Durban — South Africans are hoping for some economic relief when Finance Minister Enoch Godongwana delivers the ANC’s swansong budget on Wednesday.
It's the administration’s final budget before the country goes to the polls and given the rising cost of living, many are hoping the minister does not increase taxes to bolster the national fiscus.
Dr Bhasela Yalezo from UKZN’s Graduate School of Business said even though the country’s grant bill was high, he hoped the minister would be sympathetic to the poor and those who received grants.
“People are really struggling but it will not help to increase the grants by more than 10% because it has budget implications. The social grants cost more than R22 billion a month and around R200 billion a year … we need to find a way also of employing people rather than giving them grants.”
Yalezo urged Godongwana to refrain from increasing taxes; VAT, corporate tax or personal income tax, “knowing fully well that the government gets a lot of money from it or a greater portion of the revenues from it”.
He said the fuel levy should not be increased because that would continue to drive inflation upward and many were still battling financially.
“One of the hopes that we have is that the government will continue with austerity measures so that the wage bill does not increase, I hope so though, in light of the ruling by the Labour Court which says the government must honour and increase the salaries of employees, with real credit power. I'm hoping that the minister of finance will not bail out any more of these state-owned entities and municipalities, but rather propose a new model, which will assist either through privatisation or through another form of funding,” said Yalezo.
He said the government should avoid any situation which would force it to borrow more money thereby increasing debt expenditure.
“And we hope that the minister of finance as well will talk about dealing with the macroeconomic issues which are not assisting South Africans. Because many South Africans are unemployed, but we see a lot of government departments wasting a lot of resources through corruption and maladministration,” Yalezo said.
Mervyn Abrahams from the Pietermaritzburg Economic Justice and Dignity Group said that while it understood that the government was in need of greater revenue there were other loopholes it could plug to address the issue rather than by increasing VAT.
Abrahams said VAT was a “regressive” form of tax and because everyone paid the same amount, no matter their income, those in lower income brackets would be most affected.
“We know poor people spend their money on four things; food, where inflation is running extremely high already; electricity, where the increases have always been way above CPI; transport, which is also outside of their control as well as debt services. So from that perspective, it would be bad for low-income households,” Abrahams said.
Professor Andre Roux an economist based at the Stellenbosch Business School said from a macro-economic and fiscal sustainability perspective, it was imperative that the budget deficit be slashed for a number of years, to arrest, stabilise, and eventually lower the government debt ratio.
Roux said any new debt should be used to finance productive, wealth-creating expenditure.
He said spending less and/or generating more tax revenue were two fundamental ways of narrowing the budget deficit, but it was on the spending side where it became “politically tricky”.
Roux said it appeared that the social relief of distress grant (SRDG), which was initially introduced as a temporary financial relief to those left destitute by the Covid-19 epidemic, would become a permanent feature for the foreseeable future and there were even talks of expanding the reach of the grant.
“The freezing of civil servant salaries this year would be tantamount to political suicide.
“Then, there is a growing impatience to see evidence of the implementation of the NHI system. Of course, the elimination of wasteful, unproductive, and unaccounted for spending would go a long way towards slowing down government spending, but the potential benefits will not be immediately apparent. All of this is in addition to the normal areas of spending needed to keep the wheels turning,” said Roux.
He said growth of the country’s tax base was likely to be slim and while Sars would probably be encouraged to improve tax collection there was still a good chance of a shortfall.
“This leads to the unfortunate conclusion that at some level tax rates will have to be raised,” said Roux.
Sunday Tribune