JOHANNESBURG – Pressure on the SA Revenue Service (Sars) to meet targets took a new turn yesterday after Finance Minister Nhlanhla Nene warned that the country's current recession would impact negatively on the government's fiscal targets.
Nene told the Tax Indaba in Johannesburg that the state would struggle to fund programmes such as the National Health Insurance without expanding the tax base.
“There is now an additional downside risk to tax revenue projected at the beginning of the year, because of the contraction in the economy in the first six months of the calendar year,” Nene said.
The warning came as the country officially entered a technical recession for the first time since the 2008/9 financial crisis, with Statistics SA last week saying that real gross domestic product slipped 0.7 percent in the second quarter, dragging the rand below the R15 mark against the dollar.
The economy contracted 2.6 percent in the first quarter.
International financiers have also taken a dim view of South Africa's long-suffering economy, with Nomura saying that the rand and six other emerging market countries ran the risk of facing a crisis in the exchange rate as the contagion from recent currency plunges in Argentina and Turkey was unlikely to relent any time soon. Nomura is a Japanese financial services group.
South Africa came second only to Sri Lanka as the countries which had the highest risk of experiencing an exchange rate quagmire.
Nomura, which described its Damocles Index as an “early warning sign”, gave South Africa a score of 143 points. According to Nomura a score of more than 100 points suggests a country is vulnerable to an exchange rate crisis in the next 12 months.