Category: dearSA

Parliament, Sunday, 3 November 2019 – Among the broad range of matters on the parliamentary agenda this week, the second round of Public Hearings on the National Health Insurance (NHI) Bill by the Portfolio Committee on Health kick-started in the Northern Cape in Kimberly on Friday, 1 November. Emthanjeni Municipality in De Aar was visited yesterday (Saturday, 2 November) whilst today the Committee is at Upington and will continue to Springbok on Monday, 4 November. Mpumalanga Province’s leg was concluded last week whilst Limpopo is scheduled for the next visit by the Committee. The objective of the Bill is to achieve universal access to quality health care services in South Africa as per section 27 of the Constitution; to establish a National Health Insurance Fund as well as to set out its powers, functions and governance structures.

Meanwhile, National Assembly (NA) Speaker Ms Thandi Modise’s participation at the G20 Speakers’ Summit, questions to the Deputy President and the Economics Cluster, the consideration of the Budgetary Review and Recommendation Reports (BRRR), a mini-plenary session on Agenda 63, as well as NA and National Council of Provinces (NCOP) committee meetings are scheduled this week.

Ms Modise will represent Parliament at the sixth G20 Speakers’ Summit this week from 3 to 5 November 2019. The summit, taking place in Tokyo, Japan, aims to strengthen the role of legislatures in global affairs. The Inter-Parliamentary Union (IPU) – the largest and oldest global parliamentary platform – and the House of Councillors of the National Diet (Parliament) of Japan are hosting the summit.

Ms Modise also participated in the 2018 Speakers’ Summit held in Buenos Aires, Argentina, ahead of the 2018 G20 Leaders’ Summit. The G20 is made up of 19 countries and the European Union. The 19 countries are Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, South Africa, Russia, Saudi Arabia, Turkey, the United Kingdom and the United States of America.

On Thursday, 7 November 2019, Deputy President David Mabuza will be in the NCOP for oral replies to questions posed by its members. Putting questions to the Deputy President is one of the many ways in which Parliament holds the executive accountable. Section 92(2) of the Constitution stipulates that Members of the Cabinet account collectively and individually to Parliament for the exercise of the powers and performance of their functions.

The Economics Cluster 4C comprising the Ministries of Communications, Transport, and Public Works and Infrastructure will also respond to questions in the NCOP on Tuesday, 5 November 2019.

In all, the NA will hold three plenaries this week including a mini-plenary session. Amongst the key items on the agenda is consideration of the Budgetary Review and Recommendation Reports (BRRR) of various government departments. The BRRR provides an assessment of the departments’ service delivery performance, given available resources; an assessment of the effectiveness and efficiency of the departments’ use and allocation of available resources; and may include recommendations on the forward use of resources.

NA committees are required in terms of Section 5 of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9 of 2009) to annually assess the performance of each national department and to thereafter submit a Budgetary Review and Recommendation Report (BRRR).

The mini-plenary debate is scheduled to take place in the National Assembly on Thursday, 7 November 2019 under the theme “Advancing the African Union Agenda 2063 within the context of the twin pillars of economic development and security”. The NA Rules 49 (1) makes provision for the Speaker of the National Assembly to refer matters for consideration in a mini-plenary session, after due deliberation of views and directions of the Programme Committee. A mini-plenary session may proceed with its business irrespective of the number of members present.

Amongst parliamentary committee meetings scheduled for this week again are those of Joint Standing Committees, which will hold their meetings as follows:
Joint Standing Committee on the Financial Management of Parliament will on Wednesday (6 November 2019) receive three briefings on Parliament’s performance in the 2018/2019 financial year. The first briefing will be from the committee’s content and research team, followed by the Auditor-General of South Africa on Parliament’s 2018/2019 audit outcomes, and lastly by the Acting Secretary to Parliament.
Joint Standing Committee on Defence: the Chief Logistics on procurement will appear before the committee and give a briefing on the challenges faced by the Department of Defence on Thursday, 7 November 2019.

