Business closures, job losses will hammer revenue in the months ahead, Kieswetter warns

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SA Revenue Service Commissioner Edward Kieswetter (Photo by Gallo Images/Business Day/Freddy Mavunda)
SA Revenue Service Commissioner Edward Kieswetter (Photo by Gallo Images/Business Day/Freddy Mavunda)

While the South African Revenue Service has already been counting its losses as a result of the coronavirus' economic impact, impending joblessness and business closures would hammer revenues even harder, commissioner Edward Kieswetter said on Tuesday.

Kieswetter was speaking during a media briefing which took place on the same day he told a joint sitting in Parliament that the combined impact of SA's struggling economy and the lockdown could mean a loss of up to R285 billion in tax revenues this year.

Kieswetter told Parliament the combined impact of Covid-19 and sovereign credit rating downgrades was expected to lead to a potential reduction in revenue collections of between 5% and 15%.

The commissioner added that while April is not a significant month for corporate tax collections, indications were that there would be a significant slowdown in collections and that the downward spiral in various sectors was set to continue.

Many jobs, businesses won't come back

"The early indication is that this downward spiral will continue and will be reflected throughout the economy, except in places like electricity, gas and water, and areas that have continued to be active during this period. We expect the number of companies who will apply for business rescue will continue to grow in this country," said Kieswetter.

Kieswetter said the full impact of the novel coronavirus and the subsequent lockdown would bear out over the next few months, but that this would also depend on how South Africa manages the lockdown and phases in economic activities.

"A major concern that we have from a revenue perspective is not only a downward trend in economic activity, but a loss of economic capacity from businesses closing down and jobs that are lost, and many of these businesses and jobs will not return," Kieswetter said.

On Tuesday morning, Deputy Minister of Finance David Masondo told parliamentarians, in the same meeting, that Covid-19 had disrupted some of National Treasury's plans and that these disruptions would be factored into annual performance plans of Treasury and its entities.

"There is work going insofar as the State Bank is concerned. Perhaps we should just make sure that it is in the APP (annual performance plan) along with the sovereign wealth fund. I am sure that when we put together the APP, those matters will be in the document," said Masondo.

Masondo said, under the current situation, the South African Reserve Bank has undertaken monetary measures, including a credit guarantee scheme and reduced repo rate by 200 basis points, which he supported, "even though the Reserve Bank did not need approval to do so".

"It is the independent responsibility of the Reserve Bank to print or supply money, using different instruments, to achieve priced ability in the interest of balanced economic growth. Growth is now unbalanced due to Covid-19 and other pre-Covid constraints," said Masondo.

National Treasury director-general Dondo Mogajane told Parliament that there was still a commitment to supporting small businesses during the pandemic.

However, he said, regardless of the type of business, procurement of emergency supplies to combat Covid-19 – in line with an instruction note issued by Treasury earlier this year – would be reserved only for businesses that are registered with the database and can deliver the required goods and services.

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