Balancing act required to ensure economy doesn’t grind to a halt

And that revenue isn’t severely impacted, as SA battles the twin impact of being junked and the Covid-19 pandemic.
Sars Commissioner Edward Kieswetter: ‘We need to do what we have never done before.’ Image: Moneyweb

The South African Revenue Service (Sars) has struggled to meet revenue target collections due to a sluggish economy and its own hollowed-out capacity.

It now faces the double whammy of a rating downgrade by Moody’s and the impact of the Covid-19 pandemic, which will issue an even-harder blow on revenue collections.

“Whatever crystal ball you may look into now, you are likely to be wrong,” said Sars Commissioner Edward Kieswetter, stating that modelling adjustments with respect to the 2020/2021 revenue figures are not an immediate priority.

“What we will do is work as hard as we can with what we have, while remaining vigilant, agile and responsive to an evolving crisis,” said Kieswetter. 

He was speaking to journalists on Wednesday at the announcement of the preliminary revenue collection numbers for the 2019/2020 financial year. 

Tough year 

Sars collected R1.356 trillion against the 2019 budget estimate of R1.42 trillion, resulting in a deficit of R66.2 billion (4.7% lower than the estimate). The gap is narrowed when compared against the revised 2020 budget estimate of R1.359 billion recording a 0.2% deficit or R3.1 billion less. 

Even better was the revenue collected by Sars in the financial year ending March 2020. The net revenue collection of R1.356 trillion was 5.3% more than that collected last year, with nominal growth R68.2 billion. 

These figures come against the backdrop of an economy that slipped into a recession in the fourth quarter of 2019, a year that saw economic growth in only one quarter. 

“At the start of the year we knew that the challenges we would face would be steep, given the sluggish economy and the state of Sars,” said Kieswetter. “Notwithstanding [that], we believe the revenue result of the year-on-year growth is a credible performance within the current economic environment.”

The top three contributors to the revenue were personal income tax (PIT), which contributed R528.9 billion (39%); value-added tax (Vat), contributing R346.6 billion (25.6%); and company income tax (CIT), which contributed R214.7 billion (15.8%). 

While PIT saw an increase in contributions, Vat and CIT numbers declined somewhat, with Kieswetter stating that this was a sign of lower consumer spending and reduced company performance in a struggling economy. 

A tougher year ahead 

The “separate but intertwined” impact of the Moody’s downgrade and the Covid-19 pandemic will only make things worse. 

“Right now companies are already struggling to grow, to create more jobs, and now companies will struggle just to retain those jobs and to stay open,” he said

“The lockdown itself reduces the level of economic activity to only essential goods and services, so the overall impact of the current environment will be significant on economic activity, which translates into tax revenue, which is simply an overlay of what happens in the economy.”

Read: Moody’s downgrade compounds Covid-19 challenges

National Treasury announced several tax measures to alleviate the impact of the current crisis on businesses and consumers:

  • An additional R500 tax subsidy for employees under the Employment Tax Incentive;
  • Sars will accelerate the payment of employment tax incentive reimbursements from bi-annually to every month for compliant employers; and
  • Businesses with revenue of less than R50 million will be allowed to pay 20% less in their employee and corporate tax liabilities.

Kieswetter said government is alive to the fact that there will be no “easy fixes” and the interventions will require balancing out extracting revenue from the economy but not so much that you “kill the goose that lays the eggs”.

Can’t let economy stop

“We need to do what we have never done before to reform the structure of our economy, to manage expenditure, [and] reshape and reprioritise the shape of our spend while trying to find new sources of revenue,” he said. 

With the growing demands on government expenditure, as the state tries to contain the impact of the Covid-19 outbreak on top of the existing issues – government debt, unprofitable state-owned entities, and a growing wage bill – a decline in tax revenue would “place strain on the budget deficit and the overall fiscal framework”.

