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SA whites given bill for ending apartheid

John Carlin
Wednesday 22 June 1994 23:02 BST

THE WHITE population will pay the lion's share of the cost of South Africa's political miracle, the Finance Minister, Derek Keys, revealed yesterday when he presented the new government's first budget.

A one-off wealth tax of 5 per cent, described by Mr Keys as a 'transition levy', would be imposed until the end of August 1995 on individuals and companies with an income in excess of 50,000 rand (pounds 9,000) a year. Mr Keys, a National Party appointment in Nelson Mandela's government of national unity, said the revenue would be employed to defray the R4bn cost of running, among other things, the country's first democratic elections.

'We think that every income-earner in this country can be profoundly grateful that our transition has gone so very well,' Mr Keys told parliament in Cape Town. 'We think therefore that we should join together in meeting the greater part of the bill.'

The new tax, which the Finance Minister promised would not be renewed after August next year, would generate some R3.3bn.

All in all, however, the budget did not reflect a desire on the part of the government to punish the privileged sectors of the population for the benefits they acquired under apartheid. Company tax, for example, was reduced by 5 per cent and, despite calls from the Health Ministry dramatically to increase taxes on cigarettes, Mr Keys announced only minimal additional duties on tobacco and alcohol.

And, while it is the cornerstone of President Mandela's policy to address the economic needs of the impoverished black majority, the government's approach would be 'phased', as Mr Keys put it, rather than revolutionary.

The objective of the R135bn budget would be to blend 'the new spending directions' of the government with a commitment to fiscal discipline designed to ensure that growth (projected at 3 per cent for this year) is sustained and inflation kept in single figures.

'This government has the legitimacy, the capacity and the resolve to succeed,' said Mr Keys. 'It is determined to pursue both social justice and aggressive growth and the budget seeks to embody this aim.'

The vehicle for the government's drive to redress the economic wrongs of the past is Mr Mandela's cherished Reconstruction and Development Programme (RDP), whose priorities will be to provide more housing, improved health and education, and better access to water and electricity for the black community.

The aim was to create an RDP fund to which the government would contribute R40bn over the next five years, Mr Keys said. This year the contribution would only be R2.5bn, however, all of which would be obtained from the reallocation of existing state resources and the savings following the abolition of old apartheid structures such as the black 'homelands'.

The biggest contribution (R650m) would come from the defence budget, which - despite complaints from ministers directly responsible for implementing the RDP - nevertheless remained at more than R11bn for the year. Any pain endured by the generals, whom Mr Mandela has striven to accommodate into the new order, should be offset by an announced increase of 5.6 per cent on military pensions.

In a budget that has something for everyone, the international community was not forgotten. Longstanding pressure from foreign governments, as well as sections of South African business, persuaded Mr Keys to boost foreign trade through the immediate removal of a 5 per cent surcharge on imported goods.

In a briefing with foreign reporters yesterday morning, Mr Keys said he expected the response from the board-rooms to be positive and from the townships to be one of hope that conditions of life would improve.

The Deputy Finance Minister, Alec Erwin, of the African National Congress, said he thought it was 'a fantastic first budget'.

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