Fund SA vaccine plan by cutting waste

Raising taxes is a solution which condones waste and failed SOEs

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19/01/2021 11:15:52

Fund SA vaccine plan by cutting waste

Raising funds for the Covid-19 vaccine is an opportunity for government to show South Africans that it is serious about reducing the cost of a bloated government, unprofitable SOEs and recovery of funds lost to corruption.

Obtaining the necessary funds to pay for South Africa’s Covid-19 vaccine and roll-out plan is paramount and urgent, however, funding by way of increasing taxes should be regarded as the worst and last-resort option.

Unfortunately, South Africa has exhausted its emergency reserves, largely as a result of poor leadership decisions, corruption and excessive expenditure on failed SOEs during the Zuma era, which has given rise to excessive tax hikes and VAT increases over the past few years to finance the state’s affairs, long before the arrival of the Covid-19 pandemic.

“How is society expected to take government seriously when on one had it plans to bail-out a failed state airline with more than R15bn, whilst crying out for tax increases to vaccinate the nation and bring an end to the pandemic in South Africa?” asks Wayne Duvenage, OUTA’s CEO.

South Africa’s tax base is diminishing and overtaxed. By trying to squeeze more blood out of this stone, the state will merely drive further investment and savings offshore, which is counterproductive for attracting investment, spending and improving business confidence.

Obtaining the required quantities of the vaccine is essential for the survival of our economy and the nation as a whole. Widening the budget deficit, borrowing from international donors or funding organisations might be considered better options than raising taxes, although these are also dangerous routes to follow under our current conditions.

The state must demonstrate its competence and ability to find these funds, in a manner which citizens can respect.

Some ideas of where the state can obtain these funds for the vaccine are: 

Place an immediate ban on purchasing vehicles, property and other assets for political office-bearers, at all levels of government.

Merge a number of ministries and possibly departments and reduce the bloated size of government, along with the high salary costs for the taxpayer.

Reassess the SOEs. There are more than 300 SOEs, many of them superfluous and running at a loss, so this is an ideal opportunity to make decisions on cleaning out the rot and to sell off the non-essential entities that add no real value to South Africans. This will save the taxpayer further bailouts as well as generating income for the vaccine plan.

Work harder to recover approximately R11bn of state funds from CRRC (the Chinese SOE involved in helping loot Transnet on the locomotives contract, see here), Swifambo (the PRASA contract for too-tall trains) and HSBC bank, which was directly involved in laundering revenue from South Africa for corrupt purposes.  There are many other cases of excessive corruption and overspending reported by civil society, the media and the Auditor-General which provide the state with opportunities to recover revenues.

Excessive spending of state office rentals with the private sector, whilst Government offices remain empty and in disrepair. This is an ideal opportunity for the state to compile a comprehensive audit of its own empty offices, begin terminating leases due to expire and move state departments back into the offices they already own.

Reassess the viability and impact of some lockdown restrictions on businesses. The loss of excise duties from the alcohol ban needs to be revised.

Call on MPs to introduce acute awareness and oversight of wasteful and dishonest spending by Cabinet and members of parliament. In 2020, OUTA reported on the failure of MPs to block state capture (see here and here) and reiterated in comment on the MTBPS the need for more efficient and effective spending.

Cut the budgets of those government departments with high irregular expenditure that adds up to billions of rand each year.

A soundclip with comment from Wayne Duvenage is here.


Picture: OUTA