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Powels's comments followed the delivery of Minister Gordhan's National Budget on Wednesday.

Particularly noteworthy, Powels noted, was the substantial expenditure earmarked for capital infrastructure development focusing on projects in the energy, transport and logistics sectors.

Powels welcomed the minister's commitment to fiscal discipline and the Treasury's intention to reduce the budget deficit to 3% of GDP by 2014/15.

The association also welcomed the announcement of some relief on personal income tax, but raised concern over the increase in capital gains taxes for individuals and companies, labeling them as unexpected. These taxes, according to Powels, could prove counter-productive in promoting investment.

Minister Gordhan announced increased expenditure on social grants, which would comprise 58% of government expenditure next year. The association said this raised questions about the sustainability of this form of fiscal spending.

The minister proposed a special appropriation of R5.8 billion designed to reduce the debt associated with the R20 billion Gauteng freeway toll project. Powels said the Automotive Industry would have preferred to see freeway improvement programmes being financed through "an administratively more efficient and less costly fuel levy".

The budget contained no major tax shocks and should contribute positively to business confidence and consumer sentiment, concluded Powels.

Back to Budget 2012 Special Report