The NDP targets an annual growth rate of more than 5% per year. This would double the resources available to government in the next two decades.
The present reality is that growth is more modest. The economic turbulence we experienced in the second half of last year has resulted in a revenue shortfall that amounted to R16,3 billion, potentially. The deficit is now estimated at 5,2% of the GDP as opposed to the 4,8%, as we thought in October 2012-13. The growth outlook for the next three years has weakened, and government's net debt is now expected to stabilise marginally higher than 40% of the GDP, but still at a sustainable level.
In the Medium-Term Budget Policy Statement, we noted that if the economic environment were to deteriorate, government would reassess its revenue and spending plans to secure South Africa's fiscal footing. In these circumstances, our approach involves several elements, which are outlined as follows: additional measures to control spending, reducing real expenditure growth to an average of 2,3% over the next three years, as compared to 2,9% that we signalled in October 2012; a reduction in the budget deficit to 3,1% by 2015-16 - a level consistent with the stabilisation of debt; steps to reinforce growth, building on the competitiveness enhancement programme that was introduced last year; the initiation of a tax policy review - a review committee will be established and chaired by Judge Dennis Davies, and other names will be added later; a comprehensive review of expenditure, focusing on both spending controls and value for money in government programmes and agencies; and strengthening the capacity of the state to implement our plans and programmes. All of these indicate to you, and indeed to the South African public, that President Zuma's government and Cabinet are capable and do take tough decisions when necessary, and these serve as an example to this effect. [Applause.]
Government is committed to remaining within the expenditure ceiling set out in the Budget. New policy initiatives, over the next three years, will be financed from savings, efficiency gains and reprioritisation; no extra money.
Structural increases in spending require corresponding revenue increases if they are to be financed sustainably. If we succeed in driving growth towards 5% per year, and government revenues double in the next 20 years, major infrastructure projects and new policy initiatives such as the National Health Insurance, the NHI, programme and the expanded Vocational Education will be affordable, with limited adjustments to tax policy. However, if growth continues along the present trajectory, substantial spending commitments would require significant adjustments in revenue and reductions in other areas of spending. In other words, taxes could go up later.
On Parliament's request, the National Treasury has prepared a report that considers fiscal sustainability from a long-term perspective. The report is currently being considered within government, after which it will be tabled for Parliament's consideration.
Growing the real economy means expanding business activity and other relevant economic activity. We recognise the key role that the private companies and other enterprises play in our economy.
In the build-up towards the Budget, we engaged with several business leaders on the investment and development challenges we are facing in South Africa. Allow me to share with you some of their plans, which signal growing confidence in the business outlook, despite the difficult conditions that we are facing.
The following are a few examples: construction and refurbishment by a company in the hospitality sector of about R2,5 billion over the next 18 months, with the expansion of R3 billion in the pipeline; two telecommunications investments amounting to R14 billion this year; capital expenditure of R3,4 billion over the next three years by a rail and logistics operator; a R2,5 billion expansion and longer-term plans for R15 billion in mining projects; investments of R14 billion this year by a leading retailer, and plans to open 100 new stores by another; an expansion of R1,2 billion this year by a food and beverage sector firm; and plans for some R28 billion in long-term infrastructure investment by a leading industrial company, which will create 10 000 temporary and 4 000 permanent jobs.
In recent times, the world has become a more uncertain place for businesses, causing some to build cash reserves, both here in South Africa and outside of South Africa, rather than investing in new or expanding operations. As government, we wish to encourage businesses to keep investing in our economy and seize the opportunities around us. We are therefore reinforcing several initiatives that support business development.
The Manufacturing Competitiveness Enhancement programme announced in 2012, has received a total of 215 applications with requests for grants totalling R2,3 billion mainly from the chemicals, metals and agro-processing sectors. Applications are expected to increase over the period ahead and funding of R1,7 billion per year has been provided on the budget of the Department of Trade and Industry. The Special Economic Zone programme, also announced last year, has received funding to build world-class industrial parks. We are in discussions with Minister Davies ... go ahead and clap, we need a bit of a break ... [Applause.] ... on specific incentives to enhance this initiative.
The Jobs Fund, announced in 2011, has concluded two calls for proposals. As many as 3 600 applications have been received, 65 projects are on their way, and grant funding of some R3,3 billion's has been approved, matched by a further R3,1 billion from the private sector. So it is R6 billion commitments in all.
The small, medium and micro enterprises, SMMEs, play a key role in the development of the economy and are a significant generator of employment. Financing of SMMEs has been simplified with the creation of the Small Enterprise Finance Agency by Minister Patel. We have been working progressively to simplify tax requirements for small businesses, and you will hear about some of it later. The turnover threshold will be increased this year and the graduated rate structure will be revised as well.
