2. Budget Presentation:“Leftward Liaisons” Presented by: Dawie Roodt 4 March 2008

3. A clear leftward shift can be seen in political leadership…

5. ..But in the mean time the old guard still rules…

6. In This Presentation: • Economic Overview • Fiscal Background • 2007/08 Revenue • 2007/08 Expenditure • Social Expenditure Analysis • Funding • Budget 2008/09 - Highlights

7. Economic Overview:The Grazing Ground

8. Economic Overview

9. Inflation Inflation bracket CPIX Ave: 5.9% Source: StatsSA and own calculations

10. Interest rates Toothless SARB Source: SARB and own calculations

11. R60bn ‘investment’…? A Quick Eish’kom Calculation Vision:"Together building the powerbase for sustainable growth and development."

12. Load Shedding: The 3 Hour Effect Average GDP per day: • GDP, 2007 (current): R1,973.4bn • Workdays: 240 • GDP per day: R8.3bn Average GDP per sector: • Allocate equal weights to GDP sectors: (3 out of 24) • Loss per day: R1.1bn (13.3%) Average GDP loss per sector: • Allocate weights to GDP sectors: • Finance, real estate and business services (3 out of 8) • Mining and quarrying (3 out of 24),etc. • Loss per day: R1.9bn (22.8%)

13. Potential Job Losses • Case Study: • +/- 400 000 employees in Mining Sector • Mining production at 90% electricity – Lose 15% - 20% • 1% loss in production = 1% reduction in workforce • Thus, potential reduction in mining workforce: • 60 000 – 80 000 jobs lost • Source: Thousands face job chop at GFI, 31 Jan 2008, Fin24

14. GDP Loss: Base-Case Scenario Revised Growth Estimate: 4.6% to 3.0% Loss in real terms: R19.76bn Potential Tax Revenue loss: R5.9bn

15. ExtraLoad Shedon Consumers

16. ‘Alternative Energy’ Cost - Generator Source: Efficient Research

17. ‘Demand Side Management’ • Electricity Levy (2c per KWh) • Efficient Lighting Roll-Out Programme • Compact fluorescent light fittings (CFL’s) • Solar Water Heating Programme • Government subsidise 20% – 30% • Cost R7 000 – R20 000 (R25 000) per geyser • Fuel Switching • Liquefied Petroleum Gas used in cooking maybe not such a bright idea…

18. Fiscal Policy:Background

19. Background Deficit Gold Surplus

20. FISCAL 2007/08…

21. Revenue: Fiscal 2007/08

22. Contribution to Fiscus

23. Is Tax Crowding Out Savings..? Crowding Out ? Source: SARB Quarterly Bulletin, December 07 & MTBPS Oct 07; Efficient Research

24. Is Tax Crowding Out Savings..? Crowding Out ? Source: SARB Quarterly Bulletin, December 07 & MTBPS Oct 07; Efficient Research

25. Registered Income Tax Payers Source: Fin24, Sep 2007

26. Tax Comparison: Companies Egypt Median: 29.0% USA Average: 26.6% South Africa South Africa + STC (’07) South Africa + STC (’06) Ireland Bulgaria Source: worldwide-tax.com

27. Tax Comparison: Individuals Denmark Ireland Russia Median: 36.0% Average: 35.4% South Africa USA Source: worldwide-tax.com

28. Tax Comparison: VAT Median: 18.0% Average: 16.7% Source: worldwide-tax.com

29. Results... • Tax Burden shifted to companies • Crowding out of Individual and Company savings • Few income tax payers • Internationally: • Income tax rates high • VAT tax rate low

30. 2007/08 in Review:Revenue

31. Reasons collection changes • Individual tax • Employment and Wage increases (inflation) • Company tax • Consumption driven • High commodity prices • STC • High profits • Foreign demands • VAT • Larger VAT refunds

32. Lower VAT Collection Reasons Why: • Larger VAT refunds • Higher non-wage input costs • Higher levels of fixed investment • Inventory accumulation caused by moderation in household consumption expenditure Household Consumption Expenditure Trends (2007 Quarter Three): • Durable goods: Lower vehicle sales (consumer confidence, industry strike) • Semi-durable goods: Lower sales of clothing and footwear • Non-durable goods: Lower sales of food, beverages and tobacco • Services: Slower growth in financial services sector, consumer spending on banking services Sources: MTBPS October 2007, SARB Quarterly Bulletin December 2007

33. Final Consumption Expenditure by Households Source: SARB and Efficient Research forecast

34. Expenditure: Fiscal 2007/08

35. Total Expenditure Trend Over Time Source: SARB and Efficient Research Forecast

36. Spending Priorities Social Spending

37. 2007/08 in Review:Expenditure * Includes: Contingency Reserve (R3.0bn)

38. Social Expenditure Analysis:Money Well Spent?

39. Health

40. Public Expenditure on Health Comparison (2003-04) Iceland Cuba Malawi South Africa (‘04&’06) Average: 3.5 South Africa (’07) Median: 3.0 Myanmar Source: Human Development Report, 2006 (undp.org)

41. Private Expenditure on Health Comparison 2004 United States South Africa Average: 2.5 Solomon Islands Source: Human Development Report, 2006 (undp.org)

42. Core Health Care Indicators Source: World Health Statistics 2007, WHO (www.who.int)

43. Public Health Expenditure (2003) vs. Physicians 2004) Source: Human Development Report, 2006 (undp.org)

44. Education

45. To Stay or Not to Stay...?? Source: Documented Migration Publication, StatsSA

46. To Stay or Not to Stay...?? Sources: Economic Indicators, Economist. UN HDI 2007/2008, 7th UN Survey of Crime Trends 1998 – 2000

47. Importing Skills – A realistic solution..? Canada (3rd) US (1st) UK (7th) India (17th) Australia (6th) China (26th) South Africa (30th) Source: “Mapping Global Talent” - Heidrick&Struggles and The Economist Intelligence Unit, 2007

48. Education Comparison *Weighted Average (190 countries) Source: World Development Indicators Database, Human Development Report, 2006 (undp.org)

49. The Reading Literacy of Fourth Grade Students Russian Federation(565) United States (540) Macedonia (442) Qatar (353) Morocco (323) South Africa (302) High Intermediate Low None Source: US Department of Education, PIRLS 2006

50. Breakdown: Population Education Canada – 50.6% Ireland – 47.9% Japan – 47.7% U.S. – 39.0% Mexico – 18.1% Poland – 15.3% Hungary – 14.75% Source: Community Survey 2007, StatsSA