PUBLIC HEARINGS THIS WEEK:

Portfolio Committee on Health is currently holding its second round of public hearings on the National Health Insurance (NHI) Bill in the Northern Cape (1 to 4 November 2019).
Select Committee on Security and Justice will hold provincial public hearings on the Traditional Courts Bill on Tuesday, 5 November 2019.
Standing Committee on Finance and Select Committee on Finance will hold public hearings on the 2019 revised Fiscal Framework and

THERE ARE 34 COMMITTEE MEETINGS SCHEDULED THIS WEEK:

TUESDAY, 5 NOVEMBER 2019 
Portfolio Committee on Agriculture, Land Reform and Rural Development: Briefing by the Department of Agriculture, Land Reform and Rural Development on drought update and Provinces’ state of readiness for the 2019/20 planting season.
Portfolio Committee on Home Affairs: Briefing by the Department of Home Affairs (DHA) and the State Information Technology Agency (SITA) on resolving the network downtime at the DHA offices; Briefing by the Department of Home Affairs (DHA) and the State Information Technology Agency (SITA) on the procurement process of the Automated Biometric Information System (ABIS); Briefing by the Department of Home Affairs on the litigation case management system and categorizing of the cases.
Portfolio Committee on Public Service and Administration: Interviews for filling the vacancy of Commissioner for the Public Service Commission; Deliberations and adoption of the recommended candidate to be selected to serve as a Commissioner for the PSC.
Portfolio Committee on Women, Youth and Persons with Disabilities, (National Assembly), [Briefing by the National Youth Development Agency on the annual report for 2018/19.
Portfolio Committee on Environment, Forestry and Fisheries: [Briefing by the Department of Environment, Forestry and Fisheries on the readiness for UNFCCC Climate Change COP25 conference in Chile.
Portfolio Committee on Human Settlements, Water and Sanitation: Interrogation and discussion emanating from the presentation made by the Department of Cooperative Governance and Traditional Affairs (COGTA); South African Local Government Association (SALGA) and National Treasury on debt owed for water provision.
Portfolio Committee on Justice and Correctional Services: Briefing on the Judicial Matters Amendment Bill and Customary Marriages Amendment Bill.
Portfolio Committee on Trade and Industry: Briefing by the B-BBEE Commission on its 2018/19 Annual Report and 2019/20 second-quarter report on financial and non-financial performance; Briefing by the NLC Commission on its 2018/19 Annual Report and 2019/20 second-quarter report on financial and non-financial performance.
Portfolio Committee on Higher Education, Science and Technology: Briefing by the Department of Higher Education and Training (DHET), Umalusi and the State Information Technology Agency (SITA) on progress report in eradicating the certification backlog in the Technical and Vocational Education and Training (TVET) colleges.
Select Committee on Health and Social Services: Briefing by the Department of Health on the Annual Report 2018/2019.
Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements: Workshop on Section 139 Interventions in the Municipalities and general observations.
Portfolio Committee on Communications: Briefing by the South African Post Office on: (i) impairment of its investment; (ii) governance and operational challenges; and (iii) an action plan to respond to AGSA material uncertainty as a going concern which has been reported in audit report for the past 5 financial years; Adoption of minutes.
Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour: Consideration of the Economic Partnership Agreement (EPA) between the South African Customs Union (SACU) and Mozambique (together SACUM) and the United Kingdom; Briefing by Department of Tourism on its 2018/19 annual report.
Joint Meeting: Standing Committee on Finance, Standing Committee on Appropriations, Select Committee on Finance and Select Committee on Appropriations: Briefing by the Financial and Fiscal Commission (FFC) and the Parliamentary Budget Office (PBO) on 2019 Medium Term Budget Policy Statement (MTBPS); Consideration of draft advertisement for position of Director of the PBO.