Read: SA sees Moody’s junk rating as cue to fix economy

In addition to implementing structural reforms and managing the impact of Covid-19, Kieswetter said the economy also depends on the ability and resolve of the state and its social partners to “keep the wheels of the economy going”. 

“Even if it is down to an idle,” he said.

“Because the minute it stops completely, the time to restart it will take many more years.”

Listen: Sars commissioner Edward Kieswetter discusses the preliminary revenue outcome for the 2019/2020 fiscal year on the SAfm Market Update with Moneyweb

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LOL – Your Economy has stopped.

It will also do so for a lot longer than the Delusional 21 day period which will be extended ad nauseum.

Your ANC broke the bank and you do not have any money left for any stimulus – a rate cut will not help as no one has the money to spend and repay in any-case.

This situation is called checkmate pal !!!!

Yip. The ANC ate the pot dry.

The country was already on the road to destruction pre Corona and Moody’s downgrade was imminent

The pandemic has added to the already sorrow state of economic affairs

One begs the question, how different will this Government behave post Corona?

My summation is, given their arrogance, unabated corruption, policies of segregation (BEE) to mention but one and infighting, nothing will change

We are for all practical purposes just another failed African country. Whoever believes otherwise lives in coocko land

Maybe the article is not properly focused
This is ACTUALLY about Covid 19 and years of corrupt government
Not having anything left in the tank was always going to leave SA vulnerable
The CAUSE is Government the RESULT is a ratings downgrade
Oh how the chickens are coming home to roost!

It’s actually a story about corruption and mismanagement all thanks to the ANC. Covid-19 just tests leadership and economic robustness. We have precious little of either.

Well put. Take the root cause analysis further: government is a function of electorate’s mindset post-1994; electorate’s mindset post-1994 is a function of …

The Total Lockdown will one day be seen as one SA’S biggest economic mistakes and there have been many .More people when die of the resulting poverty ( the link between poverty and mortality is a well researched concept ) than the Virus itself . The Social distancing concept is something the poorest areas cannot practice in a 4 x 4 tin shack . Partial lockdown was the answer combined with strict hygiene rules . Liquidators are going to have a very busy 2020 !

I agree. South Korea avoided a lockdown, but to our credit we seem to be following their example, so maybe our 21 days will be the end of it.

Shutting the economy is a cure every bit as bad if not worse than the disease.

And as the government loses its taxbase dare we hope that they will acquire some respect for its taxpayers instead of treating business as enemies of the state.

We could have followed the Sweden approach. Even places like Australia people are allowed to run outside, shops/ schools are not forced to close. bad decision from government. But most of the voters think its brilliant. ha ha

Andrew they have just opened the tap for this virus to spread like wildfire. They have bowed to the taxi union, who threatened to strike, now the hours and passenger numbers have been increased. The taxi will be the biggest spreader of this virus, so much for a lockdown.

Don’t forget they closed all the foreign owned spaza shops. Only possible reason is a racist one what else.

The result of this is people that normally walk to a spaza shop now have to spend money (they don’t have) to go and add to the queuing problems at the supermarkets.

Don’t underestimate the numbers there are thousands of foreign owned spaza shops.

Instruction from the ANC government is buy just what you need. The outcome of this is people have to now go to the supermarket numerous times in an overcrowded taxi and stand in a que with no social distancing. Where do they get money for the taxi numerous times?

Seems the ANC is trying to get people exposed as many times as possible.

But best leave it to Mbalula. He will get instruction from the Taxi associations how to beat the virus. ANC might loose a lot of voters one way or another.

Undertakers will be busy too 🙁

Maybe time to ask the unions and the commies how to get out of this. They got us here.

Please consider this advice from a poor tax payer. Scrap EWC immediately and your coffers will grow by billions as you collect the transfer fees. EWC has crippled the property market. Surely you can comprehend the logic of this The ANC puts all sorts of mechanisms in place to cripple the economy, and than acts surprised when it does tank, as it has. Unfortunately there is still no tablet that can be prescribed for stupidity.

