Nearly half of SA’s material welfare improvement ‘appropriated by government’

I saw a video on TikTok, by @moneytribe21, on how quickly the petrol tax has outpaced average incomes over the past decade and wondered if that was specific to petrol or whether it was a broader phenomenon.

Petrol tax versus income

Since I already had information on general tax as a percentage of national income going back to the early 90s, all I had to do was find national income per capita (in 2021 rands adjusted for purchasing power parity) for some relevant dates, and I could make that broader comparison.

I picked three periods:

• 1991-92,
• 2001-02,
• 2020-21.

Then I averaged the two years in each period.

• In 91-92 the GDP per capita (GDPpc) was R106 234, and the average general tax per capita was R29 016.
• In 01-02 the GDPpc was R143 065 and the average general tax per capita R44 686.
• In 20-21 the GDPpc was R232 108 and the average tax R85 834.

A richer government

Over the nine years between 91-92 and 01-02 South Africa ended up 34.7% richer.

Government took 42.6% (more than two-fifths) of the gain, whereas citizens took home under two-fifths of it.

Over the nine years between 01-02 and 20-21 SA got 62.2% richer.

Government, via general tax, took 46.2% of the gain and the citizens’ after-tax income was barely half of it.

The net effect over both periods is that SA got richer by 118.5%.

General tax accounted for 45.1% (just under half) of the net gain and after-tax income barely half of the net gain, in national income.

Material welfare appropriated

In short, since the early ’90s almost half the improvement in South Africa’s material welfare has been appropriated by government and barely half realised directly by its citizens and the rate at which government is appropriating income relative to the public has steadily increased.

By international standards, the fraction of government spending on unproductive causes is very high.

In the latest budget government salaries will amount to almost one-third (the worst in the world for an economy this size), bailing out state-owned enterprises about one-seventh and interest on debt amounts to a further one-seventh of total government expenditure.

Very little gets returned to citizens in services, investment or development.

Ticking time bomb

In effect, the government is allocating a large and steadily increasing share of SA’s income to people who aren’t doing much.

This lowers our prospects of solving problems substantially.

Sooner or later, we will lack the ability to keep subsidising them, and they will bear the brunt of these problems.

Desperate people usually end up revolting.

Isn’t it time for the government to start paying more attention to developing the productive capacities of SA and its people?

Garth Zietsman is a statistician