23 February 2021
Five budget decisions that will boost business confidence and the economy.
The employers’ association, NEASA, today announced the key decisions the Minister of Finance must consider in his 2021 budget speech, in order to turn South Africa’s economic woes around. These include:
- reducing, or at the very least, not increase personal taxes;
- reducing company tax;
- extending section 12J of the Income Tax Act;
- halting public and social employment programme spending; and to
- stop propping up failing state-owned enterprises (SOEs).
According to NEASA’S CEO, Gerhard Papenfus, to save the South African economy, small businesses and jobs, the government can no longer afford to base the management of the country’s finances upon ideological imperatives. “We are in trouble and we have to make the difficult and unpopular decisions now”.
NEASA is of the view that the Minister should not increase personal taxes. In light of wasteful and fruitless expenditures and high levels of corruption, the public cannot bear any further tax increases. Ignoring this will increase public frustration and lead to tax circumvention. “What the business community wants to see is responsible spending and a complete eradication of corruption, not increased taxes upon the hard-earned wages of our employees”, said Papenfus.
South Africa’s company tax rate (currently at 28%) is already higher than the global average (24%). To stimulate growth and investment, and consequently create jobs, it will be wise to reduce the company tax rate. According to Papenfus, this will require political courage and trust in the workings of the free market and not to undermine it.
The country needs more capital investment. NEASA therefore encourages the Minister to extend the Section 12J of the Income Tax Act beyond its June 2021 expiry date. This will encourage investment venture capital companies, stimulating job growth, in especially, rural areas.
The billions spent on government’s public and social employment initiative is simply artificial and temporary. These schemes are simply paying people with tax money which is not sustainable and therefore a waste of capital. Real jobs are created by the private sector. For these real jobs to be created, significant deregulation is required. Deregulation will create sustainable jobs and skills development. It will establish an investor friendly environment and reduce poverty drastically.
Anything else is simply an exercise in futility. “It is time to give the private sector the opportunity to take care of the employment crisis in South Africa”, said Papenfus.
Lastly, Government must stop pumping money into South Africa’s entirely ineffective SOEs. SEOs have become a bottomless pit, draining the fiscus and facilitating corruption and political patronage.
At some point in time Government will be compelled to start implementing the above proposals. The earlier the better. “If South Africa is to emerge from the economic impact of the Covid-19 crisis and the state capture debacle, these tough decisions will have to be made”.
For more information:
NEASA Media Department