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Fri Sep 30 01:49:24 SAST 2016

Wage war on the state's waste

David Shapiro | 16 February, 2016 00:10
David Shapiro. File photo
Image by: SUPPLIED

Like so many other concerned South Africans, I made a point of watching the president address the nation on Thursday.

It was a distressing event. Not because of the EFF's annoying filibustering but because it was utterly clear from President Jacob Zuma's halting delivery that he had not authored, edited or adequately rehearsed the speech. Neither was it clear that he sufficiently grasped the gruelling economic and political situation in which this country finds itself.

While endless jokes about the presidency draw sniggers and jeers, the minister of finance's Budget next week 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 is a question of by how much.

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

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

In an economy overburdened by worrisome unemployment, rising interest rates and feeble growth prospects, the minister is conscious that increasing tax rates beyond a certain point becomes counterproductive.

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 infrastructure.

But if ever the government needed to encourage the industrious to yield more, it's now.

The heavy falls in global stock markets since the beginning of the year underscore the dwindling of confidence in the outlook for world growth, raising doubts that the radical stimulation introduced by the world's leading central bankers to overcome the after-effects of the "great financial crisis" will achieve their goals.

The uncertainty has been intensified by turmoil in the oil markets, in which tumbling prices have increased concerns about the effect of diminished revenues on the stability of oil-producing countries such as Saudi Arabia, Nigeria and Venezuela.

China, too, is proving no help to world trade as it transitions from being a chronic devourer of raw materials to an economy pushing services and domestic consumption.

Our desperate economic circumstances give Minister of Finance Pravin Gordhan limited latitude to overload an already stretched tax base.

He has no alternative but to wage war on the extravagances and waste that have crept into government services, sanctioned by years of inattention and imprudence.

According to the auditor-general, every year billions of rands of taxpayers' money are misappropriated, unaccounted for or allocated to hopeless projects. This behaviour can't continue with impunity, especially 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 that we're finally making progress.

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