Spending wisely

2011-09-19 00:00

PIETERMARITZBURG businesspeople might have found reason to be quite com- fortable­ that Msunduzi was not given metro status after all. This is because the metro municipalities (or five of them, at least) are hatching a plan to have a business tax imposed.

Ostensibly, this is a replacement for the former Regional Services Councils (RSC) levy which was scrapped some years ago without any substitute being identified. At the time, the national Treasury was relatively flush and the expectation was that the funds of which the municipalities had been deprived would be made up by additional contributions from the central­ coffers. Rising welfare demands in the face of poverty, increased agitation for better and expanded infrastructure, community protests and the costs of the 2010 soccer showpiece, not to mention a debilitating global recession, all conspired to place unexpected limitations on the funding available to municipalities. They began to bleed, even the strongest of them.

The economic power of the metropolitans­ is irresistible and they were favoured by being given a share of the fuel levy collected in their domains. This is not a trivial­ amount, by the way. In the case of eThekwini, I’ve been told, it exceeds the amount that the municipality­ enjoyed in the days of the RSC levies. Lucky Durban. While the RSC levies contributed by Pietermaritzburg businesses were being consumed, sometimes less than effectively, by the uMgungundlovu­ District Municipality, Durban used the levy income to fund capital projects. The port city has much to show for this revenue which, for the most part, has been used to promote considerable progress in many ways.

It would like to continue with progress in a similar vein, but cannot afford to do so without finding a new source of income. National treasury and the South African Local Government Association (Salga) appear to support this search, although, in truth, it is not the metropolitan municipalities as much as smaller entities that are faced with acute financial woes. How will they be saved, I wonder?

The concept of a business tax is going down like a lead balloon among businesspeople. It is hard to understand why there is this tendency to turn to businesses to provide extra revenue. I suppose it is because business does not have a vote and, also, has managed to build a reputation for greed, exploitation and untrustworthiness in a society where capital­ is regarded as the enemy of the people, but the saviour, nevertheless­, of some. Where job creation is an unchallengeable priority, business is perceived to be reluctant to employ and commit to the national good. In reality, however, employment is a factor of affordability and growth, and not a measure of patriotism or ideology­. It is for this reason that the cost of doing business should be consciously constrained and investment in expansion and growth promoted. The imposition of taxes, the prospect of even less flexible labour legislation and the intransigence of unions impede the very trends that the country needs.

At the very heart of the opposition is the widespread perception that this revenue, like all other, will not be spent to achieve the outcomes that we need. It has been reported that the total amount that could accrue to local government from a business tax — no one is quite sure who will collect it and on what basis — is anything between R12 billion and R19 billion. These amounts represent two percent and three percent, respectively, of national expenditure­. This means that savings­ of these meagre percentages could make up the perceived leeway and a tax would not be necessary­ after all. In KwaZulu-Natal, through the introduction of concerted strategies and prudence, the current provincial administration has been able to turn a nightmare deficit into a surplus in a comparatively short time without, I suggest, showing any signs of deteriorating service delivery. In fact, one remains conscious of expenditure which, if not wasteful, is not really necessary either. Considering the regular reports on wanton expenditure by the national government on the trappings of power, it would be a cinch to save three percent if minds were directed in that way. This, then, is surely the place to start. When all public money is spent wisely, and for the achievement of maximum value, then business may find a tax more palatable.

• Andrew Layman is the CEO of the Durban Chamber of Commerce and Industry.

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