Some commentators have criticised the call by the Democratic Alliance (DA) to restructure the way in which fuel is being taxed, calling it impossible, saying it will result in a “gaping hole” in the fiscus, even calling it “cheap politicking”. (DA’s call to cut fuel levy would leave a ‘gaping hole’ in revenue collection, Daily Maverick, 24 July 2018.)
The DA has for many years now called for a lean, effective and efficient government, including a smaller cabinet, restructured state-owned enterprises, an expenditure review, addressing corruption, and opposing government leaching on South African citizens.
The DA has also opposed multiple bailouts to State-owned Enterprises (SoEs) such as South African Airways (SAA).
Calling for the restructuring of fuel levies, and in fact reducing levies on fuel, is nothing else than being consistent. To put it differently, by not acting and by opposing calls for restructuring the levy on fuel, one willingly supports financial bailouts, corruption and a massively bloated government at the cost of businesses and South Africans, especially the poor.
We understand it is difficult to see through the smoke and mirrors, so it is crucial that we clear things up.
When it comes to the “gaping hole” in the fiscus, let’s first consider the budget balance.
In essence this is about revenue and expenditure; if revenue increases, the balance increases; if expenditure decreases, the balance increases. If revenue decreases and expenditure decreases with the same amount, the balance remains the same. Hence the question is not how the hole in revenue would be addressed, but rather how the equation between revenue and expenditure would be balanced. In terms of expenditure, the DA has for years proposed various measures including restructuring government departments and reducing expenditure on travel and VIP security.
Naturally, there would be questions around how long some of our proposals would take to implement in order to significantly reduce expenditure.
The truth is there are steps government could take right now which could result in immediate changes. For example, the Road Accident Fund could immediately stop renting office chairs for R1,666/month per chair. The Ministerial Handbook could immediately be revised so that the excessive spending by the likes of Norma Gigaba, the former Minister of Finance’s wife, who cost the taxpayer R873,366.86 in travelling overseas in 2017 does not happen again.
Now let’s say we are confined to the smoke and mirrors of the structure proposed by the ANC and cannot imagine a different reality where expenditure cannot be reduced.
Government revenue is a function of income and economic growth. South Africa’s economy contracted by 2.2% in the first quarter of 2018 and considering the latest data from various sectors and suppressed demand in the economy, another contraction is highly likely, which implies a technical recession. At the same time, the rand is under pressure by the raging trade war between China and the USA and global normalisation of monetary policy.
As a result of the weakening of the rand and the increases in fuel prices (the rand also impacts on the fuel price), inflation increases. This again puts pressure on the South African Reserve Bank to further increase interest rates. Increased interest rates would further choke out demand in the economy. This situation will further deepen a possible recession. Given that revenue is a function of economic growth and income, it is highly likely that any hole in revenue would be worsened by higher fuel prices.
The DA will not stand by idly and accept a corrupt and inefficient structure created by the ANC. If we give in and accept this as our fate, South Africans and the poor in particular will suffer for it. The fuel levy has been increasing annually for many years now and this can be placed squarely at the ANC’s front door.
The ANC government continues to burden South Africans with their poor management of the economy. The DA cannot be accused of being irresponsible for calling the ANC out on failing to implement reforms which could see this fuel levy burden lifted. DM
Solly Malatsi is the DA’s National Spokesperson.
In other news...
The South African economy is choking harder than the Proteas. Although to be choking you have to actually be eating and the Proteas seem to be on some sort of juice cleanse-like fast…*
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*Proteas, you know we love you. We’d just love you more if you won occasionally...
Despite receiving a knighthood from the Queen, Bill Gates cannot use the title "Sir" due to his being American.