Speaker 1: On the line now to the Director General of the
Speaker 1: National Treasury, Doctor Duncan Peter So, Duncan, good evening, Good
Speaker 1: to talk to you tonight. What work's been done in
Speaker 1: the last few months that led us the National Treasury
Speaker 1: to make the announcements to lower the inflation target.
Speaker 2: Now, good evening, Stephen, and good evening to your listeners. Well,
Speaker 2: as the Minister indicated earlier today, there's been actually more
Speaker 2: than a year's worth of work between ourselves and the
Speaker 2: Reserve Bank. You'll recall that a few years ago we
Speaker 2: commissioned a paper by two former central bankers to review
Speaker 2: our inflation targeting regime and they in fact said at
Speaker 2: the time that we were out of step with the
Speaker 2: rest of the world. That review then culminated in our
Speaker 2: Macroeconomic Review, where we assessed this further. That was then
Speaker 2: followed by a joint research program between the South African
Speaker 2: Reserve Bank and the National Treasury through the Macro Standing Committee,
Speaker 2: which is a committee of officials from both institutions. They
Speaker 2: didn't finalized that work about a month or so ago
Speaker 2: and made a recommendation to the Minister and the Governor
Speaker 2: for a point target of three percent with a one
Speaker 2: percentage point tolerance band, there.
Speaker 1: Will obviously be a little bit of pain in some
Speaker 1: ways before we see the long term benefits, and we
Speaker 1: would expect quite substantial longer term benefits. Has there been
Speaker 1: any modeling on how much longer interest rates will have
Speaker 1: to stay slightly higher to get us to three percent?
Speaker 2: So, Stephen, if you look at what's happened, for example,
Speaker 2: to bond yields over the last few months, and that
Speaker 2: is of course the interest rate that government pays on
Speaker 2: its bonds that we issue in order to finance our
Speaker 2: budget deficit, those bond yields have already come down, and
Speaker 2: they've come down by almost two percentage points over the
Speaker 2: last few months. That's two hundred basis points. And the
Speaker 2: reason those bond yields have come down is in part
Speaker 2: because of the lower inflation environment that has contributed to
Speaker 2: lower bond yields. Now that means that interst rates have
Speaker 2: already started coming down because bond yields set a lot
Speaker 2: of the other interest rates in our economy. So some
Speaker 2: of the benefits we have already seen. Certainly, if we
Speaker 2: are able to anchor inflation at three percent, which is
Speaker 2: where it already is currently and maintain that over the
Speaker 2: longer term, as well as continue to bold the fiscal
Speaker 2: credibility that we've been able to do over the last
Speaker 2: few months, and that culminated in today's mtbnds. Certainly, interest
Speaker 2: rates should come down now. The reason that's important is
Speaker 2: because the cost of credit it comes down for household
Speaker 2: it interestrates for lower and over sixty percent of our
Speaker 2: GDP is linked to household consumption. And then secondly, the
Speaker 2: cost of capital come down, comes down, so we can
Speaker 2: invest more and we can deliver higher growth outcomes.
Speaker 1: There are other big announcements that were made today as well.
Speaker 1: You have i think it's between eighteen and nineteen billion
Speaker 1: round more than you expected to have. At the same time,
Speaker 1: there are some cutbacks that you're making. Some projects are
Speaker 1: being cut in an environment where I'm sure everybody's knocking
Speaker 1: on your door asking for more money, how did you
Speaker 1: decide what to cut?
Speaker 2: Well, what this budget actually does, Steven, relative to the
Speaker 2: budget that was announced a few months ago. What the
Speaker 2: MTBPS actually does is it actually takes the eighteen to
Speaker 2: nineteen billion in additional revenue that we received this year
Speaker 2: and allocates about fifteen billion of that. So in fact
Speaker 2: that expenditure goes up in this budget relative to the
Speaker 2: one that was tabled a few months ago, and the
Speaker 2: main additional expenditure that we've decided to allocate is for infrastructure,
Speaker 2: and that is for transnet. And part of that is
Speaker 2: because we believe that a transnet that invests in the
Speaker 2: iron Ore Corridor and invests in the North Corridor, which
Speaker 2: is the corridor that transports coal, is a TRANSNIT that
Speaker 2: will have a healthier balance sheet and that will generate
Speaker 2: more revenue for the fiscus. So the bulk of the
Speaker 2: additional revenue that was gained this year actually when to
Speaker 2: support infrastructure projects. So overall we believe that that all
Speaker 2: have a positive revenue and growth impact for the economy.
Speaker 1: There are some plans to cut back a little bit
Speaker 1: on civil servants benefits early retirement issue as well. Do
Speaker 1: you think that's going to lead to tangible results? Wouldn't
Speaker 1: there be a bit of opposition to that perhaps.
Speaker 2: Well, what this MTVPS does, Stephen, is that it already
Speaker 2: announces six point seven billion in savings over the next
Speaker 2: three years, and that was really about rescaling down programs
Speaker 2: that are not working, in this case, the public Transport
Speaker 2: Network grant as well as efficiencies from eliminating double dipping
Speaker 2: and other fraud in social grants. We are going to
Speaker 2: bold on that work through the ghost work or audit
Speaker 2: that we are currently doing through the review of other
Speaker 2: grants within the system. Early retirement helps because we are
Speaker 2: through early retirement making some funds available to exit workers
Speaker 2: to rejuvenate the civil service and replace those with younger
Speaker 2: workers that are often paid lower wages as well. All
Speaker 2: of these initiatives will over time create much more efficient spending,
Speaker 2: and that is really what the Targeted and Responsible Savings
Speaker 2: Initiative tries to do. We were able to get some
Speaker 2: gains in this MTVPS in the form of the six
Speaker 2: point seven billion, and certainly the Minister of Finance plans
Speaker 2: to make further announcements in this regard at the time
Speaker 2: of the budget next year.