WEDNESDAY, 6 NOVEMBER 2019 
Portfolio Committee on Higher Education, Science and Technology: Colloquium on funding of the post-school education and training sector.
Portfolio Committee on Public Works and Infrastructure: Briefing by the DPWI EPWP branch on: the manner in which it coordinates the programme across the national, provincial and municipal levels of government; the manner in which the directorate ensures uniformity of beneficiary selection, the standardisation of data verification; the formulae through which job opportunities are translated into actual jobs; the skills development and certification of EPWP beneficiaries; whether and how, in the next phase of the EPW programme, these aspects are going to be improved; Consideration and adoption of minutes; Consideration and adoption of the 2019/20 First Quarter Report
Portfolio Committee on Public Service and Administration: Briefing by the PSC on the extent and nature of contract appointments in national and provincial departments; Briefing by the Department of Public Service and Administration, Government Communication and Information System and Department of Cooperative Governance and Traditional Affairs on the location and funding model of the third generation of the Thusong Service Centres; Briefing by the Department Public Service Administration on the revised Ministerial Handbook; Adoption of the report of the recommended candidate for Commissioner post for the Public Service Commission Board; Consideration and adoption of the previous Committee minutes.
Portfolio Committee on Justice and Correctional Services: Briefing on the International Crimes Bill
Select Committee on Public Enterprises and Communication: Briefing by Alexkor on progress made regarding the court review of the Deed of Settlement (DoS) for payments to be made to beneficiaries and the establishment of the CPA to complete the implementation of the DoS.
Portfolio Committee on Defence and Military Veterans: Briefing by the Department of Defence (DOD), Armscor and the South African Defence Industry on the status and challenges in the Defence Industry in South Africa.
Select Committee on Education and Technology, Sports, Arts and Culture: Briefing by the Department of Sports and Recreation on its 2018/19 Annual Report.
Portfolio Committee on Communications: Meeting of the Subcommittee on ICASA Council vacancies
Portfolio Committee on Social Development: Briefing by the South African Social Security Agency (SASSA) and National Development Agency (NDA) on its action plan to respond to the Auditor General’s audit findings for 2018/19 annual report and BRRR; Briefing by the Department of Social Development on its first quarterly financial and non- financial performance report for 2019/20 financial year (April – June 2019)
Select Committee on Security and Justice: Parliamentary Legal Advisor’s response on Department of Home Affairs proposed amendment to the Border Management Authority Bill [B9B-2016]; Parliamentary Legal Advisor’s response to written submissions on Independent Police Investigative Directorate Amendment Bill [B 25 – 2018] (National Assembly – sec 75); Briefing by the Department of Justice and Constitutional Development on the written responses to the Child Justice Amendment Bill [B 32b – 2018] (National Assembly – Sec 75); Briefing by the Department of Justice and Constitutional Development on the Promotion of Access to Information Amendment Bill.

FRIDAY, 8 NOVEMBER 2019 
Joint Meeting: Standing Committee on Finance and Select Committee on Finance:Response by National Treasury to the public submissions on the 2019 Revised Framework], Committee Room M514, Fifth Floor, Marks Building, 09:00-12:00
Portfolio Committee on Human Settlements, Water and Sanitation: Briefing by the Department of Performance, Monitoring and Evaluation on the delivery performance of the Department of Water and Sanitation and its entities for the 2018/19 financial year; Overview by the Auditor-General South Africa on the audit outcomes (financial and non- financial) performance of the Department of Water and Sanitation for the 2018/19 financial year.

ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES

Some years back when the US was fretting about high Government debt, a survey was conducted among citizens to understand how they would prefer to address the problem. By far the majority said they’d prefer a large one-off levy rather than the drip torture of higher taxes over many years.

That shouldn’t be a surprise. Most of us have learned to first tackle the least enjoyable item on our To-Do list. Similarly, when restructuring an underperforming businesses, savvy managers know it’s best to take the biggest hits up front. After clearing the decks they get on to build a better future.

After paying close attention to yesterday’s MTBPS, I got the feeling that finance minister Tito Mboweni might be lining us up for similar treatment in February next year. Circumstances are so dire, he pointed out, that big and tough decisions need to be taken. So he urged us to start talking about them.

With the double whammy of a R53bn revenue shortfall and R23bn in overspending, higher taxes are a certainty in February’s Budget Speech. Nobody likes paying more tax. But if we have to, it’s best to get it over with soonest. Collectives have long used large one-off levies when needing to bring the finances into order. It’s a principle which should also works with countries

Article by BizNews

South Africans should brace themselves for higher taxes next year as the impact of state capture, corruption, and mismanagement are starting to bite.

The National Treasury delivered its 2019 medium-term budget policy statement today, revealing that revenue collection fell far short of estimates.

