Statement by Bantu Holomisa UDM President
There are no surprises in the Budget presented to Parliament today. It is however a positive sign that the Minister has not deviated from the economic policy embodied in GEAR, which will promote economic confidence in South Africa.
Regarding economic growth projections, we are moving in the right direction, but at too slow a pace. The projected economic growth rate of 1,8% for 1999 is simply not high enough to reach the levels of growth we need to create wealth for all South Africans.
The UDM welcomes the reduction in company tax from 35% to 30%. This is a positive step towards creating an improved climate for investment.
We regard the announcement on tax relief for individuals on the lower income group, as insufficient. The UDM is of the opinion that all tax on income of individuals up to R4 000 per month should be abolished. Only such a bold step will really benefit the poor in our society.
The announced tax relief must be put into perspective. Any salary increase will push individuals in a higher bracket. This means that the effective tax burden continues to increase. The tax to income ratio for individuals has increased to record levels. It will therefore be an illusion to indicate that tax reductions are substantial, or that this ratio has decreased. The government expects an increase of 8.2% from individual income tax in the 1999/2000 financial year. Where will they get this revenue, other than from individual taxpayers?
A significant announcement by the Minister is the loss by the South African Reserve Bank of R13,3 billion. This loss was incurred in attempts by the SARB to protect the currency, and is for the account of the Government. The question is where is the Government going to find this money and how are they going to pay? This incurred loss emphasises the fact that an urgent reconsideration of our exchange rate management is needed. We urgently need a new approach in this regard.
The announced Budget deficit of 3,5% of Gross Domestic Product is twice as high as the average for the emerging world. The UDM is of the opinion that the Budget deficit should be abolished immediately, by way of ruthless cut backs on all unproductive government activities. The Budget deficit currently equates to 12% of total state spending. It therefore will mean to terminate the least essential 12% of government activity. A range of other measures can be considered to support such a step.
The UDM is surprised that the Minister has failed to address an accelerated privatisation programme, which can also be used to reduce government debt.
We are disappointed that no new and imaginative ideas were produced by the Minister to assist small businesses in South Africa. The UDM believes that enterprise development is the one important factor that can empower South African and that can build our economy.
The Minister has failed to announce anything in addition to combat crime, or to restore civil order in South Africa. The impression is created that the Government has no sense of urgency to tackle this most serious problem in our society.
In conclusion: the Government has a dismal economic performance over the last 5 years regarding job creation. Today’s Budget showed little evidence that they have the political will to be serious about our most serious socio-economic problem in South Africa.