VAT may be raised, budget deficit larger than expected, more cash for education, GDP growth forecast trimmed

South African Finance Minister Pravin Gordhan says he’s considering raising the VAT rate and has also projected a larger budget deficit than expected for next year.

Gordhan says the deficit until March 2012 will remain at 5.3% of GDP - after last year suggesting that this could drop to around 4,6% next year.

Gordhan has also warned that growth will now be slightly less than expected at 3,4% instead of 3,5%.

Bonds rise on budget 2011

The yield on 15-year government bonds rose about 10 basis points on the news.

The rand was trading at R7.10 to the dollar by 17h00 on Wednesday.

VAT to increase?

The treasury is also pondering the increase of VAT and imposing an additional levy on payroll taxes to fund the planned government health service.

The minister also forecast infrastructure spending to hit R800 billion over the next three years.

An amount of R12.8 billion has been allocated to the departments of police, justice, correctional services and the Independent Complaints Directorate, to help the police in their fight against crime, Finance Minister Pravin Gordhan said on Wednesday.

The transport sector will receive an additional allocation of R10.3 billion over the next three years to improve infrastructure and services, Finance Minister Pravin Gordhan said on Wednesday.

Here are some of the main Budget 2011 numbers :

The education budget rose by 9.7% to R189.5 billion, with the basic education allocation going up by 10.6% to R145.5 billion, and tertiary education by 6.8% to R26 billion.

Social protection followed with a budget of R146.9 billion, reflecting an increase of 10.7 percent; housing and community amenities R121.9 billion (up by 19.5 percent); and health R112.6 billion (by 9.8 percent).

The public order and safety budget allocation rose by 8.2 percent to R90.9 billion — police R60.7 billion (up 8.5 percent), prisons R16.5 billion (8.6 percent), and justice R13.7 billion (6.2 percent).

Net government debt to hit R999bn by the end of the 2011/12 fiscal year and rise to R1.4 trillion, or 39.3 percent of GDP, by 2013/14.

Total government revenue for 2011/12 forecast at R824bn, or 28.3% of GDP. That should rise a fraction to 28.4% and 28.8 percent in the following two years.

Total government expenditure seen at 33.6% of GDP, in line with the previous year’s budget. In 2012/13, it is forecast to drop to 33.2%, and 32.6% in the year after that.

Public sector spending on infrastructure expected to average 8.4% of GDP over the next three years, totaling R808bn.

Revised tax revenue for 2010/11 is R672bn, 12.3% higher than the previous year; it is seen rising to R741bn in 2011/12 before reaching R927bn in 2013/14.

Government proposes spending R150bn over three years as it tries to create 5 million jobs by 2020.

The dedicated HIV/Aids allocation to provinces will increase dramatically over the next three years, according to Budget documents tabled on Wednesday.

Spending on their HIV/Aids conditional grant would rise from R6 billion this year, to R10.6bn in 2013/14, National Treasury said in its Budget Review.

Smokers will pay 80 cents more for a packet of cigarettes - while a can of beer will cost them 6.4 cents more, a bottle of wine 13.5 cents and a bottle of sprits R2.86.

The general fuel levy will increase by 10 cents a litre of petrol and diesel from April 6th.

State old age pensions will go up by R60 a month, to R1140, with effect from the beginning of April.

An additional R4.9bn will be allocated for housing and municipal services over the next three years

With REUTERS, SAPA