CAPE TOWN – Industry commentators from various sectors have expressed a common view that Finance Minister Tito Mboweni has a tough task ahead of him as he seeks to present this year’s Medium-term Budget Policy Statement (MTBPS).
Against a backdrop of weak economic growth and bailouts for state-owned enterprises (SOEs), the MTBPS is South Africa’s hope for some much-needed clarity on how the country’s proposed economic growth strategy will be progressed.
This was according to Delia Ndlovu, managing director of tax and legal at Deloitte Africa, who warned that the bailouts, a possible Moody’s downgrade and the impact it would have on the country’s debt repayments, as well as a less than rosy global economic outlook and the performance of the dollar, all created barriers to accelerating inclusive growth – as per the 2018 MTBPS objectives.
The most recent data from the National Treasury indicated that revenue collections were lagging despite tax hikes, increased sin taxes, the implementation of the carbon tax and sugar taxes, as well as a new fuel tax. A record shortfall of up to R60 billion was forecast for the tax year ending March 2020, which will bring the accumulated tax undershot over the last six tax years to over R215 billion.
Ndlovu said adding to Treasury’s woes was the fact that earlier expectations that gross domestic product (GDP) growth in 2019 was expected to rise to 1.5 percent, and then strengthen moderately to 2.1 percent in 2021, now appear to have been over-optimistic.
“With technological advancements, the SA Revenue Service (Sars) has the opportunity to use digital innovation to change how it improves efficiency within tax collection processes,” said Ndlovu, pointing out that tax authorities around the world, including those in developing economies such as Brazil, appeared to be leveraging new technologies in order to leapfrog into modern administrations.
Uasa also identified major issues in which the trade union would like to see solutions to or at least cleared up during the minister’s speech, with the first being tax revenue.
“The South African taxpayers’ trust in Sars is declining rapidly because of the estimated R60 billion shortfall that taxpayers expect to have to pay for. The working class is under immense pressure due to high costs of living and are reaching a point where they may start dodging taxes because they simply can't afford to pay more,” said Uasa in a statement.
The SA Canegrowers Association and the South African Farmers’ Development Association in a joint statement called on the Finance Minister to halt the sugar tax, pending a full socio-economic impact assessment.
“We hope that Minister Mboweni acknowledges the impact of the sugar tax on the economy … and takes steps to do something about it. Generating revenue from a tax does not make sense if that tax destroys industries and take away people’s livelihoods.
“In order to balance the budget, Treasury has previously indicated that departments must make expenditure cuts of 5 percent, 6 percent and 7 percent over the next three years. We want to see this applied to Eskom instead of continuing its culture of impunity to managing its debt. We expect not to see Grand Inga being given any funds which will further indebt Eskom and the country.
International Rivers & WoMin African Alliance also called for a halt of the Grand Inga Dam project, saying that they expected that energy would be one of the key policy areas that received funding when the Finance Minister delivered the MTBS.
“We support the Minister of Finance's discussion paper on economic transformation that signalled support for growing renewable energy sector and hopes that the Minister's Mini Budget reflects the same support.
“We affirm that South Africa needs open, accountable procurement procedures and that the financing of the country's energy choices also needs to be handled in a transparent manner. The Grand Inga Dam project should be subjected to this democratic procurement and spending halted until this is done,” reads the statement.