Wage war on the state’s waste

DAVID SHAPIRO

Nor was it clear that he sufficiently grasped the gruelling economic and political situation in which the country finds itself. While endless jokes about the presidency draw sniggers and jeers, Finance Minister Pravin Gordhan’s budget next week Wednesday will highlight that the path to rebuilding our economic muscle and regaining the world’s respect is no longer a laughing matter. It is not whether taxes will go up, it a question of by how much.

The fall in commodity prices, the impact of low oil prices on producer nations, a slowdown in world trade, the decline in the rand, the drought in the country and a laundry list of self-destructive issues at home that include energy shortages, labour discord and corruption at the highest levels of government, have weakened the nation’s tax base.

Treasury could probably moderate tax increases, filling the gap between revenue and expenditure with further borrowings. But the higher our debt levels, the greater the portion of future tax collections will be required to finance interest payments, slashing amounts needed to fund education, health, policing, and other essential services vital to the generation of growth and jobs in the economy. 

In an economy over-burdened by worrisome unemployment, rising interest rates and feeble growth prospects, the minister is conscious that increasing tax rates beyond a certain point becomes counter-productive.

Taxes discriminate against the productive in favour of the non-productive. This is especially relevant in South Africa with the current administration’s woeful standards of governance and tardy record of maintaining the country’s infrastructure and delivery of essential services.

And if ever government needed to encourage the industrious at home to yield more, it’s now. The heavy falls in global stock markets since the beginning of the year underscore dwindling confidence in the outlook for world growth, raising doubts that the radical stimulatory measures, introduced by the world’s leading central bankers over the past eight years to overcome the aftereffects of the Great Financial Crisis, will achieve their goals.

The uncertainty has been intensified by turmoil in the oil markets where tumbling prices have increased concerns about the impact diminished revenue receipts will have on the stability of producer countries such as Saudi Arabia, Nigeria and Venezuela. China too is proving no help to world trade as it transitions from a chronic devourer of raw materials to an economy pushing services and domestic consumption.

Our desperate economic circumstances provide Minister Gordhan with limited latitude to overload an already stretched tax base. He has no alternative but to wage war too on the extravagances and waste that have crept in to government services, sanctioned by years of inattention and imprudence.

According to the Auditor General, every year, billions of rands of taxpayers’ monies are misappropriated, unaccounted for or allocated to hopeless projects. This behaviour can’t continue with impunity, especially in times when the fiscus is scratching for every cent. But our problem is that we’re relying on the team that led us into the swamp to guide us out.

We’re all in for some pain, but how we share it is optional. So, only when ministers swop their X6s for Toyotas and their Paul Smith suits for EFF overalls, will I believe we’re finally making progress. 

Reproduced by kind permission of The Times