ANALYSIS

‘Get on with it’ — Mboweni on post-Covid-19 lockdown opportunities

By Marianne Merten 30 June 2020
Caption
Finance Minister Tito Mboweni. (Photo: Phill Magakoe / Gallo Images via Getty Images)

Inheritance tax, solidarity tax and wealth tax all are under discussion ahead of the February 2021 Budget, but nothing’s concluded, according to Finance Minister Tito Mboweni. Instead, on Monday’s call hosted by Absa, he urged everyone to ‘just get out and get on with it’ — to support entrepreneurs and do things differently.

Traditionally, taxes are announced only in the February Budget. Last Wednesday’s emergency Covid-19 Budget on 24 June was slightly different in that Finance Minister Tito Mboweni also tabled two tax draft laws to effect the tax deferment and other measures as part of government’s Covid-19 relief.

But with an official R304.1-billion hole in the public purse due to a shortfall in tax collection, any call with financial institution clients would touch on taxes.

The Special Adjustment Budget on 24 June had announced an additional R40-billion would have to be raised through taxes over the next four years.

Mboweni sidestepped smoothly — “We should talk more about growing the economy” — pointing to the 2021 Budget for any announcement.

“A number of conversations are taking place, which should find an expression in the February Budget… I can tell you what conversations are taking place, which have not been concluded yet, but are taking place,” said Mboweni, confirming a wealth tax was still being discussed.

“An inheritance tax is being spoken about and Judge (Dennis) Davis is dealing with the matter as he advises me on tax matters. So, inheritance tax certainly. Number Two, people have talked about the possibility of a solidarity tax. Its architecture still has to be discussed. We might very well find by February it’s no longer relevant, but that’s definitely being discussed.”

And despite the regular touting of value-added tax (VAT) hikes for revenue in some financial circles, the finance minister was quite definite on this point

“Certainly no increase in VAT is being contemplated here unless something dramatic happens…”

The 2018 hike of value-added tax to 15%, up from 14%, unprecedented in democratic South Africa, was widely and strongly condemned. Ultimately the about R23-billion expected for that year had to be used to settle the backlog of VAT refunds that had been delayed to — on paper — boost tax collection levels.

Like tax, State-owned Enterprises (SOEs) was a talking point, especially the lack of announcements aside from the R3-billion for the Land Bank.

While Mboweni touched on February’s Budget — SAA received R16.4-billion to guarantee due loans, among support to other SOEs — he deferred to his Cabinet colleague, Public Enterprises Minister Pravin Gordhan.

In a punt for domestic tourism as international visitors are not expected before the first, or even second, quarter of 2021, Mboweni urged those on the call to “come to Magoebaskloof and do the canopy tour”.

“That new airline cannot be like the old SAA, state-owned, totally state-owned. It has to be an airline that combines a bit of the state and hopefully the bulk of it private-sector investors. But he’s still sorting that out,” said Mboweni, adding later:

“Eskom must run their business and they must make sure people who owe Eskom must pay Eskom.”

Others, such as the SABC, had to step up and demonstrate a business model, although support would come with conditions.

“I must be emphatic about this: any ideological commitment to SOEs, even when those enterprises are dysfunctional, is wrong. It’s really taking South Africa’s taxpayer for granted…”

By Monday, Mboweni had ditched Pretoria and Johannesburg where the Special Adjustments Budget had taken him the previous Wednesday and Thursday, and was back in the thatched roof office, with the big bookshelf, musing about Magoebaskloof, Limpopo.

In a punt for domestic tourism as international visitors are not expected before the first, or even second, quarter of 2021, Mboweni urged those on the call to “come to Magoebaskloof and do the canopy tour”.

There followed a segue into what seems to get Mboweni enthused — small and medium enterprises and support for entrepreneurs:

“Does the Covid-19 moment not afford us the opportunity to rethink a little bit about the economic agents?” 

And so Mboweni recalled his encounter with the young entrepreneur, who on seeing him at the Tzaneen bulk building supply store with a Jaguar, offered to transport his supplies in an old bakkie that also does a daily bulk vegetable run. Plans to buy a newer vehicle — and create additional jobs — floundered.

“The banks did not come to the party. I eventually used my credit card… to buy him a truck,” said Mboweni, who called on banks to do more to find — and support — entrepreneurs.

“If the banks can look out for these entrepreneurs. Go to them. Go sniff them out… Let’s get the dynamism back into the economy.” DM

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