When travelling to Namibia, John Endres discovered stark differences in governance and infrastructure compared to South Africa. With clean streets, reliable water, and no power outages, Namibia contrasts sharply with South Africa’s struggles. Despite being water-scarce, Namibia maintains a dependable water supply, while South Africa faces prolonged shortages. The disparity extends to taxation, where a small group shoulders the burden, prompting concerns of tax flight. Urgent policy changes are needed to avert further decline and emulate Namibia’s successes.
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By John Endres*
Earlier this week I had the opportunity to travel to Namibia. It was an eye-opening experience: Namibians − citizens of a country with one twentieth of the population of South Africa − now regard SA with a mixture of condescension and pity.Â
Quite an experience for a visitor coming from Africa’s most industrialised economy. But guess what: in Namibia there is no loadshedding. (In contrast, the South African government has been incapable of fixing the electricity crisis for going on 17 years now.)
In Otjiwarongo, a small rural town of some 30 000 inhabitants, the streets are clean and free of litter. The road markings are clearly visible. Along the highway from Windhoek to Otjiwarongo, the broad road reserve is well maintained on both sides of the route.
Namibia is a water-scarce country, but the water supply is reliable. My hosts were surprised to hear that large parts of Johannesburg were left without water for a week, with one suburb dry for nine days because someone forgot to turn on a valve. That earned me another pitying look, a pursing of the lips and a slight shake of the head.
Namibia, which is on the cusp of a potentially transformative oil and gas bounty, now fears contagion from its much larger neighbour to the south.
Bored and listless
On arrival back at OR Tambo, I was greeted by an understaffed immigration section where just two desks were manned. The immigration officials looked bored and listless. While waiting for my luggage, I received a forwarded video clip showing the looted and broken Post Office at Koster. ‘Don’t bother sending any letters,’ said the person who filmed the scenes.
On the way home, the streetlights weren’t working and the highway was in murky darkness. The taxi driver knew the route and slowed down on sections where invisible potholes lurked.
In the afternoon before leaving, I had presented a briefing on South Africa’s economic and political outlook to my Namibian hosts. I said that in SA there were 28m welfare recipients, but just 7m people paying income tax. Of those 7m, some 860 000 earned above R750 000 per year. This small group of people was paying almost 60% of all personal income tax (PIT). They were also the people with the skills and the means to leave South Africa.
When it comes to corporate income tax (CIT) the situation is even more dramatic. A million companies pay a minuscule share of CIT because they are making losses or earning less than R1m per year. About 34 000 companies contribute 97% of CIT. The air gets even thinner at the top: 842 companies − just 0.08% of all companies − earning over R100m per year contribute 72.4% of CIT. Again, those are the companies with the resources and ability to diversify offshore or leave entirely.
Tax on their income alone
Combined, this small group of companies and individuals contributes around 30% of the government’s total revenue through tax on their income alone. That is without even taking into account the other taxes they pay, like VAT, fuel levies, environmental levies, health levies, sin taxes and so forth.
Contrary to what the finance minister believes, there is not an inexhaustible supply of taxpayers that can be tapped. In fact, the pool is very small. And the government gives every appearance of sparing no effort in chasing them away, through abysmal governance that makes South Africa look bad compared to Namibia and through policies that threaten lives and livelihoods, such as the National Health Insurance, expropriation without compensation, a politicised civil service, prescribed assets and ‘harsher’ race-based employment and procurement laws that have already pushed black unemployment to world-record levels.
This is not smart. At some stage the taxpayers are going to realise that it is the government that should fear the taxpayers and not the other way around. If taxpayers start withholding their taxes, removing themselves from the country or delaying their payments, the state will find itself in considerable trouble.
Unknown to most residents
Perhaps Johannesburg ratepayers will be among the first to let the authorities feel their wrath. Last week the mayor of Johannesburg − whose name is unknown to most residents of the city, as is his party − was forced to issue a blustery rejection of the possibility of a rates boycott, after having been missing in action during the city’s water crisis. Clearly the notion of a rates boycott had him rattled.
It’s not nice, being pitied by the Namibians. To stop this from happening, South Africa has to change course. Voters should choose pro-growth parties on 29 May instead of the pro-poverty party currently running the country.
Ordinary South Africans can help by supporting the IRR’s work with a small monthly donation. Corporate South Africa must discover its backbone in opposing the government’s destructive policies. Better policy alternatives are readily available − the IRR’s Blueprint for Growth reports make concrete suggestions and are freely available on our website.
Fixing what is wrong with South Africa is not expensive and it is not difficult. All it takes is some policy changes, many of which can be implemented at no cost, and letting competent people get on with the job of repairing the infrastructure and running businesses on commercial principles. The current administration will not allow this to happen. So it will either be voted out or increasingly ignored. If it isn’t, then those 800 000 taxpayers and 800 companies will take their assets and skills elsewhere. Perhaps to Namibia.
Read also:
- 🔒 FT: Namibian oil boom – A potential game-changer in the global oil market ignites investor interest
- Namibia mourns the passing of former president Hage Geingob
- Mozambique passes landmark legislation for $91.7bn sovereign wealth fund
*John Endres is the CEO of the Institute of Race Relations (IRR).
This article was first published by Daily Friend and is republished with permission