Compared with the 2019 Budget estimates, total revenue shortfall for 2019/20 will amount to R52.5 billion.

This reflects a poor employment outlook, with job losses, lower wage settlements and smaller bonuses, reducing personal income tax collection.

There was also reduced profitability in a difficult trading environment, resulting in lower-than-expected corporate income tax collections.

Financial pressure on consumers resulted in weak household consumption which means domestic VAT collection was not as high as expected.

Tax increases planned

The Treasury said significant tax increases over the past several years leave only moderate scope to boost tax revenue.

However, given the size of the revenue shortfall, additional tax measures are under consideration for next year.

Chris Axelson, chief director for economic tax analysis in the Treasury, said that given the fiscal position South Africa finds itself in, all tax options need to be on the table.

“The 2019 Budget included R10 billion in tax increases for 2020/21. The tax policy measures to raise this amount will be announced in the 2020 Budget,” the Treasury said.

Taxpayers already overburdened

While the government wants to collect more money through higher taxes, the inverse may happen instead.

Efficient Group founder and chief economist Dawie Roodt said South African taxpayers are already overburdened.

This means that even when the government increases taxes further, they will not increase tax collection much.

It will also further frighten the existing taxpayers in the country, who are already faced with the highest taxes in history.

The consequences of ever-increasing taxes and mismanagement from the government include a potential tax revolt and skilled individuals and companies leaving the country.

The fact that South Africans are tired of paying for corruption and mismanagement at state-owned enterprises (Eskom, SAA, and the SABC), municipalities, and state departments only aggravates the situation.

Article by My Broadband

Trade Union Solidarity has released a new report on the incoming National Health Insurance (NHI) and its impact on the healthcare industry.

Nicolien Welthagen, a research psychologist at the Solidarity Research Institute, said that the report is based on questionnaires sent to healthcare practitioners in the private as well as the public sector across the country.

The general feedback shows that healthcare practitioners have huge concerns about the proposed NHI.

“The findings indicate that there is distrust towards the government regarding the way they want to implement and manage the NHI. 80% of respondents are negative or sceptical about the NHI,” said Welthagen.

“According to the results of this report, the respondents do not believe that the NHI will succeed in improving the healthcare system and service delivery.

“Only 15% of respondents believe that it would be possible to successfully implement the NHI, and 84.5% are of the view that the implementation of the NHI could destabilise the healthcare system in South Africa and could harm the high-quality service already being provided by the private sector,” she said.

Welthagen added that the report further highlights the enormous risk that the emigration of health practitioners poses to the future of healthcare in South Africa.

“There are serious concerns about a shortage of healthcare workers, the more so in view of the fact that 20.8% of the respondents indicated that they had already taken steps to emigrate, and a further 41.06% would consider emigrating when the NHI is implemented,” Welthagen said.

Emigration

In an August interview, Dr Chris Archer, CEO of the South African Private Practitioners Forum, said that his members are extremely concerned and that the bill may drive emigration as “those who want to leave see it as a reason to do so”.

Profmed medical aid CEO Craig Comrie said that health professionals are already emigrating.

Comrie said Profmed’s members are mainly health professionals, of whom 17% leave each year. This rose to 30% in June and July.

Alex van den Heever, Wits School of Governance professor, added that he expects medical professionals to emigrate in their hundreds, joining their countrymen in countries like Dubai and Australia.

Doctor shortage

South Africa is also currently facing a doctor and nurse shortage due to a lack of funding, says health minister Dr Zweli Mkhize.

Responding in a recent parliamentary Q&A session, Mkhize said that the primary reason for this shortage is that the public health sector budget has not increased in real terms for the past 10 years.

This has impacted the number of staff that can be appointed, he said.

Mkhize added that the demand for health services in the country is increasing while there is no additional funding to address the change, which results primarily from immigration into the country and the increasing burden of disease.

“The shortage of health professionals is a global phenomenon and is more pronounced in low and middle-income countries as health workers are more likely to migrate to upper-middle-income countries in search of better living and working conditions,” he said.

Article by Business Tech

Proposed national health insurance will not improve efficiency and reduce costs, but will be a magnet for fraud and corruption

Universal health coverage is an important goal, which SA can attain with the right policies. However, the proposed national health insurance (NHI) will do far more harm than good (NHI will help create a more equal, productive society, October 24).