Africa is our home, and indeed it is our future. It is a market of over one billion people and it is growing far more rapidly than South Africa. The National Development Plan acknowledges the global shift of economic power from West to East, and highlights the rise of Africa.
Indeed, we have already begun to see our trade patterns shift from traditional partners in Europe and the United States to new markets in Asia and Africa. Africa now accounts for about 18% of our total exports, and nearly a quarter of our manufactured exports, although largely in the Southern African Development Community, SADC.
The SA Reserve Bank had over the past five years approved nearly 1 000 large investments into 36 African countries. These are mutually beneficial, as they support development in those countries and also generate tax revenue, dividends and jobs, both abroad and in South Africa. To further support the private sector in expanding operations in Africa, I will announce simpler rules that will reduce the time and cost of doing business in Africa.
A number of measures are proposed to relax cross-border financial regulations and tax requirements for companies, making it easier for banks and other financial institutions to invest and operate in other countries. Similar measures will apply to foreign companies wanting to invest in African countries using South Africa as their regional headquarters. [Applause.] The outward investment reforms that apply as part of the Gateway to Africa reforms will also pertain to those companies that seek to invest in countries outside Africa, including Brazil, Russia, India, China and South Africa, the Brics countries.
In addition, substantial direct investments in regional development are under way. We are helping to build infrastructure that will create opportunities for South African companies to expand their trade and investment across the border.
The Development Bank of SA, the DBSA, is accelerating investment into the SADC region. We are supporting infrastructure projects in multiple countries, particularly in the key areas of electricity generation and transmission, and in strengthening road links in the region.
Investment by the Industrial Development Corporation, the IDC, in 41 projects across 17 countries totalled some R6,2 billion in 2012. The bulk of these projects are in mining, industrial infrastructure, agro-processing and tourism.
As part of its long-term strategy to help secure energy supply for South Africa and the region, Eskom is considering options for investment in several regional generation and transmission projects.
Next month, the President will be hosting the Fifth Annual Brics Summit, which brings together Brazil, Russia, India, China and South Africa. The summit will unveil the work we have been doing with our Brics partners on the following, amongst other projects, the possible establishment - indeed the probable establishment of a Brics-led bank, which is intended to mobilise domestic savings and cofund infrastructure in developing regions and the pooling of members' foreign exchange reserves with the view of using them to support each other during the times of balancing of payments or currency crisis. Collectively, Brics countries hold reserves totalling US$4,5 trillion. [Interjections.] [Applause.] Our colleague is trying to work out the noughts.
Work is under way to create a trade and development insurance risk pool. The aim is to establish a sustainable and alternative insurance and reinsurance network for the Brics countries. These are about a few examples - my other colleagues in Cabinet are working on a lot more other projects.
We are reminded that South Africa needs to invest in a strong network of economic infrastructure, designed to support the country's medium- and long- term social objectives.
Over the next three years, R827 billion is planned to be spent by the fiscus and state-owned companies to build infrastructure. The financing for these projects is in place, and is not affected by the spending cuts in the Budget.
The fiscus has allocated just under R430 million over the next three years for schools, hospitals, clinics, dams, water and electricity distribution networks, the electrification of over a million new homes, sanitation schemes, the building of more courtrooms and prisons, and improved bus, commuter rail and road links. Most of the spending falls under provinces and municipalities.
Eskom, Transnet and other state-owned companies fund a further R400 billion in projects, which will be financed both through their resources and additional borrowing over the next three years, in most instances, supported by Treasury guarantees. The ongoing building of power generation plants and new transmission lines, investment in rail, ports and pipelines, large new water transfer schemes and various airport upgrades will be funded from this amount.
Of course, we are well aware that there are parts of government that struggle to spend their full infrastructure budgets. It is important to bear in mind that spending programmes have become more ambitious, funding levels have increased and pressure to deliver has intensified. Records show that government's ability to spend has been steadily rising from year to year. We, however, all know that it is not good enough.
On this challenge, one South African, Willie du Preez, expresses concern about whether infrastructure investment is actually taking place. He suggests, and I quote:
As a citizen, one should be able to obtain from the Treasury's website at the end of each financial year what amount was spent on what infrastructure.
Mr du Preez, you can already obtain that information from the Treasury's website, not just every year, but every month. [Applause.] I am sure that as the PICC process advances, that structure will be able to offer more information as well.
Our urban areas make a vital contribution to the national economy, hosting factories and offices and many work opportunities, and will always be attractive to young people who are seeking a better life. It is little surprise then that Census 2011 shows that 62% of South Africans are now living in our cities and towns, and that the population of some municipalities grew by over 50% between 2001 and 2011 - in 10 years.
The challenge we are facing of highly inefficient, segregated and exclusionary divides between towns and townships imposes costs not only on the economy and the fiscus, but also on workers, families and communities.