Speaker 1: As I understand it, the Minister in Iguana was asked
Speaker 1: today about the plan by the Health Department and the
Speaker 1: medical aid tax credit. I wasn't in the room, but
Speaker 1: I've seen various reporting that he said, that's an attack
Speaker 1: on the middle class. As the Treasury opposed to that idea.
Speaker 1: Are you going to tell the Health Department no, well, what.
Speaker 2: The Minister confirmed today Stephen was that there is no
Speaker 2: announcement on medical tax credits currently and the Minister also
Speaker 2: said that at the moment he has no plans to
Speaker 2: make any announcements in this regard. Of course, we will
Speaker 2: continue to evaluate all all different tax options and typically
Speaker 2: we advise on the future of tax policy at the
Speaker 2: time of the budget, and we will continue to have
Speaker 2: engagements with the Department of Health. But as of this moment,
Speaker 2: there are no plans to do away with medical tax credits.
Speaker 1: Doctor Duncan. Peter Seip, thank you so much for the time,
Speaker 1: Director General of the National Treasury. Twenty one minutes after
Speaker 1: sixty with the money show. Edward Kisvetter is the commissioner
Speaker 1: at SARAS. Mister Commissioner, good evening. You were able to
Speaker 1: get around eighteen nineteen billion round more than was originally estimated.
Speaker 1: Where did most of that money come from? Was it
Speaker 1: mostly the elicit economy?
Speaker 3: So it's a number of things, but let me just
Speaker 3: speak to of the economy previews. We under corporate taxes
Speaker 3: routes saw high unexpected contributions in a corporate taxics, mainly
Speaker 3: from the financials eleser sector. But also there were some
Speaker 3: dividend taxes that produced a once round about one and
Speaker 3: a half billion rand, but the most significant and then
Speaker 3: there was domestic vats, which also indicates higher levels of consumption.
Speaker 3: But about half of the eighteen billion, just more than
Speaker 3: half of it actually came from our own from clients.
Speaker 3: And that's what that could mean is the additional verifications
Speaker 3: we do in customers when tax layers submit their returns
Speaker 3: and flame that new funds. We were able to in
Speaker 3: VQ prevent the outflow of about five point three billion
Speaker 3: rounds of new funds, and in corporate taxes who were
Speaker 3: able to collect from the refunds, but also in working
Speaker 3: nineteen three about two and a half billion extra revenue.
Speaker 3: And then there was other odds and ends from two
Speaker 3: levels they will in't access, but collectively here for me,
Speaker 3: I think a good data points. Firstly, we'll see we
Speaker 3: see that Treasury has now revised the GDP nomenal leaf
Speaker 3: from six point three to five point three. So what
Speaker 3: explains a nine point three percent increase in revenue, Well,
Speaker 3: that is a fourteen percent increase in compliance that yere
Speaker 3: on you. It's still below our benchmark, our our training benchmark,
Speaker 3: we would want to be in the band of about
Speaker 3: sixteen to nineteen percent, and we think in the second
Speaker 3: half of the year some momentum in the work that
Speaker 3: we've done in the revenue recovery project will gain some
Speaker 3: momentum and so we are confident. But I mean it's
Speaker 3: not just line confidence. We have a significant machinery that
Speaker 3: looks at at how we will every inch. It gets
Speaker 3: us another bit closer to taking the pleasure of the
Speaker 3: Minister in the future to look at taxes.
Speaker 1: As I understand it, if we get another twenty billion
Speaker 1: rand more than is currently estimated before February, we would
Speaker 1: be saved another tax increase. Then are you confident you
Speaker 1: can do that?
Speaker 3: You certainly. We've committed Stephen that the infence amount of
Speaker 3: two billion we want to yield at least between twenty
Speaker 3: and fifty billion. But the debt that we are now
Speaker 3: chasing a significant component of that becomes more complex. So
Speaker 3: for example, in the first cohort the city five billion
Speaker 3: were collected. Were debt that required a follow up call,
Speaker 3: an SMS reminder, a gentle nudge here and there. The
Speaker 3: debt we are getting into now are more complex debt.
Speaker 3: It requires people with a high level skilled people who
Speaker 3: can understand and analyze financial statements to look at whether
Speaker 3: company is actually can afford the debt if we don't
Speaker 3: dispute it. We've seen an increase in applications for debt deferment,
Speaker 3: payment arrangements and for compromises. There's a fifty five percent
Speaker 3: increase in civil judgments, for example. So the next chune
Speaker 3: of debt will require high high levels of skills. So
Speaker 3: we are meeting at litigation attorneys, we're looking at legal
Speaker 3: debt collectors, and we've only begun to build that in
Speaker 3: the second quarter of the first half, so from about
Speaker 3: July to September we started gaining that. We've employed about
Speaker 3: eighty people to look at more specialized debt collection and
Speaker 3: we're hoping to RAMPLETT up to two hundred and fifty.
Speaker 3: But we're also fishing in a market that doesn't always
Speaker 3: produce the kind of skills for it.
Speaker 1: Edith, thank you so much for the commissioner at SARZ