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SOUTH AFRICA/BUDGETBack
[Published: Thursday February 26 2015]

South African budget raises taxes

Pretoria, 26 Feb - (ANA) - South Africans were told yesterday to prepare for higher taxes, cutbacks in spending and three more years of power cuts. The government's annual budget outlined a 1% increase in personal income tax and spending cuts of 25bn rand (£1.4bn; $2.2bn) over the next two years. Projected economic growth for 2015 is 2%, down from 2.5% forecast last year. Finance Minister Nhlanhla Nene warned the economy would suffer from another three years of power disruptions. Economic growth could even halve again down to just 1% this year if power constraints worsened. He said state-owned power group Eskom faced a 200bn rand funding gap up to 2017. Eskom will receive a capital injection of 23bn rand this year, to be raised through the sale of non-strategic government shareholdings in some state-owned companies. Electricity prices will rise to finance Eskom's rebuilding of the country's power infrastructure. Mr Nene said he would also introduce a temporary increase in the electricity levy, to 5.5 cents per kilowatt hour (kWh) from 3.5 cents/kWh. "The most important challenges facing the economy are unemployment and the security and reliability of the energy supply," he said. "Today's budget is constrained by the need to consolidate our public finances, in the context of slower growth and rising debt." Economic growth in 2014 was 1.5%, dragged down by prolonged labour strikes in the key mining sector as well as energy shortages. Mr Nene called for moderation in wage increases to spur faster growth and create more jobs. The unemployment rate stands close to 25%. Public sector union Nehawu is in talks relating to demands for pay increases way above inflation. The Treasury forecasts inflation will be 4.3% in 2015, and rise to 5.6% in 2016. The budget also included spending cuts of 25bn rand over the next two years, while maintaining core social and economic programmes. (ANA)
FA/ANA./26 February 2015--------------
 

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