A new formula for the local government's equitable share will be introduced in 2013-14. It recognises the need better to differentiate the assistance given to different municipalities, including those in rural areas particularly. [Applause.] Municipal infrastructure grants will also be re- aligned, and go hand in hand with the more integrated planning of new developments, so that we can make meaningful strides in overcoming the spatial inequalities of the past.
The New Development Plan and our own commitments to the climate change process further call on government to send a signal out to the industry and the consumers to indicate that we are living in an environmentally stressed world.
So government proposes to price carbon by way of a carbon tax at the rate of R120 per ton of CO2 equivalence - very techno jargon - effective from 1 January 2015. To soften the impact, a tax-free exemption threshold of 60% will be set, with additional allowances for emissions-intensive and trade- exposed industries. An updated carbon tax policy paper will be published for further consultation by the end of March 2013. Support mechanisms for both biofuel production and the upgrade of oil refineries to cleaner fuel standards will be introduced to ensure that South Africa produces fuel that is more environmentally friendly.
In addition, government continues to direct spending towards environmental programmes, such as installing solar water geysers, procuring renewable energy, low carbon public transport ... I see Minister Molewa has a new car, and I hope she would lend it to us some time ... [Interjections.] ... cleaning up of derelict mines, addressing acid mine drainage, supporting our national parks and, in particular, saving our rhino population, which remains under threat. [Applause.]
We are also encouraging the private sector and smaller public entities to be creative and develop low-carbon projects through the Green Fund. In the first call for proposals, 590 applications were received. The R800 million that was previously allocated is to be topped up with an additional R300 million.
The National Development Plan recognises that reducing the cost of living is essential for broadening economic participation and eliminating poverty. Alongside the economic wage, as we call it, earned through work, the social wage provided by government is a steadily rising contribution to improving the living conditions of working people and their families.
Substantial growth in social spending over the past decade has financed a three-fold increase in the number of people receiving social grants, a doubling in per capita health spending, construction of 1,5 million free homes and the provision of free basic education to the poorest learners. The impact is evident in improved living standards, expanded access to basic services and the changing landscape of both urban and rural areas.
The social assistance budget has increased in part by an average of 11% per year since 2008-09 due to the extension of the child support grant to the age of 18 years. Spending on social assistance will rise to R120 billion next year. The old age and disability grants will increase in April from R1 200 to R1 260 per month. [Applause.] The foster care grant will increase from R770 to R800 per month ... [Applause.] ... and the child support grant will increase to R290 per month in April and R300 per month in October. [Interjections.] [Applause.]
It is also proposed that the old age grant means test should be phased out in 2016, and accompanied by off-setting revisions to the secondary and tertiary rebates that are in the income tax system. All citizens over a designated age will be eligible for the grant, which will simplify its administration and address the disincentive to save that arises from the present means test. [Applause.]
Alongside social assistance, access to health care is a vital element in the social wage. There has been progress in reducing mortality and improving our HIV and TB programmes, and an expansion in medical and nursing training capacity is under way under the very tough hand of Minister Motswoaledi. Pilot National Health Insurance projects have been initiated this year in 10 districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms. A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in co-ordinating these reforms.
The initial phase of the NHI development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase - I am going to say will be needed - it might be needed, I hope. The National Treasury is working with the Department of Health to examine the funding arrangements and system reforms required for the NHI. A discussion paper inviting public comment on various options will be published later this year.
Government's contribution to housing and basic municipal services is a substantial component of the social wage. The budget for housing and community amenities has increased by over 16% per year since 2008.
Progress continues to be made in extending access to housing, electricity, water, sanitation and refuse removal services. The main contribution of the national Budget to the financing of household amenities is the local government's equitable share. A new equitable share formula, as I have indicated earlier, is proposed in this Budget and will provide a subsidy of R275 for every household with a monthly income that is less than R2 300, or about, as I have pointed out earlier, 59% of all households. [Applause.]
We also recognise that many businesses provide their employees with housing assistance or housing loans. However, the current fringe benefit tax is unduly burdensome in cases where an employer transfers a house to a low- income worker at a price below market value. Tax relief is proposed to address this difficulty and to make this process less expensive. [Applause.]
The social wage complements employment earnings and contributes to a more equitable and inclusive economic growth path. National health insurance and further steps in social security reform will also reinforce social solidarity and a decent work agenda. However, social spending is not a substitute for job creation and for people having jobs. [Applause.] We must all agree, as the President has indicated on many occasions, that every able-bodied person in South Africa should have a job, the dignity of a job and the security of income. [Applause.] At the same time we know that it is not going to happen tomorrow morning, so the social wage plays a very important supportive role in our communities. [Applause.]
As I indicated earlier, one of our most pressing development challenges is to expand work opportunities for young people. There has been extensive debate on how this should be done. As I indicated earlier as well, the answer is that a wide range of measures that include further education and training; public employment opportunities; and support for job creation in the private sector, are needed.
