NAAMSA MEDIA RELEASE ON THE 2008/2009 BUDGET: FOR IMMEDIATE RELEASE

Commenting on the budget proposals announced today by the Minister of Finance, Mr Trevor Manuel, in Parliament – the President of the National Association of Automobile Manufacturers of South Africa (NAAMSA), Dr Johan van Zyl, said that against the background of a lower domestic economic growth rate, rising inflationary pressures, volatile international financial markets and a deteriorating global environment – the Minister had, as expected, presented a conservative, yet counter cyclical budget aimed at providing support to the South African economy over the medium term.

NAAMSA shared the Minister’s pragmatic assessment of South Africa’s economic achievements and future challenges, particularly the importance of maintaining a balance between the country’s growth momentum, employment creation and social goals – on the one hand – and fiscal and monetary discipline as well as government debt reduction, on the other hand. The latter had enabled the fiscus to achieve ongoing surpluses and allocate increased resources on social and economic development in South Africa.

Despite the likelihood of reduced growth in revenue, the Minister had been able to announce further substantial increases in funding for a broad range of social priorities, including, education, training, skills development and crime combating initiatives. Particularly, the higher allocation on social security assistance and benefits, an additional R12 Billion in total, would provide relief for the needy sectors of society. Other noteworthy features in the budget included the reduction in the corporate tax rate to 28% which would boost investment and support economic development. Furthermore, the proposed adjustment to personal income tax and car travel allowances to compensate for inflation were welcome. Moreover, the additional infrastructure investment allocations involving rail and port infrastructure development, the construction of the liquid fuels pipeline and an expansion of South Africa’s electricity generation capacity represented important steps to improve the country’s logistics capability and to enhance South Africa’s future growth potential.

NAAMSA welcomed the Minister’s emphasis on supply side measures to boost the productive capacity of the South African economy which would support employment stability and growth. Overall, the proposals would support investment and economic development and were expected to be well received by the business community generally. However, the increase in the interest rate tax exemption threshold and the capital gains exclusion were relatively insignificant and would do little to boost savings.

NAAMSA had taken note of the proposed environmental tax reform measures to be implemented from 2009 onwards and particularly the possibility of vehicle taxes aimed as promoting fuel efficiency. The automotive industry planned to engage National Treasury on these issues.

NAAMSA OFFICES: PRETORIA

20^th February, 2008

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