NHI proponents (in the presidency’s policy unit and NHI “war room”) assert, without evidence, that the NHI will end queues, improve efficiency, reduce costs, promote innovation and contribute to economic growth and socioeconomic stability”.

The reverse is true. Waiting times will double, as they have in (wealthy) Canada under its broadly similar “single-payer” system. Emigration will reduce the number of health professionals, increasing the burden on those that remain.

Costs will rise sharply, if only to pay for the huge bureaucracy needed to administer NHI controls over fees, prices, medicines, treatment protocols and medical technologies. Centralised top-down planning will stifle innovation and erode efficiency. Stock-outs and already defective maintenance will worsen as suppliers wait for payment from the NHI, the only permitted purchaser countrywide.

The NHI fund’s enormous revenue (about R450bn a year at the start) will be a magnet for fraud and corruption. Major additional taxes will also have to be imposed on a small and already overburdened tax base, ostensibly to fund the NHI. But without legislation ring-fencing this additional revenue for NHI purposes (the Treasury is averse to ring-fencing), the extra monies will soon be diverted to public service wages or more bailouts for state-owned enterprises.

Reduced choice, diminished quality, long waiting times and increased taxes will give the skilled middle class yet more reason to emigrate, curtailing economic growth, making it harder to sustain the social wage, and adding to destitution and despair.

Section 27 of the constitution does indeed require the state to “take measures” to expand access to health care. But it says these must be “reasonable” and match “available resources”. The NHI fails both these crucial constitutional tests.

Dr Anthea Jeffery
Institute of Race Relations

The Road Accident Fund (RAF) is hopelessly insolvent.

The fund was set up to pay compensation to victims of road accidents and provides support in respect of future treatment and rehabilitation.

Dependent on fuel levies to meet its ever-increasing liabilities, and with an accumulated deficit R262.2 billion in 2019, the RAF is deep in the red.

Board chair Dr Matsontso Mathebula, in his report to the 2019 integrated annual report, remarked that the RAF “has continued on its journey to be a key player in South Africa’s social security system …”, and notes that challenges remain in the “legislative and financial environments”.

Acting CEO Lindelwa Xingwana-Jabavu reported that: “Close on 2 100 fraudulent claims to the value of R1.45 billion were identified before payments were made and nine people were arrested for fraud against the RAF.”

She added that “the increase of 30c/l in RAF Fuel Levy” that came into effect on April 1 last year saw total revenue increase by 15.8% to R43.2 billion.

Cash flow constraints resulted in a 30% increase in the amount of interest paid during the year, from R224 million in 2018 to R291 million in 2019.

Claims of R42.6 billion were settled in the 2018/19 financial year: R3.6 billion was paid towards medical costs, R160 million towards funeral costs, R10.3 billion towards legal and other expert costs, R9.2 billion towards general damages (primarily to persons not seriously injured), and R19.4 billion towards loss of earnings and support for those who qualified.

The percentage of RAF fuel levy income that was used to pay claims rose to 97%  (from 93%).

The increase in total revenue for 2019 to R43.24 billion (2018: R37.34 billion) was mainly due to the 30c per litre (c/l) increase in the RAF fuel levy from the beginning of the financial year.

During the 2019 financial year the RAF fuel levy was set at 193c/l (2018: 163c/l).

The total amount of claims paid (including net effect of ‘requested not yet paid) increased by 21% to R41.96 billion (2018: R34.6 billion).

Claims liabilities increased by 27% to R272 billion (2018: R215 billion).

The RAF is hopelessly insolvent.

Auditor-General’s report to parliament

The Auditor-General (AG) notes that the accumulated deficit of R262.2 billion, together with the excess of liabilities over assets of R262.1 billion, indicates that there is a material uncertainty relating to whether the RAF is a going concern.

This will not absolve it from its debts. The total claims liabilities amount to R271.9 billion.

Other notable concerns were:

• Material misstatements were identified in the annual performance report submitted for auditing.
• Management did not implement proper record-keeping in a timely manner to ensure that complete, relevant and accurate information is accessible and available to support performance reporting.
• Management did prepare regular performance reports, however, these reports were not accurate and complete and were not supported and evidenced by reliable information.

