The Budget generates a lot of heat about the choices the Finance Minister makes, but for us in Grahamstown what the municipality does or does not do is of more interest than debates about fiscal balances and how these affect the cost of debt, as important as these are.
The Budget generates a lot of heat about the choices the Finance Minister makes, but for us in Grahamstown what the municipality does or does not do is of more interest than debates about fiscal balances and how these affect the cost of debt, as important as these are.
The Budget has some surprisingly good news for residents of this city, as well as some bad news.
First, the bad news – because it has been in the headlines.
As expected, some of us will pay more in income tax next year.
The one percentage point increase in tax will be offset by adjustments to the tax tables for inflation.
According to Old Mutual, the effect is that there will be tax relief for those earning less than around R450 000 a year.
The government is considering, according the Budget Review, increasing the electricity levy by 2c/kWh to 5.5c/kWh, which is an almost 60% increase.
Solar energy is becoming increasingly attractive, along with gas for heating and cooking, and that kind of behaviour change is what this kind of tax is supposed to do.
It's temporary measure until the electricity shortage ends, though who knows when that will be.
Really bad news is the increase in the fuel levy of 80.5c a litre.
This comes just as we were getting used to the idea that it will cost less to travel to Port Elizabeth and elsewhere in the province.
Long-distance travel is inevitable for many Grahamstonians.
There is good news for residents as well.
For the middle class, most of whom have some interest in the property market, and estate agents, the reduction in transfer duties will be especially welcome.
Anything that makes buying or selling cheaper adds to the liquidity of the property market, and buying and selling is what estate agents rely on.
I have some misgivings about the overenthusiastic investment in residential property markets, but on the other hand high transfer duties are an unnecessary punishment for sellers.
It might strike you as odd that the Finance Minister chose to give property owners a break in a year when there is pressure for greater revenue to balance the government’s books.
The change in transfer duties, however, along with the income tax changes, illustrates the way government’s tax approach is becoming more progressive, in the sense of ensuring wealthier people pay more than the poorer citizens.
From March 1 this year, all real estate bought for less than R750 000 will pay zero transfer duty.
This is up from R60 000.
Traditionally black township areas would have the majority of these properties, I guess, though some flats might qualify.
On a property worth around R1 million I calculate you’ll save around R4 500, and on a property of R1.5 million around R7 000.
Properties priced above R2 250 000 now attract higher transfer duty.
So on a property worth around R3 million you will pay around R10 000 more in transfer duty.
This should act to depress prices of some high-end property.
If you are planning to sell your house or R2.4 million, for example, you would probably accept R2.2 million so as not to be pushed into a higher transfer duty bracket.
The Budget generates a lot of heat about the choices the Finance Minister makes, but for us in Grahamstown what the municipality does or does not do is of more interest than debates about fiscal balances and how these affect the cost of debt, as important as these are.
For instance, municipal infrastructure grants administered by the Department of Cooperative Governance will rise by around R2 billion from 2014/15 to R16.4 billion by 2017/18.
That these grants are actually spent relies on competent municipal management.
Treasury is well aware of the kind of inefficiencies in spending and is reviewing the local government infrastructure grant system.
The number of grants will be reduced, and the rules are being changed to allow funds to be used for refurbishing and replacing assets – if they have been maintained.
That’s the crux, and the back-to-basics approach of the previous Finance Minister, now in charge of local government, had better work.
To this end, plans were also announced to cut tender corruption and ensure government pays fairer prices for goods and services.
Aside from municipal spending, government is engaged in a host of smaller initiatives to make life a bit easier for the poorer residents of Grahamstown.
Social grants have been increased by around 4%, but may be increased more later to counteract the effects of higher inflation.
Of particular interest to small municipalities like Makana is confirmation that the community work programme will be extended to all municipalities, and 21% more allocated to it.
The low wage of CWP workers is more like a grant than a real job, but it does mean that people earn money and do something useful.
Another example: Environmental Affairs is also creating 107 000 jobs and 224 work opportunities.
These are just some small examples of a host of useful things that government spending achieves, particularly in poor rural areas such as that in which Grahamstown is situated.
* Reg Rumney is the Director of the South African Reserve Bank Centre for Economics Journalism at Rhodes University
