy at Birth
30
40
50
60
70
80
90
0 20 40 60 80 100 120 140 160Countries
Years
Source: Human Development Report, 2006 (undp.org)
South Africa
Swaziland
Japan
Average: 65.5
Cuba
Malawi
Median: 70.1
South Africa (2006 est.)
Public Health Expenditure (2003) vs. Life Expectancy at Birth (2000-05)
Health Spending vs Life Expectancy
0
4.5
9
30 60 90
Life Expectancy (years)
Hea
lth E
xpen
ditu
re (%
GD
P)
Malawi
South Africa ('07)Cuba
Singapore
Namibia
South Africa
Source: Human Development Report, 2006 (undp.org)
Physicians
Physicians 1990-2004
0
100
200
300
400
500
600
0 20 40 60 80 100 120 140 160 180
Countries
per 100,000
Source: Human Development Report, 2006 (undp.org)
South Africa
Malawi
Average: 147.0
Cuba
Median: 109.0
South Africa(2001)
Public Health Expenditure (2003) vs. Physicians 2004)
Health Spending vs Physicians
0
4.5
9
0 300 600
Number of Physicians, per 100,000
Hea
lth E
xpen
ditu
re (%
GD
P)
Malawi
Cuba
Saint Lucia
Canada
South Africa
South Africa (2001)
Source: Human Development Report, 2006 (undp.org)
Percentage of People ages 15-49 Infected with HIV, 2005
HIV Prevalence (% Ages 15-49)
0
5
10
15
20
25
30
35
0 20 40 60 80 100 120 140 160 180
Countries
%
Source: Human Development Report, 2006 (undp.org) from UNAIDS (Joint United Nations Programme on HIV/AIDS). 2006
South AfricaJapan
Swaziland
Average: 2.0
Zimbabwe
Number of HIV Positive and Cumulative HIV Deaths
Total HIV+ and Cumulative Aids Deaths
0
1
2
3
4
5
6
Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15
Mil
Total HIV+ Cumulative Aids Deaths
Projection
Currently 250 000 on antiretrovirals- Shortfall 800 000! ( Economist)
Source: Centre for Actuarial Research and South African Medical Research Council, 2004
Estimated HIV Prevalence Amongst Antenatal Clinic Attendees, by Age
Age group (years)
2000 prevalence
%
2001 prevalence
%
2002 prevalence
%
2003 prevalence
%
2004 prevalence
%
2005 prevalence
%
<20 16.1 15.4 14.8 15.8 16.1 15.9
20-24 29.1 28.4 29.1 30.3 30.8 30.6
25-29 30.6 31.4 34.5 35.4 38.5 39.5
30-34 23.3 25.6 29.5 30.9 34.4 36.4
35-39 15.8 19.3 19.8 23.4 24.5 28.0
40+ 11.0 9.8 17.2 15.8 17.5 19.8
Source: Avert international AIDS charity
Tuberculosis Cases – Prevalence per 100 000 People, 2004
Tuberculosis Cases Reported
0
200
400
600
800
1000
1200
0 20 40 60 80 100 120 140 160 180
Countries
Per
100
,000
peo
ple
Source: Human Development Report, 2006 (undp.org)
South Africa
Iceland
Djibouti
Average: 200
Zimbabwe
Median: 83
Summary
Low/average spending on health Very low life expectancy Lack/losing skilled medical personnel HIV and Tuberculosis:
Top prevalence rates in the world Appears to escalate Lack of commitment from Government (Department of Health)
Impact on economy
Serious competence and planning deficiency
PROBABLY THE WORST RUN DEPARTMENT!
Protection
Our Fine for Crime
Budget 2006/07 Budget 2007/08
Functional allocation (Protection services)- Police
R79.4bn
R34.3
R86.9bn
R37.8bn
% of Total Expenditure- Police
18.0%7.8%
17.3%7.6%
% of GDP - Police
4.5%1.9%
4.5%1.9%
Expected Under run (R1.6bn)
2007 Budget: R6.8bn more for justice and crime prevention
Foreign Bribery by Exporters Index
Bribery Index (Least probable = 10)
4
5
6
7
8
Ind
ex
Source: Transparency International
South Africa
Switzerland
India
Protection Services Spending as % GDP
Protection Services Spending
1.0
1.5
2.0
2.5
3.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% GDP
Defence and Intelligence Police
Source: Various Budgets and own calculation
Military
Military Expenditure, % of GDP (2004)
Military Expenditure per country
0
2
4
6
8
10
12
0 20 40 60 80 100 120Countries
% GDP
Source: SIPRI (Stockholm International Peace Research Institute). 2006c.
