Minister Enoch Godongwana. Photo: GCIS/GovernmentZA/Flickr

Finance minister Enoch Godongwana must announce concrete steps on how the government is going to tighten the belt in the midst of the country’s looming financial crisis.

According to Thys van Zyl, CEO of Everest Wealth, Godongwana must not only sweet talk in the run up to the election but be honest about the country’s financial crisis and what the government is doing about it when he delivers the medium-term budget policy statement (MTBPS) next week.

“The reality is that there is not enough money, there are too many expenses and that the government is going to have to cut back. Bailouts for state-owned enterprises must be stopped and the number of government departments and enterprises must be drastically reduced to bring down the public service’s sky-high salary bill. Privatization and partnerships with the private sector must receive urgent attention so that proper intervention can be made where the government fails.”

There are already indications that tax revenues will not meet the government’s targets this year. “The government largely relies on a small group of taxpayers and the answer is not to tax them more heavily by increasing VAT, for example, but rather to increase the tax base by growing the economy.

“Just over 2.5 million people pay 84% of all personal income tax and it is clear that there are not enough taxpayers to make up the deficit. Many taxpayers are also in effect double taxed and also have to watch every month how a large part of their hard-earned money is taken by the government and in return they get no or poor services while there are almost daily reports of how tax money is stolen or wasted. “

The government continues unabated to borrow money with national debt rising only further. “At this stage, money is only being borrowed to try to curb the energy crisis while infrastructure is collapsing.

“If the government is serious about achieving any potential economic recovery, urgent action must be taken. The government must get reforms in place to remove the country’s logistical constraints so that the economy can grow.”

South Africa is also becoming less and less attractive as an investment destination and negative investor sentiment only seems to be further soured with various challenges that call into question South Africa’s attractiveness as an investment destination.

“Corruption and misappropriation of public funds make investors reluctant to invest in South Africa. Diplomatic missteps by the government and political instability are spooking investors amid sluggish economic growth, largely due to load shedding and the country’s deteriorating transport network. South Africa and its economy therefore discourage foreign investors and their actions highlight this.”

Everest Wealth has already warned consumers that they will have to brace themselves in the midst of further sharp price increases that erode their quality of life. Consumers hear they have to tighten their belts but then the government has to set the example and do it too.

“Consumers have to watch as government officials earn more and more and are seemingly not at the mercy of the many crises ordinary citizens face. They get generous benefits and are kept safe at taxpayers’ expense and protected from the devastating impact of load shedding by taxpayers who have to pay for generators. A highly paid and bloated, but poorly performing executive authority therefore continues unhindered to milk the tax cow for all it is worth, while the country experiences a financial crisis.”