1. 2002 Medium Term Budget Policy Statement October 2002

2. Introduction 2002 MTBPS highlights Growth forecasts revised upwards
Inflation target date extended
Exchange control changes w.r.t to Africa
Strong real growth in expenditure
Continued revenue buoyancy
Shift in resources towards provincial and local spheres
2003 Budget will prioritise social and household services, fighting crime, land restitution and international commitments
National Treasury

3. MTBPS covers... Chapter 1 - Overview
Chapter 2 - Macroeconomic overview
Chapter 3 - Fiscal framework
Chapter 4 - Taxation
Chapter 5 - Medium term expenditure framework
Chapter 6 - Provincial and local government finances
National Treasury

4. Growth prospects SA economy resilient under difficult circumstances
Growth projections revised upwards
National Treasury

5. Sectoral GDP Growth (year-on-year)
National Treasury

6. Domestic demand Consumption
Rising disposable income, declining debt and tax cuts
Investment
Rising confidence
Rising export opportunity
Government investment
Rising net exports
Competitive exchange rate
Global recovery
National Treasury

7. Balance of Payments Positive BOP supported by…
Strong current account performance
Particularly strong trade balance
Positive domestic economic outlook
SA increasingly differentiated among emerging markets
National Treasury

8. CPIX plus targets
National Treasury

9. CPI inflation by expenditure group (year-on-year)
National Treasury

10. Percentage change in employment
National Treasury

11. Inflation targets
Depreciation, rising oil prices and rising food prices drive inflation above target.
Monetary policy response 400bp increase in key interest rates.
Forecast:
2002 – 9.6%
2003 – 7,2%
2004 – 5,5%
2005 – 4,9%
Target for 2004: 3 – 6%
3 - 5% target falls away until further notice
National Treasury

12. Exchange control
Allowance for new investments in Africa is increased from R750 million to R2 billion
Expanded use of “top-up” funding for the financing of new approved expansions of existing, prior exchange control approved, foreign direct investments in Africa
National Treasury

13. Macro forecasts
National Treasury

14. Fiscal Framework
National Treasury

15. Key MTEF trends
Real non-interest expenditure growth averages 4,7 per cent per year
Main budget revenue at 24,5 per cent of GDP
Total of R79 billion new money + R5,6 billion unallocated infrastructure money = R84,9 billion over 2002 Baseline
National Treasury

16. Debt and Financing
Debt service costs decline to 3,9 per cent of GDP in 2005/06
Includes provision for assumption of GFECRA losses up to R28 billion, R7 billion this year
National government debt declines to 37,7 per cent of GDP by 2005/06
Of which foreign debt declines to 7,1 per cent of GDP by 2005/06
National Treasury

17. Revenue estimates 2001/02 Outcome
R14,8 billion more than estimated
2002/03 revised estimate increased up by R8,1 billion:
Due to higher nominal GDP (inflation)
National Treasury

18. Revenue estimates
National Treasury

19. Implementions of 2002 Budget Proposals
Learnership allowance
285 registered learnerships, enrolled
Strategic Investment Programme
7 applications considered, 5 approved with total investment of R2 billion, creating direct & indirect jobs
Public Benefit Organisations (PBOs)
Business accomodation & subsistence allowances
Companies’ reorganisations
National Treasury

20. 2003 Budget tax proposals Considering the following tax proposals:
Moderate personal income tax relief
Taxation of retirement savings - review with wide consultations & enactment into law by 2004
Mineral royalty bill will be introduced in 2003
National Treasury

21. Key MTEF Priorities Extending social assistance, health and education
Investing in municipal infrastructure and basic services
Expanding capacity in the safety and security sector:
…with a particular focus on court administration
Higher education restructuring
Accelerating land reform and restitution
Better services to citizens provided by Home Affairs
Growing international role : NEPAD and AU
National Treasury

22. Adjusted Estimates 2002
The 2002 Adjusted Estimates provides for total adjustments of R8,1 billion
R billions
General Inflation Adjustment 3,4
Provinces Unforeseen & Unavoidable 2,3
National Unforeseen & Unavoidable 1,4
Infrastructure development 0,7
Food Security 0,4 Total Adjustments 8,1
The net increase in spending is R3,8 billion after in-year savings, contingency reserve, etc.
National Treasury

23. Division of revenue Additional R84,9 billion over the 2003 MTEF
Inflation adjustment of R27,8 billion
New policy priorities receive R57,1 billion
National Treasury

24. Division of revenue
2003 MTEF will result in a moderate reallocation of resources towards provinces and local government
National Treasury

25. Key spending areas Social Services Protection Services
Additional funding of R11,5 Billion in 2003/04 and R15,6 Billion in 2004/05 (3,7 per cent average real increase)
Additional funds target
Health personnel, medicines, hospital buildings and equipment, fighting HIV/Aids
Learner support material and ECD
Restructuring of higher education, Research & Development
Protection Services
Additional funding of R3 Billion in 2003/04 and R3,5 billion in 2004/05 (2,4 per cent average real increase)
Expansion of sector policing strategy
Court administration
New design prisons in outer year
National Treasury

26. Key spending areas Economic services and infrastructure Administration
Additional funding of R2,9 Billion in 2003/04 and R3,8 billion in 2004/05 (2,2 % real average increase)
Targeted towards
Land restitution and reform, national electrification
Basic infrastructure services,
Administration
Additional funding of R2,4 billion in 2003/04 and R4,2 billion in 2004/05 (6,1 per cent real average increase)
HANIS system in Home Affairs, SARS transformation
Elections in 2004 and 2005, New African missions
National Treasury

27. Provincial budget priorities
Health infrastructure (both human and capital)
HIV/Aids programmes
Lifeskills, home-based care, prevention of mother-to-child transmission, gradual expansion of treatment regimes currently under investigation
Early childhood education
Enhanced delivery of learner support materials
Reducing classroom backlogs
Increasing income support to the poor
Improving the social grant payment system
Investing in provincial roads & other infrastructure
National Treasury

28. Provincial allocations
National Treasury

29. Local budget priorities
Further extension of free basic services
Accelerated roll-out of household service infrastructure
Strengthening redemarcated municipalities
Capacity building
Expanding labour-based infrastructure programmes
Investing in URS and ISRDS nodes
National Treasury

30. Local government allocations
National Treasury