To complement these existing programmes - I am repeating this so that you understand it - a tax incentive aimed at sharing the costs of employing young work seekers will be tabled for consideration by Parliament so that the private sector and government can share costs. It will help young people enter the labour market to gain valuable experience and access career opportunities. As I pointed out, a similar incentive is proposed for eligible workers of all ages within the intended special economic zones.
In last year's Budget, I indicated the need for South African households to save more. I am now able to announce the following proposals for consultation with all stakeholders before we introduce the necessary legislation this year.
Tax-preferred savings and investment accounts will be introduced in 2015. There has been a lot of research work done in this area; retirement funds will be required to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs. It means that you have to keep your retirement funding safe so that you can actually enjoy your retirement on your own savings; retirement funds will be required to guide their members through the process of converting savings into a regular income - what people would call an annuity - after retirement and to choose or establish default annuity products that meet appropriate principles and standards. More competition will be promoted by allowing providers other than life offices to sell living annuities; the tax treatment of pension, provident and retirement annuity funds will be simplified and harmonised; and governance reforms of retirement funds will be implemented, with measures in place to ensure that trustees of retirement funds are trained once they have been appointed. I intend to call a conference of all trustees this year to take this process further.
We are also considering how to encourage all employers to provide appropriate retirement mechanisms for their employees as part of the broader social security reforms. In implementing these reforms, the vested rights of current members of retirement funds will be protected.
Let me take this opportunity to confirm that the Government Employees Pension Fund has remained fully funded despite the turmoil in financial markets in recent years. [Applause.] A 6% increase in Public Service pensions will be effected in April this year for retirees. [Applause.]
There has been rapid growth in unsecured credit in recent years. The share of new mortgage lending has fallen rapidly and is now less than or almost equal to both new vehicle credit and new personal loans. We will engage with the banking sector to explore how to increase the level and share of new mortgage loans. Small business financing must also be supported to a far greater extent than is currently being done.
We are concerned about the abuse of emolument attachment orders that have left many workers without money to live on after they have serviced their debts every month. We are in discussion with the National Credit Regulator, the Department of Justice and banks to ensure that the lending market remedies its behaviour. In the meanwhile, all employers, including the public sector, can play a role in assisting their workers to manage their finances and to interrogate all emolument attachments, or garnishee orders as they are called, to ensure that they have been properly issued. I also call on the various law societies - and I'm sure the Minister of Justice will help me in this regard - to take action against members who abuse the system. [Applause.]
Now for the important part, where you have to pay more tax. Allow me to turn to the revenue or tax proposals. As I indicated, we find ourselves in a challenging period, with revenues lower than expected by probably R16,3 billion compared with estimates at the time of the 2012 Budget a year ago. This is predominantly due to weak economic growth during the second half of 2012, the disruptions that we have seen in the mining sector and lower commodity prices for the structural reasons I outlined earlier. Tax revenues are expected to improve over the medium term in line with higher economic growth and the stabilisation of key commodity prices.
Over the past decade, we have steadily broadened the tax base, both through policy reforms and improved revenue administration. This has made substantial tax relief possible. Sometimes my predecessor used to be Father Christmas in February, giving tax breaks to everybody in the years gone by, contributing both to household disposable income and a lower cost of doing business.
The main tax proposals for 2013 are as follows: The good news is that there are no tax increases. [Applause.] In fact, we are giving personal income tax relief of R7 billion to remove most of the fiscal drag, together with adjustments to the medical tax credit and other monetary thresholds, amounting to about R350 million; reforms to the tax treatment of contributions to retirement savings that you will find in the details; as I pointed out, an employment incentive through the tax system, that must be registered through Parliament because it has to be part of the Budget process; further tax relief for small businesses, including an increase in the monetary tax thresholds applicable to small business corporations - this will give them some relief - an overall increase of 23 cents per litre on fuel levies in April, which includes 8 cents per litre for the Road Accident Fund levy ... [Interjections.] That's the part you won't like ... [Interjections.] ... increases in excise duties on alcohol and tobacco products of between 5,7% and 10% ... [Interjections.]... and, as I pointed out earlier the introduction of carbon tax in 2015, together with the phasing-out of the electricity levy. So your pack of cigarettes or can of beer is going to cost marginally more. [Applause.]
As I pointed out, a tax review will be initiated this year to assess our tax policy framework and its role in supporting the objectives of inclusive growth, employment and development. Above all, fiscal sustainability will be looked at.
