SEIFSA Chief Economist Henk Langenhoven said that while Minister Nene and his team should be commended on a delicate balancing act given our economy’s poor performance and the growing budget shortfall, nevertheless it was very concerning that, with the exception of sin and personal taxes, “virtually all the announced tax measures will hit the productive sectors of the economy the hardest”.
“Politically it may make sense not to have raised VAT, but the choice of indirectly burdening the productive side of the economy is a critical blow to growth and investment in the foreseeable future,” he said.
Mr Langenhoven said that the impact of slow economic growth and the electricity constraint had “all but put a stop to other policies to stimulate the economy, bar low energy-intensive users”. He said that the situation was set to remain for the next seven years.
Mr Langenhoven also decried the one percent increase in personal taxes for high earners.
“The taxes that were announced on individuals will hurt mainly the largest consuming part of the population and will no doubt have a negative influence on consumption expenditure, further constraining economic growth. If anything, this budget highlights the extent to which institutional decay can throw the country’s path to prosperity off track,” he said.
SEIFSA Chief Executive Officer Kaizer Nyatsumba said South Africa’s reliance on a small base of taxpayers to provide more social benefits for the growing numbers of poor people was not sustainable. He said that it was unfortunate that the Government continued to squeeze the middle class and higher income earners instead of working with the business community to grow the country’s economy and to create sustainable jobs.
“As a country, we have a big civil service bureaucracy and, without doubt, one of the biggest Cabinets in the world. Our priority should be ensuring that we have a lean and efficient public service that delivers value to the general public, with zero tolerance for any forms of corruption.
“We need to grow our economy and to see more people weaned off social benefits and absorbed into the job market. To accomplish that goal, the Government has to acknowledge business as a vital partner and ensure that there is a strong partnership involving itself, business and labour, with South Africa’s best interests coming first,” Mr Nyatsumba said.