ETM Analytics has published a graph that compares the South African government’s revenue and spending, and it shows a rapidly increasing deficit.
ETM Analytics is a financial market research and analysis firm which provides commentary and advisory services.
The graph it published shows a steady increase in spending over the past decade, with revenue plummeting in 2020.
This decline in revenue is no surprise – South African Revenue Service (SARS) commissioner Edward Kieswetter said by the end of June, revenue collection was already trailing by R73 billion year-on-year.
Finance minister Tito Mboweni said in his supplementary budget in June that the National Treasury expects a R300-billion tax revenue shortfall for the 2020/21 financial year.
To make up for this shortfall, the government borrowed $4.3 billion from the International Monetary Fund and $1 billion from the New Development Bank.
This money did not go far; reports showed that South Africa lost more in tax revenue in the first three-and-half months of its fiscal year than it borrowed from these two organisations.
Sasfin Securities deputy chairman David Shapiro added that the weakening rand will put further pressure on repayment of these loans.
“Last week, we received a $4.3-billion loan from the IMF. At R16.40 to the dollar that gave us the R70 billion,” he said on 4 August.
“The rand is now R17.40 to the dollar, which means we owe the IMF R75 billion. A loss of R5 billion or 7% in a week.”
South African government revenue and spending
ETM Analytics’ revenue and spending graph, embedded below, caused alarm among many South Africans, who criticized the government for poor fiscal management.
“This is scary… real scary. Either taxes will be increased, or the government will spend less. Let us guess what it’s going to be,” said Brenthurst Wealth Management director Magnus Heystek.
While Mboweni did not announce immediate tax increases in his Supplementary Budget Review in June, he did say tax increases would be forthcoming over the next few years.
“Given the extent of fiscal consolidation now required, however, both expenditure reductions and tax increases are necessary to stabilise debt,” Treasury said.
The Financial and Fiscal Commission has also proposed many new taxes for local government, which include development charges, tourism and fire levies, and amusement taxes.
A Treasury spokesperson said they have considered the recommendations by the Financial and Fiscal Commission and supported them.
Comment about the graph
This is scary…real scary. Either taxes will be increased or the government will spend less. Let’s guess what it’s going to be… https://t.co/bVsQzBrzeZ
— Magnus Heystek (@MagnusHeystek) August 5, 2020
— Michael Jordaan (@MichaelJordaan) August 6, 2020