Three top SA executives have called for a sharper focus on cutting wastage and improving efficiency to address the budget shortfall.
Nedbank COO Mfundo Nkuhlu, Discovery CEO Adrian Gore and Shoprite boss Pieter Engelbrecht shared their wish list with Business Day on Tuesday, a week before finance minister Enoch Godongwana is due to have another go at presenting the budget.
The cabinet’s rejection of the budget last month over raising the VAT rate by two percentage points to 17% while widening the list of exempted goods, sparked nationwide debate on how to raise the R60bn shortfall without burdening consumers, businesses and knocking fiscal consolidation policy off the tracks.
The budget was now alarmingly 30 times larger than it was in 1994, said Engelbrecht.
“It’s scary that we’re spending 30 times more, but we all know about service delivery issues [and] crumbling infrastructure,” said Engelbrecht.
“If we can just stop the wastage and spillage; there’s so much money that’s unaccounted for. If we can just be more efficient and spend our money more wisely, it is not necessary to increase taxes. What I don’t want to see is a VAT increase.”
A VAT rise tempered with a wider list of exempted items may be a double-edged sword for retailers such as Shoprite, which targets lower-income consumers with discounts on staples. While it could alleviate some financial pressure on essential goods, it could also lead to higher costs for raw materials and business services, and reduce spending on high-margin products at its high-end Checkers outlets.
The VAT proposal united most economists in their belief that it would harm the economy. They said it would add to the financial burden of highly indebted consumers and hike costs of goods and services that could reverse gains in the Reserve Bank’s war on inflation.
Gore said: “My desire is to see a push for deregulation, more efficiency and less waste. I’m not convinced that the only problem is where to get extra revenue from. We have an excellent revenue collection service. I don’t know what the actual variables will be, probably some compromise, but the ability to get rid of regulation, get rid of red tape, the ability to bring costs down, [and] the ability to spend less or not just raise taxes [are essential].
“We know it would be good for the economy. We need to see more efficiency, rather than more taxes. Whatever we do we’ve got to create growth that creates jobs.”
Nkuhlu echoed Gore’s comments, saying Nedbank would prefer a growth-orientated budget “because growth lifts all boats”.
“We all wait for the 12th to see where the balance of evidence goes. The challenge they’re facing is whether to raise taxes as a source of financing the budget or to bank on expenditure and not put further strain on consumers already in recession. That’s really the trade-off.
“Ultimately, the leadership makes that call. What we would like to see is a budget broadly supportive of economic growth,” said Nkuhlu. “The reality is that over a period, the average growth rate in our economy has been 0.8%. That’s just not good enough to meet the needs of our society, which are immense and varied. We’ve got to be able to use our resources to reach all corners of our country.”
motsoenengt@businesslive.co.za
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.