Dear Pravin : Tips for the upcoming budget speech
I am not sure whether it is still appropriate to send you tips for the upcoming budget speech given the sensitivity of the ruling party to any criticism and suggestions. However, I felt that as a “rich” South African, I have to give you tips from the “elite”. Before you finalise the budget, I suggest you watch the movie Armageddon. I earn R105 000 per month hence, according to the ruling party I am classified as "rich".
In this movie, there is a scene, prior to the rocket departing to attempt to divert an asteroid which is on a collision course with earth, where one of the actors, Steve Buscemi, asks his fellow astronauts whether they are aware that the ship they are in comprises of more than one million parts which were all manufactured by the lowest bidder. I am aware that this is going to be toughest budget you have ever prepared and you will be tempted to increase taxes I have to pay. I have religiously paid my taxes since the ANC government came into power because I realised that the country will never succeed with the sea of poverty facing us as a nation, but I have grown resentful of the government. It appears that the government has forgotten its constitutional duty in terms of procurement. The constitution provides that “When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”. I have highlighted the words competitive and cost-effective.
Just to illustrate the clip from the movie I referred to above and the meaning of the words competitive and cost effective, it is well know that a loaf of bread cost R9 – R10 whilst government buys bread for up to R40. That is not cost-effective Minister. Now getting to the budget, I think that South Africa has the highest tax rate in the world and increasing taxes will be killing the goose that lays the golden egg. Let me explain.
1. Government does not provide me with healthcare, safety and security and education whilst I am required to have tax morality. The borders are porous, crime is rampant, corruption of the public purse is endemic and government is unaccountable, i.e. the tax morality you have been preaching is not accompanied by expenditure morality. The President believes he is entitled to R200 million upgrade of his house using taxpayer’s money. Surely this situation is untenable. Something has to give. What are my taxes being used for? By taxing me more, you are in essence saying that it is privilege to live in a crime infested country?
2. I know you are going to be tempted to borrow more to meet the deficit. I urge you not to. The reason for this is that 50% of the country from the latest census is youth whilst we know that up to 40% of these youth are unemployed and unemployable. If you borrow more, how are these youth going to get the country out of debt in 20 years if they are not contributing to the fiscus.
3. It is unsustainable that taxes raised by government, 88% goes towards paying salaries, which grow above the inflation. No money is left for service delivery. Furthermore, government pays up to 40% higher wages than the private sector. When will this end? Retrenchments cannot be avoided Minister.
The tip I had for you is really called financial prudency. Let me explain. Last year you presented a trillion rand budget broken down into various categories, health, education, policing etc. One item was missing from the budget speech, the elephant in the room. You want to take a guess? I mean corruption.
The old adage that if you ignore something for long enough it will go away, unfortunately, does not apply to corruption. It becomes cancerous. Any Financial Director, will tell you that you have to budget for all costs so that those costs which are out of control can be identified and measures can be taken to reduce them or eliminate them completely. It pains me to say it, but real tip is that of the one point trillion budget you are going to present this year, I suggest that you itemise corruption. After all, the President has not done anything to appoint the head of the SIU or the head of the NPA. Have the courage.
In terms of raising taxes to pay for other things (except corruption), I do not mind if you increase taxes for me to 100% because it will hasten my departure from a country where I pay taxes because it is a privilege to live in such country. Maybe you should increase it to 200% if it will help. Lastly, good luck.