Covid-19 containment measures have pushed SA towards a difficult future – and the only hope of changing course is for Eskom to be fixed fast and other reforms to be implemented urgently. Also necessary will be much faster roll-out of Covid-19 vaccines in order to avoid containment measures like lockdowns and other strict rules that put a lid on business activity.
That message has been underscored in the national budget in two graphs that complement the ‘hippo mouth’ that Finance Minister Tito Mboweni presented in June when he explained that the country is at a cross-roads.
At the time, the upper jaw showed debt spiralling upwards, the rand weakening and capital flight; the lower jaw represented government stabilising debt, increasing revenue collection and stimulating business activity.
Adjustments to the budget tabled in February 2021 show that government officials believe the way to ensure that South Africa faces a brighter future is if there is a rapid increase in electricity supply and the faster implementation of reforms.
Also critical is to speed up vaccination roll-out to avoid waves of Covid-19 infections and lockdowns and other restrictions required to save lives.
SA was in trouble before the pandemic turned off global cashflow engines, with widespread corruption at state entities, a bloated civil service and policies that tie up businesses in red-tape and favour labour dragging the economy down.
Mboweni isn’t solely responsible for the plan to fix SA. Other ANC leaders need to buy in to get the country back on track.
In Parliament on Wednesday, Mboweni warned that public finances are “dangerously overstretched”. SA will need to borrow well over R500bn each year and it “owe[s] a lot of people a lot of money”. These include foreign investors, pension funds, local and foreign banks, unit trusts, insurance companies, the Public Investment Corporation and ordinary SA bondholders, he said.
SA expects to record its largest tax shortfall on record by the end of the tax year – and a staggering R213bn less than its 2020 Budget expectations.
Personal income tax brackets will be adjusted by 5% to provide relief to mostly lower and middle-income households and corporate income tax will be lowered. To help pay for SA’s army of public servants, fuel levies and excise duties on alcohol and tobacco will increase. The government also plans to inject R13bn into improving the capability of the South African Revenue Service to improve tax compliance.
Mboweni warned that some taxpayers have been identified for investigation and these individuals can expect to receive an unpleasant letter in the post in April.