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Pre-Budget Presentation: Leftward Liaisons

Explore the economic impact of the energy crisis, potential job losses, GDP loss scenarios, tax revenue implications, and alternative energy solutions. Understand the correlation between household debt, savings, and tax revenues. Delve into fiscal policies, budget sustainability, and the balance between social spending priorities and education expenditures.

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Pre-Budget Presentation: Leftward Liaisons

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  1. Pre-Budget Presentation: Leftward Liaisons Presented by: Dawie Roodt 6 February 2008

  2. Chairman and Chief EconomistEfficient Group81 Dely RoadHazelwood0081Tel: (012) 460-9580Cell: 082 456 0204Email: dawie@efgroup.co.za Dawie Roodt

  3. Intro

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

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

  6. A Quick Eish’kom Calculation Vision:"Together building the powerbase for sustainable growth and development."

  7. 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%)

  8. 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

  9. 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

  10. Extra Load Shed on Consumers

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

  12. ‘Demand Side Management’ • 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 BULL!

  13. Economic Overview:The Grazing Ground

  14. Economic Overview

  15. Credit Demand Source: SARB and own calculations

  16. Household debt to disposable income 59.4% 56.9% 50.2% 44.5% Source: SARB and own calculations

  17. Savings to disposable income of households 9.2% 5.4% 2.6% 0.5% Source: SARB and own calculations

  18. Is Tax Crowding Out Savings..? Income Tax Revenue from Companies and Individuals vs Private Sector Savings Crowding Out ?

  19. Inflation 14.6% Inflation bracket 10.0% 5.3% Source: StatsSA and own calculations

  20. Interest rates

  21. GDP at Market Prices Source: StatsSA and own calculations

  22. Fiscal Policy

  23. Background Dissaving Gold

  24. Budget Sustainability Main Budget and Structural Budget Balances, 2000/01 – 2010/11 Source: Fiscal Policy, 2007 MTBPS

  25. FISCAL 2007/08…

  26. Revenue: Fiscal 2007/08

  27. Contribution to Fiscus

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

  29. Redistribution *Average family consists of 4 people, aggregates taken per capita Source: Efficient Research

  30. Individual Tax Rate, per Country (2006) Denmark Ireland Median: 36.0% Russia Average: 35.4% South Africa USA Source: worldwide-tax.com

  31. Company Tax Rate, per Country (2006) Egypt Median: 29.0% USA Average: 26.6% South Africa South Africa + STC (’07) Ireland South Africa + STC (’06) Bulgaria Source: worldwide-tax.com

  32. VAT Rate, per Country (2006) Median: 18.0% Average: 16.7% Source: worldwide-tax.com

  33. 2007/08 in Review:Revenue

  34. Expenditure: Fiscal 2007/08

  35. Spending Priorities Social Spending

  36. 2007/08 in Review:Expenditure * Includes: Contingency Reserve (R3.0bn)

  37. Expenditure Analysis:Money Well Spend?

  38. Health

  39. 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)

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

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

  42. Eddjucation

  43. Education expenditure comparison (2002-2004 as available) Lesotho South Africa (’06 & ’07) Average: 4.7 Zimbabwe Equatorial Guinea Source: Human Development Report, 2006 (undp.org)

  44. The Reading Literacy of Fourth Grade Students Russian Federation(565) United States (541) Macedonia (439) South Africa (302) High Intermediate Low None Source: US Department of Education, PIRLS 2006

  45. Breakdown: Population Education Source: Community Survey 2007, StatsSA

  46. SC HG Maths & Science Passes Source: Dep of Education, Education Statistics in SA at a glance , SC Examination Results, 2006

  47. Enrolment for SC HG Maths and Science as % of SC enrolment 13.3% 9 % Source: Dep. of Education, Education Statistics in SA at a glance , SC Examination Results, 2006

  48. Government Targets for SC HG Maths passes vs Actual passes • Achieved • Targets Sources: Dep. of Education, Statistics in SA at a glance, 1999 – 2005; Senior Certificate Examination Results, 2006.

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