Afreekonomics

Reflecting on the Treasury's latest Carbon Tax proposals

Posted: 2012-Feb-28

The Minister of Finance on Wednesday reiterated in his budget speech that the need for carbon pricing in South Africa is accepted. This should not have surprised anyone - the fact that a carbon tax was on the cards was clearly signalled in last year’s budget and a discussion paper dealing with carbon taxes in South Africa was released in December 2010. What was more surprising, however, was that the implementation date for a carbon tax, its proposed design features, and its suggested levels were included in the Budget Review. The 2011 Budget Review did mention that the design features and implementation schedule for a carbon tax would be announced in the 2012 Budget, but this was scheduled to follow the publication of an updated carbon tax policy paper for public comment in November 2011. The revised carbon tax discussion paper will now only be published in 2012. Until the Carbon Tax Policy Document is released uncertainty remains on how exactly the proposed carbon tax design features mentioned in the 2012 Budget Review will be implemented. This blog post aims to provide some initial reflections on the latest proposed carbon tax design features and highlight some of the uncertainties that remain. Read Article

Keeping the public wage bill in check

Posted: 2012-Feb-27

In the 2012 budget speech, the Minister of Finance raised concerns about the sustainability of the public sector wage bill. Spending on compensation of employees in the public sector has grown from R32 billion in 2001/02 to R98.6 billion in 2011/12, effectively tripling over a ten year period and greatly outpacing increases in inflation. The official explanation for this is higher staff levels in health and policing, as well as the introduction of an occupation specific dispensation (i.e. much higher salaries) for government employees in critical fields like health and education. We also know that the higher than expected wage settlement negotiated after a prolonged public sector strike in 2010 has had an impact. This wage settlement is expected to cost the fiscus an additional R5.6 billion in 2012/13. 
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Taxpayer funding for toll roads

Posted: 2012-Feb-27

The public outcry over the proposed tolls for the Gauteng Freeway Improvement Project (GFIP) have substantially delayed Sanral’s toll implementation plan. They also pose a more fundamental question: if the user-pays principle is no longer going to be used to finance road infrastructure, then who is in fact going to pay? In this year’s budget, we got our first hint at an answer to this question, and not unexpectedly, its the taxpayer. Read Article

Bailouts of state owned enterprises and their impact on public finances

Posted: 2012-Feb-27

SAA has recently requested a capital injection of R 6 billion from the fiscus. Requests from SAA for recapitalisation (or bailouts) must by this point create a feeling of déjà vu for most South Africans. In 2009/10, national government allocated R1.6 billion to SAA, and in 2007/08, R744 million was injected into SAA to allow the entity to restructure its operations and improve its debt to equity ratio.  

Unfortunately for taxpaying South Africans, our national carrier is not the only state owned enterprise to have asked for a bailout from national government. Between 2008/09 and 2011/12, government gave Denel R747.1 million to pay for claims under an indemnity agreement with Airbus Military for the commercially nonviable production of A400m aircraft, an agreement which Denel should not have been party to in the first place.  Over and above this, Denel received capital injections of R2 billion in 2005/06, R 567 million in 2006/07 and R933 million in 2008/09. In the 2012 budget, an additional R700 million is allocated to Denel to recapitalise its aerostructures division.

Why Greece doesn't matter...and does.

Posted: 2012-Feb-23