On the line now to the Director General of the National Treasury, Doctor Duncan Peter So, Duncan, good evening, Good to talk to you tonight. What work's been done in the last few months that led us the National Treasury to make the announcements to lower the inflation target.
Now, good evening, Stephen, and good evening to your listeners. Well, as the Minister indicated earlier today, there's been actually more than a year's worth of work between ourselves and the Reserve Bank. You'll recall that a few years ago we commissioned a paper by two former central bankers to review our inflation targeting regime and they in fact said at the time that we were out of step with the rest of the world. That review then culminated in our
Macroeconomic Review, where we assessed this further. That was then followed by a joint research program between the South African Reserve Bank and the National Treasury through the Macro Standing Committee, which is a committee of officials from both institutions. They didn't finalized that work about a month or so ago and made a recommendation to the Minister and the Governor for a point target of three percent with a one percentage point tolerance band, there.
Will obviously be a little bit of pain in some ways before we see the long term benefits, and we would expect quite substantial longer term benefits. Has there been any modeling on how much longer interest rates will have to stay slightly higher to get us to three percent?
So, Stephen, if you look at what's happened, for example, to bond yields over the last few months, and that is of course the interest rate that government pays on its bonds that we issue in order to finance our budget deficit, those bond yields have already come down, and they've come down by almost two percentage points over the
last few months. That's two hundred basis points. And the reason those bond yields have come down is in part because of the lower inflation environment that has contributed to lower bond yields. Now that means that interst rates have already started coming down because bond yields set a lot of the other interest rates in our economy. So some
of the benefits we have already seen. Certainly, if we are able to anchor inflation at three percent, which is where it already is currently and maintain that over the longer term, as well as continue to bold the fiscal credibility that we've been able to do over the last few months, and that culminated in today's mtbnds. Certainly, interest
rates should come down now. The reason that's important is because the cost of credit it comes down for household it interestrates for lower and over sixty percent of our GDP is linked to household consumption. And then secondly, the cost of capital come down, comes down, so we can invest more and we can deliver higher growth outcomes.
There are other big announcements that were made today as well. You have i think it's between eighteen and nineteen billion round more than you expected to have. At the same time, there are some cutbacks that you're making. Some projects are being cut in an environment where I'm sure everybody's knocking on your door asking for more money, how did you decide what to cut?
Well, what this budget actually does, Steven, relative to the budget that was announced a few months ago. What the MTBPS actually does is it actually takes the eighteen to nineteen billion in additional revenue that we received this year and allocates about fifteen billion of that. So in fact that expenditure goes up in this budget relative to the one that was tabled a few months ago, and the main additional expenditure that we've decided to allocate is for infrastructure,
and that is for transnet. And part of that is because we believe that a transnet that invests in the iron Ore Corridor and invests in the North Corridor, which is the corridor that transports coal, is a TRANSNIT that will have a healthier balance sheet and that will generate more revenue for the fiscus. So the bulk of the additional revenue that was gained this year actually when to
support infrastructure projects. So overall we believe that that all have a positive revenue and growth impact for the economy.
There are some plans to cut back a little bit on civil servants benefits early retirement issue as well. Do you think that's going to lead to tangible results? Wouldn't there be a bit of opposition to that perhaps.
Well, what this MTVPS does, Stephen, is that it already announces six point seven billion in savings over the next three years, and that was really about rescaling down programs that are not working, in this case, the public Transport Network grant as well as efficiencies from eliminating double dipping and other fraud in social grants. We are going to bold on that work through the ghost work or audit that we are currently doing through the review of other
grants within the system. Early retirement helps because we are through early retirement making some funds available to exit workers to rejuvenate the civil service and replace those with younger workers that are often paid lower wages as well. All of these initiatives will over time create much more efficient spending, and that is really what the Targeted and Responsible Savings
Initiative tries to do. We were able to get some gains in this MTVPS in the form of the six point seven billion, and certainly the Minister of Finance plans to make further announcements in this regard at the time of the budget next year.
As I understand it, the Minister in Iguana was asked today about the plan by the Health Department and the medical aid tax credit. I wasn't in the room, but I've seen various reporting that he said, that's an attack on the middle class. As the Treasury opposed to that idea. Are you going to tell the Health Department no, well, what.
The Minister confirmed today Stephen was that there is no announcement on medical tax credits currently and the Minister also said that at the moment he has no plans to make any announcements in this regard. Of course, we will continue to evaluate all all different tax options and typically we advise on the future of tax policy at the time of the budget, and we will continue to have
engagements with the Department of Health. But as of this moment, there are no plans to do away with medical tax credits.
Doctor Duncan. Peter Seip, thank you so much for the time, Director General of the National Treasury. Twenty one minutes after sixty with the money show. Edward Kisvetter is the commissioner at SARAS. Mister Commissioner, good evening. You were able to get around eighteen nineteen billion round more than was originally estimated. Where did most of that money come from? Was it mostly the elicit economy?
So it's a number of things, but let me just speak to of the economy previews. We under corporate taxes routes saw high unexpected contributions in a corporate taxics, mainly from the financials eleser sector. But also there were some dividend taxes that produced a once round about one and a half billion rand, but the most significant and then there was domestic vats, which also indicates higher levels of consumption.
But about half of the eighteen billion, just more than half of it actually came from our own from clients. And that's what that could mean is the additional verifications we do in customers when tax layers submit their returns and flame that new funds. We were able to in VQ prevent the outflow of about five point three billion rounds of new funds, and in corporate taxes who were able to collect from the refunds, but also in working nineteen three about two and a half billion extra revenue.
And then there was other odds and ends from two levels they will in't access, but collectively here for me, I think a good data points. Firstly, we'll see we see that Treasury has now revised the GDP nomenal leaf from six point three to five point three. So what explains a nine point three percent increase in revenue, Well, that is a fourteen percent increase in compliance that yere
on you. It's still below our benchmark, our our training benchmark, we would want to be in the band of about sixteen to nineteen percent, and we think in the second half of the year some momentum in the work that we've done in the revenue recovery project will gain some momentum and so we are confident. But I mean it's not just line confidence. We have a significant machinery that
looks at at how we will every inch. It gets us another bit closer to taking the pleasure of the Minister in the future to look at taxes.
As I understand it, if we get another twenty billion rand more than is currently estimated before February, we would be saved another tax increase. Then are you confident you can do that?
You certainly. We've committed Stephen that the infence amount of two billion we want to yield at least between twenty and fifty billion. But the debt that we are now chasing a significant component of that becomes more complex. So for example, in the first cohort the city five billion were collected. Were debt that required a follow up call, an SMS reminder, a gentle nudge here and there. The debt we are getting into now are more complex debt.
It requires people with a high level skilled people who can understand and analyze financial statements to look at whether company is actually can afford the debt if we don't dispute it. We've seen an increase in applications for debt deferment, payment arrangements and for compromises. There's a fifty five percent increase in civil judgments, for example. So the next chune
of debt will require high high levels of skills. So we are meeting at litigation attorneys, we're looking at legal debt collectors, and we've only begun to build that in the second quarter of the first half, so from about July to September we started gaining that. We've employed about eighty people to look at more specialized debt collection and we're hoping to RAMPLETT up to two hundred and fifty. But we're also fishing in a market that doesn't always produce the kind of skills for it.
Edith, thank you so much for the commissioner at SARZ