Can we turn this economy around?

As we move towards the festive season, most of the focus in South Africa usually falls on the Medium-Term Budget Policy Statement (MTBPS), often referred to as the Mini Budget.

This years MTBPS will be delivered this afternoon by another new Finance Minister, Tito Mboweni. FAnews spoke to Mike Teuchert – National Head of Taxation at Mazars – to find out what we can expect from Mboweni and the MTBPS. 

A shrewd appointment

Before we get into the nitty gritty about the highlights of the MTBPS, we need to establish how we got to this point. 

The carousel of Finance Ministers began in December 2015 and we have seen no less than four different Ministers during that time. It looked like we were on a good wicket with Nhlanhla Nene back at the helm, until he opened up about meetings that he had with the Gupta family. 

The Ramaphosa presidency is predicated on honesty and the fact that it will go to extreme lengths to root out corruption. This was the basis behind the decision to appoint Mboweni. “We cannot look past what a shrewd appointment Mboweni is. He has taken a back set politically over the past few years, he was not embroiled in the State Capture scandal and has no visible links with the Guptas. I think that the appointment of Mboweni will be good for the country. He is respected internationally and did well as the governor of the South African Reserve Bank (SARB),” said Teuchert. 

A show of force

South Africa’s economic woes are well documented. However, Ramaphosa seems to have a plan and has developed a stimulus package which he hopes will kick start the economy. 

“This will be the major focus of the MTBPS. Mboweni cannot go through it without giving further insight into how this package will work and who will benefit from it. His main job will be to settle the country down and to look towards getting us back on the growth path,” said Teuchert. 

There has been little to no news about how this stimulus package is going to be funded or rolled out. Teuchert pointed out that we know that R50 million will be made available and that a large portion of this will be taken from underperforming departments and redistributed to departments that traditionally do well. 

“We need to encourage a positive climate within the country. Do South Africans actually believe that economic growth can be encouraged? This has a lot to do with investment from the private sector, can we encourage South African companies to invest in their own country?” said Teuchert. 

Danger ahead

Speaking of confidence, a major part of the MTBPS will be about tax collection and how the South African Revenue Service (SARS) is progressing on that front. 

Based on the news regarding the appointment of SARS Commissioner Tom Moyane, the SARS enquiry and the cringe worthy television interview with the SARS Chief Officer for IT, Mmamathe Makhekhe-Mokhuane, what can be said when it comes to confidence in SARS? 

“Mboweni must give us some indication on how tax collection is progressing. And there are serious indications that the collection figure will have to be revised down from the figure provided in February this year,” said Teuchert. 

Despite this challenge, Teuchert pointed out that SARS has also put significant efforts into increasing its own administrative capabilities to help increase revenue collection. “These measures include the re-establishing of its Large Business Centre, collaborating with the Tobacco Institute of Southern Africa (TISA) and Fair-trade Independent Tobacco Association (FITA) to combat the illegal cigarette trade, and the proposed imposition of administrative penalties from December for outstanding corporate income tax,” said Teuchert. 

Teuchert explained that another key point expected to be discussed during the 2018 MTBPS is information regarding the Woolard Panel’s report on zero-rated items and whether South Africa will be able to afford amendments to the list. 

“The 1 percentage point increase in the rate of VAT to 15%, was one of the most unpopular tax changes this year, and it will be important for Treasury to offer the South African public as much feedback as possible relating the impact this had on revenue collection and whether relief can be provided in some or other form,” said Teuchert. 

Editor’s Thoughts:
At the end of the day, confidence is in short supply in the country. The public wants to believe that the economic growth is around the corner, but this was promised and not delivered in the past. What do you think needs to be focused on to achieve economic growth? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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