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We need to get SA companies working better

Sars would have collected much more revenue if mining policy, for example, worked better.
Image: Moneyweb

Good economic news should be celebrated. Last week’s announcement by the SA Revenue Service (Sars) that it had managed to exceed revised budgets for tax collections is very welcome.

The tax authority collected R38 billion more than had been estimated in the February budget for the 2020/21 year. The extra collections mean government has a little more breathing room in getting its debt levels under control. It also reflects a better economic performance than had been expected, with the excess collections largely due to profits at mining companies on the back of high global commodity prices.

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Read: Sars exceeds revenue targets
Listen/Read: Sars commissioner Edward Kieswetter comments on the 2020/2021 preliminary revenue results

But, while the good outcome will help lift sentiment from its rock-bottom levels, we must keep the context in mind.

The collection figure of R1 250.2 billion for the year is still R106 billion less than the R1 356 billion collected last year (-7.8%) and R175.4 billion (-12.3%) less than the R1 425 billion that had been budgeted for the year in February 2020. The good news is that it was a far better outcome than the R300 billion collapse in revenue that had been expected at the time of the emergency budget last year.

Digging into the numbers, though, reveals the outcome was good luck rather than an outcome of good policy interventions.

The surprise positives were driven by higher provisional tax payments and royalties collections from mining companies on the back of a weaker rand and high prices for iron ore, platinum group metals and gold. Provisional income tax by the mining sector was 57% higher than the year before. But the much larger finance sector saw a 15.3% reduction in income tax payments as profits collapsed. Manufacturing also fell 16% and community social and personal services fell 28.7%.

The mining sector therefore saved us from a much worse outcome.

But imagine how much better it could have been if policy for the mining sector worked better than it does now. Imagine if the 5 000 mining rights applications awaiting approval at the Department of Mineral Resources and Energy had been processed on time? Imagine if long-outstanding revisions to mining legislation and the mining charter had been finalised? The mining sector would have been much bigger than it is and the collections therefore even bigger.

When it comes to specific government interventions, there is evidence of major blows to tax collection. Excise duties were substantially constrained by the alcohol and tobacco bans, with R14.6 billion (-31%) less in collections compared with a year ago. The biggest fall (-46%) was in cigarettes, even though several studies showed that cigarette consumption did not fall much during the ban as smokers just switched to illicit economy supply chains.

The figures go to prove the point I have made often: we need to get companies in South Africa working better. That requires creating a conducive environment – reducing red tape and making it easier to operate.

If companies find it faster and simpler to navigate government bureaucracy, they can become more responsive to opportunities, investing and growing the economy, boosting the taxes they pay as a result.

Interventions

The list of things to be done is long but starts with some relatively easy interventions.

  • First, make it easier for companies to generate their own electricity and resolve the chronic energy insecurity that currently bedevils operations. Let them create plants up to 50MW without a licence.
  • Second, make it easier to hire skilled foreigners to replace those lost to the skills exodus. The reality is that many companies can’t find the people they need to operate the expanded capacity they could be creating, so they don’t invest.
  • Third, get the auctions of spectrum done so that network providers can invest in expanding capacity and increasing broadband availability in the economy.
  • A last issue to mention here, as BLSA has recently highlighted through extensive research, is the need to boost infrastructure investment. We are investing far less in expanding capacity of the economy through infrastructure than high-growth countries do.

The key is to make it easier for the private sector to bring the skills and funding needed to drive public infrastructure investment though the right regulatory amendments.

This can be done without extra costs to government – indeed it can even release some budgets for greater spending on public services.

If we delivered on these structural reforms, which the president has already committed to doing, the figures from Sars would be even more impressive. It is time we used policy to drive greater economic activity and generate the revenue government needs.

The recent announcement that Johnson & Johnson will produce 30 million vaccines is an injection of hope for South Africans, I wrote in Business Report.  We now need much greater detail on just how we reach the target of vaccinating 40 million South Africans by the end of 2021. We urge the government to handle this process in such a way that it achieves the desired result of a sustainable economic recovery. Business stands ready to assist.

The effects of the pandemic have been felt far beyond hospital beds. It has caused loss of income and food security and sustenance of many South Africans. BLSA and its members stepped in to support the vulnerable with more than R6.5 million ploughed into various NGOs across the country to provide food parcels to communities, schools and orphanages. Click here for more details.

Busi Mavuso is CEO of Business Leadership South Africa.

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We – The ANC — We need more loot maaney !!!

“We need to get SA companies working better”

Should the heading not rather read “ We need Government to assist Business in general to get SA working better?”

The tax payer and working class do their bit! They carry this country and contribute vastly to the fiscal! If a Government doesn’t look after SMME’s, how can anyone expect Big Business to grow? The one feeds off the other

As long as BEE, Corruption, Cader Deployment and Nepotism is around, nothing can and will work in this country.

Case in point was the latest life line/ subsidies thrown at the Leisure Industry, which excluded the Minorities, the very people responsible for employment

Nothing is going to change whilst the ANC is at the helm. They want a failed State!

Busi – its all good and well to stand ready to support the government whilst it kick starts the economy, however yours may be a dream unfulfilled as the government is unable and incompetent in doing anything positive for this country, and good old SARS raises its ugly head in an attempt to gouge more taxes out of citizens meanwhile no jail time for the looters of the eiscus

As much as we should look for an antidote to chaos, we also need a certain amount of chaos to ensure the necessary stresses keep us alive.

I say that because too much good news will be followed with bad decisions. Just wait until the unions read that the government collected R38 Billion more, there is no way they will back down from their demands of higher wages and bonuses.

R38 Billion in the context QE means very little, The Reserve Bank just printed more money, flooding the system and now everyone thinks that they can breath easier but the air just got thinner. The time will come when we all choke!

Easy. Cut out the anti-minority racism that is distracting business and the country. Free up business to focus on business, instead of race.

While EWP is still being shouted from the roof tops you can forget about anything working better.

If the low life ANC want more loot money, stop the EWC nonsense.

EG. I want to add a garage and fix my kitchen. As long as EWC is there and the threat of me losing my house and improvements I will not. This means no jobs for the builders, no tax from them, no increase in my house value, less com for agents, less transfer duty and all of that plus more has a SARS contribution.

Simple as that, but the cancer don’t see it that way. Once they have taken everything SARS will have no function.

The economy is not working because we SAFA under the ANC’s corruption.

Then I suggest you keep your interfering and controlling communist noses out of free market business of which you understand SFA!

Can you imagine! You have more tax revenue when companies make more money. What a radical thought…

There are three key problems:
1. The ANC stealing and wasting most of what is collected. Basic Income grants and BEE tenders to buy votes. Bloated civil service and bailouts of SOEs stolen into insolvency. Fraud and corruption everywhere.
2. We are a dirt poor country. We do not attract entrepreneurs. They flee the place. Shuttleworth, Musk etc. Same for rich retirees. Rather pay on a remittance basis in the UK or Israel than 45% over GBP80k of income here.
3. If we had booming growth no need to spend billions on tax collecting. Will get whatever you need from VAT. Look at Russia- 15% flat tax. Why bother putting the maid through the business payroll at that rate. Small businesses steal a fortune in taxes but to steal VAT is far more difficult

End of comments.

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