Executive remuneration

Despite leading the company into an unsustainable loss position, the board and executives received performance bonuses for the year.

Amounts paid to the board members and executive remuneration amounted to R28.8 million (2018: R28.9 million). Performance bonuses amounted to R4.6 million (2018: R6.5 million). Non-executives were paid fees of R6.6 million (2018: R6.8 million).

Crawling out of the mess

The government cannot continue to hike the fuel price to bail out the insolvent RAF.

The latest fuel price is R15.79 per litre. Fuel price increases have a devastating impact on the poor, leading to higher transport and food costs.

The RAF as a concept is not viable. It is time to bring in the expert insurance companies and plot the way forward.

Article by Moneyweb

The office of the public protector’s COO will be vacating his position at the end of the month.

The office of the public protector’s chief operating officer (COO), Basani Baloyi, has been axed by Busisiwe Mkhwebane.

She has also suspended four senior officials and investigators: executive manager Pona Mogaladi, chief investigator Abongile Madiba, chief investigator Lesedi Sekele, and senior investigator Tebogo Kekana, News24 reports.

Office of the public protector CEO Vussy Mahlangu said in a letter that Baloyi lacks the skills or conduct for his position, the publication reports.

It was further reported that at least one of those suspended is believed to have been involved in a complaint lodged by Economic Freedom Fighters (EFF) leader Julius Malema against the Financial Services Conduct Authority, which resulted in a report that is currently under judicial review.

The Citizen has contacted spokesperson for the office of the public protector Oupa Segalwa for comment, and will update this article once it’s received.

More to follow.

(Compiled by Daniel Friedman.)

The Bill must now be approved by the National Council of Provinces before it can be signed into law by the president.

CAPE TOWN – The National Assembly has passed the Special Appropriation Bill, which aims to provide Eskom with a R59 billion bailout for the rest of this year and the next financial year.

The Bill must now be approved by the National Council of Provinces before it can be signed into law by the President.

Debate on the bill saw opposition parties blame the ANC for state Eskom finds itself in, with some, like the EFF and the Freedom Front Plus, saying they could not support it.

Wrapping up the debate, Finance Minister Tito Mboweni told the House that Eskom’s problems were not just financial.

“One of the key issues that we need to solve is by appointing the correct people to run Eskom. That’s what we need to do. We must appoint the correct board of directors, we must appoint a competent management team and we must then be in a position to hold the board of directors and the management team accountable for the operations of Eskom.”

Mboweni said that Eskom’s problems are many and complex.

“The problem at Eskom is not just financial and if we’re going to reduce a complex problem to the lowest common multiplier, being the financial problem, we’re not solving the problem. We need to approach solutions to Eskom via complex theory – understand the complexity of the institution we’re dealing with, to come up with complex solutions.”

The Bill passed with 200 votes in favour and 105 against. There were no abstentions.

Article by EWN

Tax revenue for the first 5 months of the tax year is running significantly behind target.

Experts are now forecasting a record shortfall for the tax year ending March 2020 – of as much as R60 billion.

That will bring the accumulated tax undershot over the last 6 tax years to over R215 billion.

That gap has to be plugged, and that is going to inflict collateral damage on consumers.

A widening tax shortfall is going to blow another hole in state finances – and ultimately leave ordinary people poorer.

Every tax year since April 2014, Sars has fallen short of the tax collection target set by National Treasury in the prior year’s Budget Speech.

Experts are now forecasting a record shortfall for the tax year ending March 2020 of as much as R60 billion, bringing the accumulated tax miss over the past 6 years to over R215 billion.

Figures from the National Treasury released at the end of September show that Sars collected 3.1% more tax during the first 5 months of the tax year compared to the same period in 2018.

However, to meet finance minister Tito Mboweni’s February Budget Speech target for the full tax year of R1.422 trillion requires 10.4% more in tax, which means Sars is 7.3 percentage points off the pace.

Here are six ways Sars’ failure to collect enough tax is likely to make you poorer: 

You can expect more tax, soon.
The government deficit has to be plugged sooner or later.