The Budget Review outlines various measures proposed to protect the tax base and limit the scope for tax leakage and avoidance. The taxation of trusts will come under review in order to control some of the abuse that goes on at present. Modifications are proposed to the tax treatment of employment share schemes and disability or income-protection policies; outstanding difficulties in the distinction between debt and equity will be addressed; and it is proposed that foreign businesses that sell e-books, music and other digital goods and services to South Africans should be required to register as VAT vendors, in line with our VAT regulations. [Applause.] These are the same provisions that have been adopted by the European Union and other jurisdictions across the world.
With regard to tax administration, millions of honest taxpayers in our country continue to sustain our growth and development agenda. As I often remind you, it is their money that we spend and are talking about today. To them we owe a debt of gratitude and, more importantly, a commitment to spend that money wisely, efficiently and effectively. [Applause.]
Let us give a loud and joint thank you to all tax-compliant citizens of South Africa. [Applause.] Anybody who is feeling guilty about not paying their fair share can see Commissioner Magashula later on. [Laughter.] We also owe it to our taxpayers to ensure that they are not carrying the burden of those who benefit from our country's infrastructure and resources without paying their fair share of the costs.
Around the world, taxpayers and their governments are challenging large multinational companies that pay little or no tax in the countries in which they operate and that they profit from. Meeting in Moscow earlier this month, finance ministers and central bank governors of the G20 countries were united in supporting an overhaul of international company tax rules to address this issue. [Applause.]
The SA Revenue Service, Sars, is currently engaging with companies that have their base of operations in South Africa, which means they operate here, they make their money and profits here, but appear to have shifted a large proportion of their profits to low-tax jurisdictions, where only a few people are employed and very little tax is paid in South Africa. This is unacceptable! [Applause.] Sars is also pursuing schemes identified under the revised general anti- avoidance rules following several years of painstaking work in tracing transactions through multiple jurisdictions and entities. These benefits typically accrue to advisers and pre-existing shareholders, rather than new shareholders who were introduced as the ostensible beneficiaries of these transactions. These are all schemes that require very careful attention.
Hon members will remember that a temporary, voluntary disclosure programme was implemented under legislation enacted in 2010 which allowed taxpayers in default to regularise their tax affairs. More than 18 000 taxpayers have made use of this programme and tax of more than R3 billion has been collected so far as a result of this programme. [Applause.] This morning Minister Sexwale had a special request for me that I shouldn't praise any of these people, because they had been dodging tax. From 1 October 2012, a permanent, voluntary disclosure programme, as part of the Tax Administration Act, became effective. Some 700 taxpayers have already come forward. Tax of more than R200 million will be collected before the end of March 2013.
Sars is also targeting other areas of noncompliance, including recipients of government expenditure who are not up to date with their taxes. To put it more simply, people get tenders and contracts from the state, but they don't pay tax to the state. [Applause.] Together with Treasury, and in interfacing with government department payment schemes, Sars has identified companies that have received payments but have not declared their full income tax. They are being audited and others will follow. We do have sufficiently developed systems which allow us to know who received, and how much they received from the state. We are now sending auditors to all of them, or as many of them as possible, and we are telling them to show us that they have paid their fair share of tax. [Interjections.] [Applause.] This intervention will be further underpinned by the reform of the Tax Clearance Certificate process that I announced in October.
In the near future, Sars will introduce a single registration process in which companies are able to register once in a simple manner for all tax types and customs activities. On this point we can perhaps consider adding the suggestion by Amanda Hayes, who runs a small business in Cape Town. She proposes that a single database of suppliers to government be created out of all the companies that apply to Sars for tax clearance certificates. In addition to reducing the burden on small businesses, Amanda says this database will help reduce corruption because of the tighter national oversight over companies who are registered on this database. Thank you for your suggestion. [Applause.]
I have indicated many of the specific programmes and activities of government that contribute to our growth and social development objectives. Allow me to summarise the framework within which these allocations are made.
The 2013 Budget provides for continued real growth in spending to support service delivery and to expand investment in infrastructure. It will also accommodate the costs of the three-year Public Service wage agreement signed last year. In the past we were able to add substantially to medium- term spending plans during the Budget, but this year is different. Money has been taken away from certain programmes that are not performing or are not aligned to government's core priorities and given to programmes that are delivering as planned. [Applause.]
The main appropriation provides for R1,055 billion in expenditure next year, rising to R1,2 trillion in 2015-16. Debt-service costs, which is the interest that we pay on our debt, will come to R100 billion next year and R4 billion is set aside as a contingency reserve. This leaves R951 billion to be divided between the national, provincial and local spheres.
National departments are allocated 47,6% of available funds in 2013-14. Provinces are allocated 43,5% mainly for education, health and social welfare. Local government receives 8,9% primarily for providing basic services to low-income households.
