In his budget speech, Finance Minister Pravin Gordhan earmarked R95-million for the establishment of a Steel Development Fund over the Medium-Term Expenditure horizon. This fund will be controlled by the Industrial Development Corporation (IDC) for the benefit of the sector.
SEIFSA Senior Economist Tafadzwa Chibanguza welcomed Gordhan’s announcement, saying the Fund could improve the competiveness of foundries and steel fabricators in the metals and engineering sector, contributing to efforts to reverse the crisis that has long beset the sector.
Chibanguza said the Minister’s announcement was a product of numerous engagements between various stakeholders in the metals and engineering industry, including SEIFSA, with the IDC, the Department of Trade and Industry and the Finance Ministry about the importance and need for a dedicated fund for the sector.
“We believe that this allocation for the Fund takes those engagements significantly forward, indicating the Government’s commitment to assist the sector,” said Chibanguza.
In his speech, Gordhan indicated that over the 2017/2018 fiscal year, the Finance Ministry is expected to spend R1.56 trillion but forecasts to collect only R1.41 trillion, leaving a budget deficit of R149 billion, which equals 3.1% of GDP at a consolidated level. However, revenue compared to non-interest expenditure yields a R21 billion surplus.
Chibanguza said that there is no doubt that preparing the current budget was a very challenging exercise for the Minister, his colleagues and the Treasury team. “It was a delicate balancing act between maintaining spending commitments, particularly in higher education, health and social obligations, while ensuring responsible management of public finances,” he said.
In his toughest budget speech yet, Gordhan seemed to tighten control as the expenditure celling will be reduced by R10 billion in 2017/18 through reducing national departments’ operating budgets, lower transfers to entities, provinces and local government and real locations.
In order to induce additional revenues of R28 billion needed for the 2017/18 period, income taxes for individuals earning more than R1.5 million will be increased to 45% and dividend withholding taxes will be increased from 15% to 20%. The fuel and road accident fund fuel levies will also be increased by 30c/l and 9c/l respectively.
Chibanguza said that of importance to the metals and engineering sector was the fact that, broadly, manufacturing incentives will receive R9.6 billion over the medium term expenditure framework (roughly R3.2 billion per annum), which includes roughly R433 million per year dedicated to boosting competitiveness. He said that the sector will either directly or indirectly benefit from a medium-term R4.2 billion that has been allocated for industrial infrastructure projects over the medium term. This budget includes 32 strategic projects expected to be approved for special economic zones and industrial parks.