The taxes that will be most likely be increased to do that will be personal income tax and valued added tax (VAT), Adrian Saville, Cannon Asset Managers CEO and a professor of economics at the Gordon Institute of Business Science, told Business Insider South Africa – not the corporate taxes that affect consumers less directly.

Government debt will cost you, eventually.
To plug the shortfall in tax revenue in the meanwhile, Mboweni is adding to government debt.

That expanding government debt has seen steadily increasing state bond yields to compensate investors for the worsening creditworthiness, says Glynos George, ETM Analytics managing director and chief economist.

The cost of servicing debt has been the top growing state expense for many years.

Eventually something has to give, and that something will be consumers one way or the other, most likely through more tax hikes.

Interest rates will rise if SA’s credit rating drops any farther.
The worsening creditworthiness of the government, with tax shortfalls at its heart, risks further rating downgrades. That would immediately push up the cost of debt – and would quickly require an increase in interest rates, rising the price of everything from credit card debt to home loans.

Fuel, food, and imported consumer goods will become more expensive.
The worsening state of government finances will make the rand vulnerable, and a weaker rand can have a dramatic impact on the cost of fuel and food, among other items dependent on imports or global prices.

A weaker rand will increase the price of maize, which will have an impact on the price of numerous foodstuffs from mielie meal to meat. South Africa is a major importer of wheat, so a weaker rand will also increase bread prices.

Other products that would be hit include chocolate, cell phones – and foreign holidays too, for those who can still afford them.

Electricity prices will go even higher.
Eskom has been burning billions of rands in imported diesel to try and avoid load shedding.

At the end of July, Eskom reported that the group and independent power producers had spent R6.5 billion on diesel-generated power in the year ended March.

That doesn’t get cheaper when the rand weakens, and ultimately Eskom recovers that money from consumers.

There will be even fewer jobs.
Whatever mechanism is used to plug the revenue shortfall will hit consumer confidence and business confidence, both of which are at the heart of economic growth. Nobody wants to invest when things are getting worse.

The impact of even lower growth will not be a decrease in the already sky-high unemployment – not as companies cut costs and consumers hit by higher taxes and other costs hang on to their money more tightly.

Article by Business Insider

Growing the economy will require the increase of both foreign and domestic financial capital, says deputy finance minister David Masondo.

Speaking at a recent private investors conference, Masondo said that while government was working to attract overseas investment, there is also ‘enormous power’ in the size of long-term fund managers, such as pension funds.

“At this point, let me be clear about our views. Firstly, from a Finance Ministry perspective, the savings of workers must be protected. In this regard, they should never be exposed to risks emanating from poor financial management in either the public or the private sector,” he said.

“Second, the onus must be on economic actors to ensure that the value proposition of the investment is sound. Government can never compel asset managers to invest their clients’ money in unsound or poor-return projects.

“But let us not forget that the size of long-term fund managers such as pension funds alone is a source of enormous power and influence in driving economic growth and reform.”

Masondo said that these types of funds have the ability to secure longer-term returns by insisting on high standards of delivery, governance, and social responsibility.

“We need to ask ourselves that: what prevents the full potential of these instruments from being unleashed on the economic potential before us?” he said.

Pensions

In August, President Cyril Ramaphosa said that South Africa should investigate using worker pensions to finance development and infrastructure projects.

“We need to discuss this matter (prescribed assets) and we need to discuss it with a view to actually saying what is it we can do to utilise the various resources in our country to generate growth in a purposeful manner,” Ramaphosa said.

The ANC has also previously floated the idea of using pensions to help fund embattled state-owned enterprises.

The DA’s Natasha Mazzone has said that the use of prescribed assets would cause incredible damage to the savings of millions of South Africans, and is unlikely to help the country’s state-owned enterprises to recover from debt.

“South Africa has hundreds of SOEs, many of them are either completely dysfunctional, bankrupt, or frankly serve no purpose other than lining the pockets of the connected few,” she said.

The DA’s Geordin Hill-Lewis added that the proposal was equivalent to theft.

“This government is proposing to steal pensions of hardworking South Africans to pay for their mismanagement,” he said.

Article by Business Tech