South AfricaMauritius
Oman
Average: 2.3
Median: 1.7
South Africa (’07)
Police and Crime
2007 Budget: R2.4bn more to get 190 000 police by 2010
Murders (per capita) by Country (1998-2000)
Total Recorded Homicides Completed
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0 10 20 30 40 50 60Countries
Per 1000
Source: UN Survey of Crime Trends and Operations of Criminal Justice Systems, 2000
South Africa
Colombia
Qatar
Jamaica
Venezuela
South Africa (2006)
Reported Crime Figures for the financial years 1994/95 to 2005/06
Crime Categories, per 100 000 population
0
50
100
150
200
250
300
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Rat
io p
er 1
00 0
00
Rape and attempted rape Murder Aggrevated Robbery
Source: Institute for Security Studies (issafrica.org) / saps.gov.za
Illegal Possession of Firearms and Ammunition Financial Years 1994/95 to 2002/03
Illegal Possesion of Firearms and Ammunition
10
11
12
13
14
15
16
17
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Number ('000)
Firearms and ammunition
Source: Institute for Security Studies (issafrica.org) / saps.gov.za
Burglary at Residential Premises for the Financial Years 1994/95 to 2002/03
Burglary at Residential Premises
200
220
240
260
280
300
320
340
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Number ('000)
Burglary
Source: Institute for Security Studies (issafrica.org) / saps.gov.za
Crime and Policing Facts:
2000: SA murder rate 3rd of 63 countries. (Behind Swaziland and Colombia) Murder rate per 100 000:
1994/05: 66.9 2005/06: 39.5 World average: 5.5
Policing Expenditure % GDP: 2.0% (1994), 1.8% (2003) % budget expenditure: 6.7% (1994), 7.9% (2003), 7.8% (2007 est)
Security personnel outnumber police officers 3:1 2006: Almost 300 000 security officers (1996: 100 000) 2006: SAPS employment complement 155 000, of which around (only) 105 000
officers
Source: Institute for Security Studies (issafrica.org) / SAPS Annual Report / own calculations /
UN Survey of crime trends and operations of criminal justice systems
Cost of Crime
Violent crime has affected 8 out of 10 businesses in South Africa (Survey of 200 companies)
Effects of crime on businesses: 88%: Increased costs for security 65%: Decreased productivity of staff 65%: Decrease in motivation 41%: Decrease in creativity and resourcefulness 32%: Loss of personnel 18%: Loss of clients
Source: Grant Thornton Accountants: International Business Report for 2007. Business Day 1 February 2007
Police (per capita) by country (2000)
Police (per capita) per Country
0
1
2
3
4
5
6
7
8
0 10 20 30 40 50Countries
Per
100
0 p
eop
le
Source: United Nations Office on Drugs and Crime, Centre for International Crime Prevention
South Africa
Costa Rica
Montserrat
Average: 2.9
Median: 2.6
Prisoners (per capita) by Country, 2003
Prisoners Per Capita
0
100
200
300
400
500
600
700
800
0 20 40 60 80 100 120 140Countries
Per 100,000
Source: International Centre for Prison Studies – World Prison Brief
Russia
United States
Burkina Faso
South Africa
Average: 157
Median: 111
South Africa (2006)
Summary
Average number of police officers Change in different crimes: 1994-2003 2003-2006
• Rape and attempted Rape: 17.2% 1.6%• Murder: -17.0% -16.7%• Robbery with aggravating circumstances: 49.7% -8.6%• Burglary at residential property: 38.3% -15.1%• Illegal possession of firearms and ammunition: 44.0% -18.0%
Security personnel outnumber police officers 3:1= (police efficiency?) 8 out of 10 businesses affected by crime Murders per 100 000 almost 8 times higher than world average! President Mbeki’s stance on crime?
Lack of commitment…Questionable statistics…Be scared, be very scared!
Capital Expenditure
2007 Budget: - R13.3bn more for 2010 World Cup
- R2.3bn more for public transport
Capital Expenditure
General Government (Dis-) Saving
-30
-25
-20
-15
-10
-5
0
5
10
15
20
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
R bn
Summary
Improving trend Main “reason” for our low savings Improve mainly due to higher taxes (lower deficit) Planned capex welcomed ….lower current expenditure would be better
Too much emphasis on current expenditure
Financial Management
Auditor General: 12% of state departments received clean audit reports (2005/06) Qualified audit reports of state departments:
2005/06: 32% 2004/05: 21%
Large number of qualifications fell into level two: Lack of basic financial control
Generally deficient financial control, and deteriorating……..leading indicator of corruption?
Fiscal Efficiency: Summary
Social Spending: Increasing burden on state Education: Efficiency problem but improving Health Care: Serious efficiency problem and deteriorating
Safety and Security: Shocking figures, questionable statistics! Capital Expenditure: Glimpse of hope
Fiscal Efficiency:A Revenue Comparison
Revenue Sources (Est. 2006/07)
29%
25%28%
4%
4%
10%
Individual Tax
Company Tax
VAT
Excise Duties
Fuel Levy
Other
Contribution to Fiscus
Tax Compliance Time of Mid-Size Company, per Country (2006)
Tax Compliance Time
0
200
400
600
800
1000
1200
1400
0 20 40 60 80 100 120 140 160
Countries
Hours per year
Source: World Bank and PriceWaterhouseCoopers LLP 2006
South Africa
United Arab Emirates
Cameroon
International Ave
Median: 248
Budget Revenues (per $ GDP) by Country, 2006
Dollar Revenue per Dollar GDP
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 20 40 60 80 100 120 140 160Countries
$
Source: Nationmaster: CIA, World Factbook
Libya
Kuwait
Afghanistan
South Africa
Average: 0.32
Median: 0.29
Collection cost: 1.3% of revenue; US 0.5%
South Africa (07/08 est.)
