Why today's Budget speech will be a horror show
- Tax collections are falling, while government spending is increasing.
- Budget Day will be a brutal reality check.
- The world, particularly ratings agency Moody’s, is waiting to see whether we should be consigned to full-blown junk status.
Cue the theme music from the 1966 cowboy movie classic: The Good, the Bad and the Ugly.
What’s a cowboy movie? Oh dear. It’s like Avengers, just with no special effects. And a plot.
Forget the movies for now.
Let’s rather talk the brutal reality of the 2019 Budget. Unlike the State of the Nation which allows the sitting president to dream and create a vision of the future, Budget Day is a brutal reality check.
It’s like standing naked in a brightly lit changing room cubicle surrounded by mirrors. It’s pointless trying to lie to yourself.
You really do look like that from behind.
South Africa’s bottom line is equally unattractive.
The state of South Africa’s finances right now is a bit like logging into your bank account on 10 January after your December holidays to discover there is more month than money. You have to act sharply to get yourself out of trouble before you lose complete control of your household finances.
Except, in this case the country’s finances are much harder to fix because politicians haven’t made the hard calls for years. This has to be the year, no matter how difficult, to do precisely that. Otherwise there is going to be hell to pay.
If you’re more of a reality TV fan than an avid movie watcher, and can keep down your lunch, even when you are scared, then tune into the parliamentary channel from 14:00 today for a terrifying reality show.
If that horror story doesn’t grip you, nothing will.
We’re spending more than we are earning. Lots of people who have traditionally lived, earned and paid their taxes here have given up and moved elsewhere, while many more have been finding creative ways to avoid paying what is due to SARS, partly in protest against industrial scale corruption and some, simply because they think they can get away with it.
On top of that the economy has not grown and hundreds of billions have been stolen over the past decade.
It leaves the Finance Minister in a difficult position ahead of the most pivotal budget speech of our modern democracy. The world, particularly ratings agency Moody’s, the agency that hates us least, is waiting to see whether we should be consigned to full-blown junk status.
Finance Minister Tito Mboweni will have to show that government is serious about tackling corruption. He will have to show it’s as serious about cutting expenditure. Essentially he has to submit the country to a bout of debt-counseling where the country’s credit cards are cut up and we learn to live within our means.
And he's going to have to make it clear that he appreciates profitable companies that create the jobs for people who pay their taxes and he's going to have to suck up to that constituency especially hard.
Taxpayers are becoming an endangered species.
Already the country spends 5% more than it earns.
It’s spending in the region of R200 billion a year in interest alone, money that could be better applied to Eskom, water security, education... Take your pick, there are plenty of places the money is needed.
Gone are the days of tax cuts and expansionary budgets. Instead, we will see a budget shortfall of some R36bn. Numbers from PwC show a sharply shrinking tax base.
Corporate tax revenues, which were budgeted to grow by 6.5% have contracted by 1.1% as profits have shrunk, while personal taxes, which make up the single biggest contribution to state revenue, will also fall well short.
Forgive my torturing the cowboy movie analogy, but South Africa is checking into the last chance saloon. Its horse is lame and there’s one bullet left in the revolver. It’s time to pick our fight carefully.
The Sheriff is running out of patience and is assembling a posse to run us out of town.
And nobody wants to be left out in the desert in the searing sun with only rattlesnakes for company.
Bruce Whitfield is a multi-platform award-winning financial journalist and broadcaster.
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