Tablet for stupidity does exist – It contains 95% pure concentrated arsenic !! Prescribe en masse !!

It’s not about revenue coming in, we have done our bit and more. This is about whats going out, bloated government earning huge salaries, SOE hand outs and most of all what was and still is being stolen.

To balance don’t always loot at the light side, most of the time it is the heavy side that is out of kilter.

Typical ANC apparatchik speak; all about extracting as much as possible from the productive portion of the economy to spend on the unproductive portion, primarily the bloat in the SOE’s, municipalities and government itself. What Ramaphosa, Gordhan, Kieswetter and others should be actually doing is telling all non-essential employees paid from taxpayer’s money but not working now is that they are going to get a salary cut; 10% at the bottom, 30% at the top. Lead by example ha ha..

Can’t we just print money like the USA?

You can if you assets behind you . Like raising money against a property . South Africa’s house is on fire so no !

No-one wants our sh!t currency. Everyone wants US$

SA has been most severely impacted with the twin impact of being ANC mismanagement and ANC corruption. The junked and the Covid-19 pandemic just make it worse.

Should’ve at least allowed the highest tax paying companies and exporters to keep going.

That would have at least saved the rand and fiscus somewhat.

But the same government who came late to the shutdown party has failed to think this through.

The first sentence is this article should have been : “And that revenue isn’t severely impacted, as SA battles the triple impact of firstly the anc’s failure the manage any monetary entity (soe’s like the eskoms, saa etc, etc),as a direct result thereof being junked and then the Covid-19 pandemic.

the ironical part about this is that the Covid-19 pandemic is a temporary “medical” problem – the first 2 problems are long term financial problems inflicted be the anc onto the sa taxpayer.

would like to see where the inflation rate is standing now – after all: what we are officially told it is and what one experience financially in day to day cost are miles apart and what will the direct effect will it have on pension payouts.

Covid 19 is about the tide going out and seeing who has the most shrivelled up weener.
Africans have big weeners with plenty of natural resources underground and fertile farmland above it – now we know we aren’t all going to die yet we can rest assured we’ll be ok.
The playing field will be levelled after this covid 19. We live in a digitised globalised economy and all that separates us is our geography. We can put passed mistakes behind us and build on what we have so lets quit with the government slaying and work towards a better future! Even if it involves more digitised AI state control it will keep the bad onions at bay.

With its measures to protect the hospitals from being overrun by covid-19 patients, the government merely shifted the problem to shelters and soup kitchens. The government has merely shifted the workload from doctors to bankers and welfare services. The government exchanged a run on hospitals for a run on the banks. Social services and churches are currently being overrun by the demand for food of which they can satisfy less than 10%.

Lockdown saved medical personnel from choosing who to help and who to show away. Lockdown forces social workers, charitable organisations and churches to make a call on who to assist and who to show away. The government use lockdown measures to prevent social unrest and riots at hospitals, but they merely shifted that social unrest and riots to the spaza shops and the soup kitchens.

The free-market economy is the only mechanism that can distribute resources effectively. Government central planning can never take its place. 80% of the people in the small rural community where I live depend on no-work-no-pay employment opportunities. As the saying goes – 9 meals are the difference between law and order and anarchy.

We have a whole nation run by proxy.

“Sars collected R1.356 trillion against the 2019 budget estimate of R1.42 trillion, resulting in a deficit of R66.2 billion (4.7% lower than the estimate).”

That is a deficit of R64 billion, not R66.2 billion.

It seems like no cares about a couple of billion anymore.

That is not a deficit. Its a shortage of expected revenue collection. the deficit is more than R250 bn.

Interestingly, Kieswetter is not seen as “incompetent” after missing even the revised revenue collection target. His predecessor would have been crucified, but for some reason the new crowd in charge can do no wrong. We will hear excuses for their incompetence for the next ten years, by which time there will really be nothing left to save.

End of comments.

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