Posted: 2008-02-20 23:58 Budget 2008 interview - Trevor Manuel  Presenter: Themba Hlengani Guest(s): Trevor Manuel - Click here to listen to the interview Summit TV speaks to Trevor Manuel about the 2008 Budget with its emphasis on corporate and personal taxes, poverty alleviation, service delivery, infrastructure and economic development THEMBA HLENGANI: Today the Minister of Finance delivered what some are saying is a very fair Budget, and here to discuss the Budget is the Minister himself. Minister, what were some of the key elements for you coming out of this Budget? TREVOR MANUEL: I think what’s very important is that we understand that every Budget we deliver is quite different - the difference this year is of cause that we’re dealing with quite a different global scenario. There is the unresolved debate in the United States of whether it is in a recession or merely in slowdown - but whatever it is it’s having an impact across the world. You’re seeing countries as far afield as China having to re-gear their own growth forecast downwards - India has had to do the same - and this has had an impact. The other feature of course is that oil prices remain high - and today it’s been over $98 a barrel - so this is quite a different environment. The impact on South Africa is slightly low growth - and we must factor in the energy emergency that we are facing in this country. Food prices are high, inflation is high - it’s quite a different scenario. Trying to make a budget in this environment is tougher than what we’ve had to do previously because we want to stimulate growth - so on the tax side the stimuli are there, and very evident. There’s the corporate tax cut, the simplification for small businesses both in respect of VAT generally, but also in the presumptive tax. Then to individuals we can offer a line in respect of personal income tax and fiscal drag - so that’s on the tax side. We had to take a view on exchange controls as well, and we were able to do that. I think the expenditure side shows progression on where we’ve been - so we are getting the money into the areas that will make a difference. THEMBA HLENGANI: Despite the challenges you’ve outlined you’re still confident we will achieve 4.1% growth this year. Most analysts are saying that we’ll be lucky to go to 4% - what gives you this confidence? TREVOR MANUEL: We have two opportunities a year. We give a forecast at Budget time, and we give one at the Mid-Term Budget Policy Statement in October. That’s the only two opportunities - we can’t change our mind in between. So we put a lot of effort into ensuring that there’s durability to the forecast. If you look back over the past ten years or so you would find that whilst all economists - including the treasuries own economists - are wrong once the numbers are raised later and sometimes recalibrated, we have every year been far less wrong than many of the private sector economists. So I think we have reason for confidence. We are looking at 4.1% - we think that we can attain it provided of course that commodity prices remain in the range where they are and we benefit from the positive terms of trade that arise from the strong commodity prices. THEMBA HLENGANI: One of the challenges you’ve mentioned is power and energy and you’re giving Eskom a loan of R60billion over five years. People are saying “we’ve been investing in alternative energies - maybe the Minister should have given us a tax break.” What was the reason behind your department saying we aren’t going to give direct tax breaks for alternative energies that you’re currently using? TREVOR MANUEL: There is in this Budget some R2billion that we’re happy to commit to alternate energy sources. I’d include in that energy saving devices - the compact fluorescent bulbs, the solar powered water heating systems, all of those things - there will be support for those kinds of measures, the R2billion in the Budget. One issue that we debated quite extensively was the individuals who bought generators and want tax incentives for this or some reduction somewhere - what we can’t do where the environment is fragile is actually incentivise behaviour that will see the burning of more fossil fuels. It’s not a pleasant decision to announce - but I think we have turned the penny over so many times and we’ve debated it from every particular angle that I know we are standing on confident ground as we say this to people who were expecting something else. THEMBA HLENGANI: Can I say this is a green Budget? You stated at the beginning of the press conference to the media that even the paper you used this year - that you actually counted how many trees were cut to make this… TREVOR MANUEL: We want to ensure that environmental issues become part of what we consider in economic policy-making everywhere - so apart from the count, and it’s an embarrassing statement of the amount of carbon dioxide emissions - I think we are also looking to the future, and there we are saying tax cuts or tax incentive for bio-diversity on private property, we’re looking at further enhancing energy saving mechanisms, and I think we are also looking in the future at a tax environment that may penalise emissions differently from what we’ve done today. THEMBA HLENGANI: Let’s look at the poverty war room the President alluded to - he said you would give us more details on it - what is this concerted effort that you are putting into poverty alleviation? TREVOR MANUEL: If we want a full attack on poverty one of the first things we need are costed plans - and the costed plans are there in education, in skills development, in health education more generally - but there are also issues associated with infrastructure, in the built environment, housing, water and sanitation. We know the plans and we have a pretty good idea of where the changes should be driven. Now you need close monitoring - the big change for us is not just to hand the money over to the provinces and hope and pray they will spend the money correctly, it’s actually knowing that the money hits the ground. We are looking for a different means of communication - so in the Presidency we will have to put together a much better monitoring and evaluation system focused on these kinds of areas, and we want to signal to all spheres of government that apart from the normal accountability to Parliament or councils we also want to see a flow of communication and an accountability to the centre. You can’t abstract poverty - people are not poor in a municipal context and un-poor in a provincial context, you’ve got to tie these together. The poverty war room will be driven in that kind of way out of the Presidency… THEMBA HLENGANI: I guess one of the biggest areas that you’ve constantly re-iterated to your colleagues in the Cabinet is implementation and what are you doing about it? You can give the money to fight poverty - but what are you doing to make sure that projects are being implemented? TREVOR MANUEL: Parts of it are difficult. You know we are all equal as Cabinet members, so I have a defined job responsibility - I’m not a supervisor to my colleagues - but Parliament doesn’t have that problem. I think accountability to Parliament - not just later, but in the year - is very important. We have systems in the Public Finance Management Act that compels us to publish actual expenditures each month - these are available to Parliament. Parliament has this tome of more than 1,000 pages of an estimate of national expenditure, and it details the programmes of departments, it details also the performance measures that the departments want to see in place. This thing works because Parliament is diligent and active and asks the tough questions - and sometimes goes out to see that these are not just reports filed from an office somewhere in Pretoria, but actual improvements in the quality of life of people. That’s the change we want and that’s what we have money for. THEMBA HLENGANI: What are you giving small businesses this time around? TREVOR MANUEL: The big changes in small business on the tax side - and I want to say that one of the reasons why we can make a difference here is because small businesses came to the party and enrolled last year as part of the tax amnesty - are presumptive tax for businesses with a turnover of less than R1million, also changes to the way in which VAT is calculated, and finally it’s the VAT threshold moving from R300,000 to R1million turnover. www.summit.co.za Transcripts: onsub1@johncom.co.za mvr/met Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :