Gigaba’s speech points to lack of faith in Zuma’s government – experts

Shareholders in “South Africa Incorporated” are fast losing hope in the state of the country and where they invest their money, and this is apparent by the non-compliance to pay tax as divulged by Finance Minister Malusi Gigaba’s in his medium-term budget policy statement yesterday.

According to financial pundits, the projection of tax revenue to fall R50.8 billion short of the 2017 budget – the largest drop since the 2009 recession – spoke to the erosion of trust citizens had in a government, plagued by corruption and state capture scandals.

“One would be surprised with all the scandals that people were being confident in how their taxes are spent,” said 10X Investments CEO Steven Nathan.

“All taxpayers are shareholders of ‘South Africa Incorporated’, and if you are in a company you invest money in, which calls for funds and bailouts such as SAA … If I was a shareholder, I would be reluctant to keep on investing into operations that produce poor returns. As a shareholder, you wouldn’t do that.”

Nathan said taxpayers needed to have confidence in the way the taxes were being spent.

“It is clear that there has been an erosion of trust from taxpayers, and its worsened over the last while. There is no surprise that non-compliance is increasing.”

Moreover, Nathan said his company over the last while has seen a much greater demand for offshore investments which does nothing for South Africa.

“That talks to the lack of confidence people have in their longterm savings [being in the country]. And this erodes more of South Africa’s resources to have this money outside of South Africa.

“That would corroborate what the minister says about compliance becoming more of an issue.

“Unless confidence increases, we would expect the trend to continue, where more people would be non-compliant.”

He attributed non-compliance to issues such as state capture and state-owned entities which are not currently seen as attractive in commercial terms. Restoring public confidence, Nathan said, could only occur by correcting all the wrongs.

“If you look at the number of corruption scandals, from the president down, and the state capture allegations – those have to be dealt with. People are getting frustrated that due processes are not being followed.”

All citizens wanted to live in a just and equitable society and not one “where some think they are above the law”, he said.

South Africa was additionally going down the integrity rankings globally year by year. “We need honest people with integrity. People who care.”

South Africa was also fiscally irresponsible, said Nathan, comparing it to Mexico, Brazil and Argentina where there are fiscal challenges and credit downgrades.

David Crosoer, executive of Research and Investments, said revenue shortfall which Gigaba himself alluded to, showed “government today is itself the problem”.

“Whether it has the ability to fix itself is still very much an open question. One thing that is clear is the minister clearly doesn’t think South Africa can afford nuclear power,” Crosoer said.

“Whether he can follow through on this and the other hard expenditure decisions that need to be made [and were largely avoided this time around] remains to be seen.” – yadhanaj@citizen.co.za

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