Allocations from the contingency reserve will be made later in the year, mainly for unforeseeable and unavoidable expenditure. Work is in progress to determine funding requirements for reconstruction and rehabilitation following flood damages in the Western Cape, KwaZulu-Natal, Limpopo and Mpumalanga. An allocation will also be made in the adjustments appropriation for the Dinaledi schools' connectivity programme and other broadband infrastructure projects, subject to the finalisation of implementation plans.
The equitable division of revenue between provinces and municipalities takes into account the 2011 Census, which shows substantial shifts in the distribution and age structure of the population since 2001. The changes to provincial and municipal allocations will be phased in over a period of time to avoid the disruption of services.
The provincial equitable share amounts to R338 billion in 2013-14 and conditional grants to provinces will total R77 billion. Additional allocations have been made to increase the employment of social workers and to provide additional support to nongovernmental organisations that provide critical welfare services. There is additional funding for teachers in the poorest 20% of schools and Grade R classes, and for community library services. Provinces are also funded for an expansion in HIV and Aids programmes and an improved tuberculosis, TB, diagnosis system.
Infrastructure transfers to provinces have increased sharply in recent years, growing from R4,8 billion in 2005-06 to R39,7 billion in 2012-13. To improve the quality of spending, the application process for infrastructure grants is being revised. Provinces will be required to submit building plans two years ahead of implementation and will only receive allocations if plans meet certain benchmarks. [Applause.]
A total of R85 billion is allocated for transfer to municipalities in 2013- 14, rising to R101 billion in 2015-16. Additional allocations are made for municipal water infrastructure, public transport and integrated city development.
There is considerable detail in the Budget Review and the Estimates of National Expenditure - the thickest book that you see here - on government spending plans and service-delivery targets. I will highlight just a few points.
Consolidated government expenditure is budgeted to increase by 8,1% a year, from R1,1 trillion to R1,3 trillion in 2015-16, but still within the parameters that I outlined earlier.
Allocations for job employment programmes increase by 13,5% a year over the next three years. There will be higher funding for employment projects of nongovernmental organisations and for Working for Fisheries. Minister Joemat-Petterssen, do we see a smile? The Expanded Public Works Programme aims to support 684 000 full-time equivalent jobs in 2013-14. Additional allocations are also made to the sheltered employment factories of the Department of Labour, and to support the work of the Commission for Conciliation, Mediation and Arbitration. [Applause.]
Consolidated spending on health and social protection will be R268 billion in the coming year. Health infrastructure remains a priority. In 2012, a total of 1 900 health facilities and 49 nursing colleges were in different stages of planning, construction and refurbishment. Substantial improvements in the social assistance payment systems are in progress, providing easier access for recipients to their grants. The cost of social grant payments has been reduced from R32 to R16 per disbursement. Thank you, Minister Dlamini. [Applause.]
Spending on education, sport and culture will amount to R233 billion in 2013-14. Over the period ahead, the basic education sector will focus on improving numeracy and literacy, expanding enrolment in Grade R and reducing school infrastructure backlogs. Together with the broader education infrastructure grant, approximately R24 billion is available to provincial education departments for infrastructure over the next three years, but they must spend that money. [Interjections.]
An amount of R700 million has been allocated over the Medium-Term Expenditure Framework, MTEF, period for the technical secondary schools' recapitalisation grant. This will finance the construction and refurbishment of 259 workshops and the training of over 1 500 technology teachers.
Transfers to higher education institutions increase from R20,4 billion this year to R24,6 billion in 2015-16. The total number of students enrolled in higher education institutions is expected to increase from the current 910 000 to 990 000 in 2015. Funding has been allocated for the construction of new universities in the Northern Cape and Mpumalanga, to commence this year, as Minister Nzimande announced earlier. [Applause.]
Expenditure on economic services in 2013-14 will amount to R48 billion, including R5,3 billion for the Manufacturing Competitiveness Enhancement Programme and R2,9 billion for special economic zones. Additional allocations include R450 million over three years to the Economic Development Department for the Small Enterprise Finance Agency. The Department of Agriculture, Forestry and Fisheries will continue its support for smallholder farmers. Additional funding goes to the Department of Mineral Resources to support beneficiation and to rehabilitate derelict and ownerless mines. [Applause.] The allocation to the Department of Science and Technology includes R2 billion to support the Square Kilometre Array project. [Applause.] Expenditure on transport, energy and communications will amount to R89 billion next year. The allocation to the Department of Transport increases from R42 billion next year to R53 billion in 2015-16, reflecting increased allocations to the Passenger Rail Agency of South Africa for its rolling stock procurement programme and for further investment in the national road network. Additional funding goes to the integrated public transport networks in urban areas and for provincial road maintenance.
The integrated national electrification grant is allocated additional funding to increase the number of new electricity connections by approximately 645 000 over the next three years. The solar water geyser programme will be continued until 2015-16 and Sentech will receive R599 million over the medium term for the migration from analogue to digital terrestrial television. [Applause.]
