Finance Minister Tito Mboweni has promised to tackle government spending, and put the ball firmly back into the private sector’s court to make their own contribution to economic recovery by investing and creating jobs.
By Kathy Gibson
It still remains to be seen whether last Wednesday’s budget speech has gone far enough to avert a ratings downgrade from Moody’s next month, says Dion Shango, CEO of PwC Africa, who adds that external events lie the US-China trade wars and the Covid-19 virus all weaken the South African outlook.
However, Minister Mboweni presented what is possibly the most positive budget in the circumstances, he adds.
Lower taxes and a addressing of the pubic sector show that government knows what needs to be done. Implementation remains an issue, he adds.
Shango believes this is the moment for business to take action. “We know we have the capacity and the resources to do so,” he says. “We cannot allow uncertainty to lead us into a state of paralysis.”
Some of the opportunities businesses can exploit include looking at ways of upskilling people in the communities in which we do business; and they can look at ways to make their operations more effective and streamlined.
Commenting on the budget, political analyst Ralph Mathekga, believes it is a statement of intent. “The bigger part of this budget is the execution.
“The unions say there will be blood on the floor; they know the president cannot afford to pick up the fight.”
However, Mathekga says one things different in this budget is that there is a recognition that the unions need to act for the good of all.
Phuthi Mahanyele-Dabengwa, CEO of Naspers South Africa, thinks it was a bold budget to take on the issue of the unions. “I also thought it was very encouraging.”
The more attractive tax environment for business should act to help them create jobs and nurture start-ups, she says. “It is a difficult period we are going through. We can only do this if we move forward.”
Kyle Mandy, tax lead at PwC, points out that no-one expected there was the political will to deal with the unions. “We are actually very pleased with this budget, although it was not what we expected.”
Having committed to reduce the size of government, the minister has essentially pushed the initiative on to the private sector to create jobs.
Lullu Krugel, chief economist at PwC, says the minister did everything in how power to not strangle growth any further. “They know we are at the max of where we can go.
“So it’s good news, but there are a lot of factors that need to go right. The unions are one; and also National Treasury’s growth forecast ranges from 2% if we get things right to the potential of a recession.
“So there is a lot riding on this and the minister has put a challenge to the rest of the cabinet to do the right thing.”
Edward Kieswetter, commissioner of South African Revenue Service (SARS), says: “What is important is that this is a sensible approach by the minster, but taskling the expenditure side of this budget will have ripples.”
He points out that the wage bill is the biggest contributor to public sector spending – but retrenchments are not a good idea, or even ethical, in a country with such high unemployment.
Like the unions, all South Africans should look to politicians and senior civil servants to take accountability for the current situation, he adds.
“But the unions could step back and take a decision in the interests of broader society.”
He adds: “I have a feeling the parties will find each other. There will be a lot of arm wrestling on the way, but we cannot not do it.”
Openly taking about the wage bill, and having the courage to put it on the table, is important. There are also enormous inefficiencies across the state, Kieswetter adds, which much be addressed. “We have to become more productive overall. And putting these issues out there is a first tie for all of us.”
Tweaking tax rates is always easier than other options, but Kieswetter says this would be dangerous in the current economic climate.
SARS will also tighten up on private companies in areas like assessed losses and offshore profit shifting to help raise revenue collection.
The agency will also improve administration and tax morality to collect more revenue without having to raise taxes.
SARS is using business intelligence and artificial intelligence (AI) used ai to increase collections, with multiple property owners and VAT abuse being just two areas where additional revenue has been collected.
Kieswetter says the agency wants to expend the use of data to improve the experience for ordinary taxpayers.
“These ordinary taxpayers represent millions of people, and they shouldn’t have to submit a return,” he says. “Non-filing is one of our visions for s significant portion of taxpayers.”
PAYE non-compliance is currently preventing this from becoming a reality, with just 57% of employers currently tax-compliant, Kieswetter says.
“If we get the compliance levels right we won’t have to hassle ordinary taxpayers and can go after the real crooks.”