Company Tax Rate, per Country (2006)
Company Tax Rates
0
5
10
15
20
25
30
35
40
45
0 10 20 30 40 50 60
Countries
%
Source: worldwide-tax.com
South Africa
Bulgaria
Egypt
Average: 26.6%
Median: 29.0%
Ireland
USA
South Africa + STC (’06)
South Africa + STC (’07)
Individual Tax Rate, per Country (2006)
Individual Marginal Tax Rates
10
20
30
40
50
60
0 10 20 30 40 50 60
Countries
%
Source: worldwide-tax.com
South Africa
Russia
Denmark
Average: 35.4%
Median: 36.0%
USA
Ireland
VAT Rate, per Country (2006)
VAT Rates
0
10
20
30
0 10 20 30 40 50
Countries
%
South Africa
Ireland
Denmark
Singapore
Source: worldwide-tax.com
Average: 16.7%
Median: 18.0%
Fiscal Efficiency: Revenue Summary
Average tax red tape Individual tax rate: above average (high marginal rate, low threshold) Company tax rate: above average VAT rate: below average
Urgent overhaul of tax regime required!
The 2007 Budget
Changes to Taxes
New Tax Table
2006/07 2007/08
Taxable Inc (R) Rates of Tax Taxable Inc (R) Rates of Tax
0 – 100 000 18% 0 – 112 500 18%
100 001 – 160 000 R18 000 + 25% 112 501 – 180 000 R20 250 + 25%
160 001 – 220 000 R33 000 + 30% 180 001 – 250 000 R37 125 + 30%
220 001 – 300 000 R51 000 + 35% 250 001 – 350 000 R58 125 + 35%
300 001 – 400 000 R79 000 + 38% 350 001 – 450 000 R93 125 + 38%
400 001 – R117 000 + 40% 450 001 – R131 125 + 40%
Rebates Rebates
Primary 7 200 Primary 7 740
Tax Threshold Tax Threshold
Below 65 40 000 Below 65 43 000
Effect of Adjustment
Income 2006/07 Tax 2007/08 Tax Difference
R100k R10 800 R10 260 R540 (5.0%)
R150k R23 300 R21 885 R1 415 (6.1%)
R200k R37 800 R35 385 R2 415 (6.4%)
R300k R71 800 R67 885 R3 915 (5.5%)
R400k R109 800 R104 385 R5 415 (4.9%)
R500k R149 800 R143 385 R6 415 (4.3%)
What to do with the “surplus”?
Actually app. R29bn Water under the bridge Pay off debt Balances currently R100bn! R45bn to SARB
Changes to Energy Taxes
Fuel levy increased – 5c/l Originally intended to maintain road network (toll roads!)
Windfall tax on Sasol Possibly on back burner Likely to be linked to subsidy
Western Cape/Gauteng (and other provinces) fuel levy
Possible Other
Tax breaks for science and research (increased education spending) Threshold for transfer duties upped Tax changes clubs (R100k) Possible smallish adjustments on medical deductions What about a flow through share? Sin taxes to be upped A new land tax?
Taxes: A Wish List
Tax Category Wish Outcome
VAT Higher STC Lower/Scrap Company tax Lower PIT (Mid/high income) Lower Transfer duty Abolish Customs Duties Lower/Scrap Pension fund tax Scrap Small comp. VAT returns Lower frequency/Higher
threshold
Flat tax rate 22%
Expenditure
Main Expenditure Trends
More for Education (R8.1bn) and Health (R7.2bn) Service delivery to get more and more Capital spending
World Cup (R13.3bn) Housing (R3.7bn)
Let’s hope; safety and security (R11bn) - World Cup
Higher revenue helps spending higher – danger!!
Possible Changes to Social Grants
Grant Type 2006 Expected Outcome
Old Age Grant R820 R860 R870
Disability Grant R820 R860 R870
War Veterans Grant R838 R890
Foster Care Grant R590 R620 R620
Care Dependency Grant (disabled) R820 R870
Child Support R190 (13) R200 (15?) R200
Grant in Aid (full-time attendance) R180
BIG remains too Big
Cost R110 per beneficiary Population: 47.4m Cost: R62.6bn Vat Increase: 5.3% Workforce: 29.9m Cost: R39.4bn Vat Increase: 3.4% Unemployed: 17.4m Cost: R23.0bn Vat Increase: 2.0%
Unlikely now with SST
Summary 2007/08
MTBPS Budget ‘07 Efficient Difference
Revenue 543 544 545 2
Expenditure 534 534 536 2
Deficit/Surplus 9 10 9 0
% of GDP 0.5% 0.6% 0.5%