Local government, community amenities and housing are allocated R132 billion in 2013-14. The largest increases go to the water treatment of bulk water and water distribution projects, and allocations to the local government equitable share. An amount of R4,3 billion is allocated to a new grant that will be administered by the Department of Water Affairs, providing for water treatment, distribution, demand management and support for rural municipalities. [Applause.] The Municipal Infrastructure Support Agency of the Department of Co-operative Governance receives R820 million to provide technical assistance to rural and low-capacity municipalities.
Funding for improving human settlements will grow from R26,2 billion to approximately R30,5 billion over the next three years, including R1 billion to support the informal settlement upgrading programme in mining towns. Social housing receives an additional allocation of R685 million.
The general public services function is allocated R57 billion. This includes the Sars budget of approximately R9 billion, which is just over 1% of revenue to be collected. The cost of collecting all those billions of rands is just 1%. Other agencies must start emulating that.
The Department of Public Works reprioritised R464 million over the medium term to fund its ... my scroller is moving too fast ... turnaround strategy, which focuses on lease and property management. [Interjections.] The Public Service Commission receives R71 million to combat corruption and address grievances.
Over the MTEF period, the Department of Home Affairs will spend R1 billion on its information systems modernisation programme, which has already led to substantial reductions in the time required to produce official documents. Congratulations, Minister Pandor. [Applause.] The allocations for defence, public order and safety amount to R154 billion in 2013-14. Provision is made for peacekeeping operations in the Central African Republic, where 400 defence force personnel have been deployed. The Department of Police has reprioritised R2,5 billion over three years to improve detective and forensic capability. The Department of Justice and Constitutional Development receives R1,2 billion for the criminal justice sector revamp and a modernisation programme. There is increased funding ... Minister Radebe is not happy ... [Applause.] ... allocated to the National Prosecuting Authority for the Thuthuzela Care Centres. The Public Protector of South Africa receives funding to increase its investigative capacity ... [Applause.] ... and additional funds ... you had better match them on this side ... [Applause.] ... are also made available to Legal Aid SA and the SA Human Rights Commission.
Last year I told this House that we would continually endeavour to increase the value that government receives for the money it spends. Let me be frank. This is a very difficult task with too many points of resistance around the country. However, we have registered some progress. In the present system, procurement transactions take place in too many localities and the contracts are too short-term. Consequently, there are hundreds of thousands of transactions from a multitude of centres across the country. There is very little visibility of these transactions. While our ablest public servants have had great difficulty optimising procurement, this process has yielded rich pickings for those who seek to exploit it. There are also too many people who have a stake in keeping the system the way it is. [Interjections.] Our solutions, hitherto, have not matched the size and complexity of the challenge. As much as I want, I cannot simply wave a magic wand to make these problems disappear. This is going to take a special effort from all of us in government, assisted by people in business and broader society, including the ladies and gentlemen on my left. [Interjections.] [Applause.] It will take, time but we are determined to make progress.
The process for setting up the Chief Procurement Office, CPO, and officer is in place and the National Treasury has deployed a senior Deputy Director- General, Mr Kenneth Brown, to this position. We have been given seconded personnel from the private sector to assist us in this unit, and work is well on its way. [Applause.] A project team seconded from state agencies and - as I mentioned - the private sector, has identified four main streams of work, involving immediate remedial actions; improving the current system; standardising the procurement of critical items, that we call transversal contracts; and the long-term modernisation of the entire system.
Amongst the first initiatives of this Office will be to enhance the existing system of price referencing. This will set fair value prices for certain goods and services. Some of this system already exists and some will be added on. Secondly, it will pilot procurement transformation programmes, and I want to thank the Ministers of the Departments of Health and Public Works, nationally and in the provinces, in this regard.
National Treasury is currently scrutinising 76 business entities with contracts worth R8,4 billion that we believe have infringed the procurement rules, while Sars is currently auditing more than 300 business entities and scrutinising another 700 entities. The value of these contracts is estimated at over R10 billion. [Applause.] So far 216 cases have been finalised, resulting in assessments amounting to over R480 million being raised. The Financial Intelligence Centre, FIC, has referred approximately R6,5 billion's worth of transactions for investigation linked to corrupt activities. I fully support Minister Sisulu's call for appropriate curbs on officials doing business with government. [Interjections.] [Applause.] I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act. [Applause.] [Interjections.]
Worldwide special measures are being taken to oversee the accounts of what have become known as politically exposed persons - public representatives and senior officials. I have asked the FIC to explore how we might bring South Africa into line with these international anticorruption and antimoney-laundering standards. [Interjections.] [Applause.]
Taxpayers, and indeed all South Africans, are understandably impatient for tangible change. A recurring theme in the tips sent to me for this Budget was to ensure value for money. Peter Maibelo, aged 24, from Pretoria, Tshwane, summed it up as follows:
Minister, I won't be fancy with words or complicated ideas. My advice for a healthy and sustainable fiscus is to brutally eradicate corruption. Then we will be honoured to pay taxes. [Applause.]
Mr Maibelo, while we are cleaning up the system, please continue to pay your taxes. [Laughter.] As I pointed out earlier, rooting out corruption requires a collective effort from all of us.
In conclusion, my sincere appreciation goes to President Zuma and Deputy President Motlanthe for their guidance and support throughout this year. It's been a difficult economic year. My appreciation also goes to colleagues of the Ministers' Committee on the Budget, for their continuous and vigorous engagement with the challenges that face us and their bold and steadfast advice to Cabinet.
Above all, I wish to thank my Cabinet colleagues, who collectively own this Budget. Their support and understanding for tough measures, including taking headcuts and haircuts, is highly appreciated.
A heartfelt thank you to Deputy Minister Nene, whose vigilant participation and sound advice is invaluable at all times. [Applause.] Thank you to the MECs of finance, who play a critical role as guardians of approximately 43% of our collective spending. They have a heavy responsibility.
In addition, our appreciation also goes to Governor Marcus and the Deputy Governors of the SA Reserve Bank for their constructive management of monetary policy. Thank you to Commissioner Oupa Magashula and the staff of the revenue service for their diligent contribution to fiscal stability. I hope better times return for them soon and they give us more money. [Applause.]
Thank you to the Financial and Fiscal Commission and its acting chairperson, Mr Khumalo, for their contributions to the Budget process. Thank you to Mr Jabu Moleketi, chair of the Development Bank of SA, DBSA, and its brand-new chief executive officer, Mr Dlamini, who are positioning the DBSA to make a greater contribution to infrastructure development. [Applause.]
Thank you to the chair of the Land Bank, Mr Ngubane, and in particular the CEO, Mr Hadebe, for his illustrious service to the bank. His turnaround strategy really worked. [Applause.] Thank you to the leadership of the Public Investment Corporation, PIC, the Financial Services Board, the FIC, and the Government Pension Administration Agency, for running a good show. Thank you to Mr Smith, the managing director of the National Economic Development and Labour Council, Nedlac, and the constituency representatives for their engagements with the Treasury, which I hope will continue to improve.
Thank you to the hon Thaba Mufamadi and Charel de Beer, who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the Appropriations Committees, the hon Sogoni and Chaane, who ensure that Parliament remains a vibrant forum for engagement ... [Applause.] [Interjections.] ... and participation.
Thank you to our Director-General, Lungisa Fuzile - and Mrs Fuzile - for his professionalism, frankness and profound commitment to building credible institutions and advancing government's objectives. [Applause.] Thank you to the rest of the management and staff of the National Treasury, whose extraordinary contributions to and caring for a better South Africa enhances our country's standing in all international fora. They produced all these documents. [Applause.]
Thank you to my chief of staff, Mr Mogajane, and the Ministry staff for their enthusiastic support, as well as to my family for making my contribution possible. [Applause.]
Finally, I must express sincere gratitude to South Africans from all walks of life and parts of South Africa who offer words of encouragement and assurance, as well as critiques and concerns. This is what keeps us accountable and drives us constantly to improve our performance as government. Thank you. [Applause.]
Forgive the long presentation, but this is just to remind you about what we have said for about an hour and a half. There are signs that global growth is improving. However, uncertainty remains and the events around us certainly suggest that they are going to remain for some time.
South Africa's economy must grow faster and more inclusively. There is no other alternative for us. Future growth is also dependent on private-sector investment in the economy. They must do their share to contribute to growth in South Africa. The National Development Plan, together with other plans, will be implemented by government and budgets will be aligned accordingly. Government continues to invest significantly in infrastructure and will continue to do so.
We are taking additional steps to create opportunities for young people. By this time next year, let us say that we have actually implemented schemes. Reduced revenue results in less spending in the years ahead, unless the economy grows. There are new opportunities to be seized in Africa and other emerging markets. Let's energise ourselves to seize them.
We are committed to reviewing and assessing our tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability. A new local government formula significantly benefits rural municipalities.
I hereby table before the House the Budget Speech, the Budget Review 2013, the Division of Revenue Bill tabled in terms of section 10(1) of the Intergovernmental Fiscal Relations Act, the Appropriation Bill and the Estimates of National Expenditure. These are all the documents that lie in front of me.
I table this Budget in the hope that, as the President said, we as a nation will be able to rise above our own interests and prevail with greater maturity, pull together and take this country forward. We have said that South Africa is changing. Indeed it has changed since 1994. Let us work together to ensure that tomorrow will be better than today. Let me remind this House of what former President Nelson Mandela said:
What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead.
Thank you very much. [Applause.]