Latest news with #R7.5
The South African
2 days ago
- Business
- The South African
South African economy failing behinds its counterparts
The South Africa economy would be R5-trillion better off if we'd simply kept pace with other emerging countries over the last 15 years. In the last decade and a half, the South African economy has grown at an average of 1% annually. However, other emerging counterparts have grown at 1.4% or higher. This damning data was revealed by Investec's Osagyefo Mazwai. 15 years of lost growth coincides with the South African economy plowing money in State-Owned Entities (SOEs) like Eskom, Transnet and the Post Office. 'It is our proposition that the South African economy is falling behind. Had it followed a more pragmatic approach, focusing on the structural enablers of the economy, the outcomes could be much better for society,' Mazwai said in a Daily Investor report. Likewise, the South African economy displays a stark dislocation in GDP per capita. Proving that, essentially, residents are worse off than they were in 2010. The government has been ineffectual in addressing poverty, unemployment and inequality. And, per capita, the rest of the world is 50% richer than the average South African. With more money to play with, many of the country's crippling debt issues could've been avoided. Image: File As such, Investec compared the South African economy to other emerging markets over the same period. Many emerging nations have been growing at upwards of 4.5% per year. 'Had we grown at 4.5%, our nominal GDP would have been just below R12 trillion. Compared this with the actual number, R7.5 trillion, which is 35% less,' explained Mazwai. This lack of economic growth cost government revenue R800 billion in 2024 alone. And remember that the 2025 Budget impasse squabbled over a mere R75 billion from proposed VAT increases. This is an insignificant amount when one considers how much more growth our emerging-market peers have to play with. In practical terms, Mazwai explains that the missing R5 trillion would have been enough to clear nearly all of the country's national debt. Should SASSA grants be given a re-think in light of this damning data? Image: File As such, finance experts point out that Eskom and Transnet's lacklustre performance is arguably the most significant factor impeding the South African economy. Eskom is R400 billion in debt. Transnet is R140 billion in debt. Likewise, South African Social Security Agency (SASSA) grants cost the fiscus around R265 billion annually. SASSA grants, while well-intentioned, breed an unhealthy dependency on the social welfare system, reducing employment. SASSA grant beneficiaries now number 45% of all residents, and five out of nine provinces have more SASSA recipients than salaried employees. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1. Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
IOL News
06-06-2025
- Business
- IOL News
Why voluntary disclosure to Sars is crucial to avoid severe penalties
With R7.5 billion allocated for enforcement, Sars is intensifying its crackdown on non-compliant taxpayers. Image: File photo. The South African Revenue Service (Sars) is preparing to escalate its enforcement drive. With R7.5 billion in additional funding over the medium term and the implementation of a focused initiative known as Project AmaBillions, Sars now has both the mandate and the means to pursue non-compliant taxpayers with renewed vigour. Commissioner Edward Kieswetter's two-pronged approach — assisting those who comply and cracking down on those who don't — is no longer just rhetoric. Sars is making it clear that time is fast running out for those who have not regularised their tax affairs. The VDP: a last safe exit The Voluntary Disclosure Programme (VDP) offers qualified taxpayers a structured, legislated opportunity to correct prior non-compliance. It is not a loophole or workaround, but a legitimate mechanism designed to encourage voluntary compliance before Sars initiates an audit or investigation. Taxpayers who took this route early have protected themselves from reputational harm, potential financial ruin, and in some cases, criminal prosecution. Those who did not are now facing consequences that include public naming and shaming, civil judgments, and penalties that can reach up to 200% of the original tax debt. In more serious cases, individuals have faced prosecution, with imprisonment as a real possibility. VDP process improved, but not without risk Sars has made the VDP process more accessible for taxpayers acting in good faith. The application system has been digitised and streamlined, turnaround times have improved, and Sars has demonstrated a willingness to engage constructively with applicants, provided the disclosure is made voluntarily and before Sars begins any form of inquiry. While the process may appear simpler, the legal requirements remain stringent. A taxpayer must be registered and up to date with all tax returns, and the disclosure must be complete and accurate. Sars has successfully invalidated VDP relief where applications were rushed or failed to meet the statutory criteria, leaving those taxpayers exposed to both penalties and potential criminal liability. Legal privilege: a crucial but missing conversation What many taxpayers fail to appreciate is the importance of legal privilege, especially when the risk of criminal sanctions arises. In matters where potential prosecution is on the horizon, engaging a tax attorney ensures that communication and strategy discussions are protected by law. This privilege does not extend to accountants or consultants. Without it, sensitive disclosures and planning documents could be accessed and used by Sars in subsequent enforcement proceedings. When the stakes include imprisonment, legal privilege is not a luxury — it's a necessity. Sars is now faster, smarter, and sharper This new era of enforcement is underpinned by smarter systems and sharper tools. Sars has invested significantly in data analytics, automation, and inter-agency cooperation. Audits are no longer random — they are precise, data-driven, and often highly effective. Once an audit, investigation, or verification commences, the door to the VDP closes. This is not theoretical. Sars has in many cases already executed garnishee orders, asset preservation applications, and criminal prosecutions. Disclose before they come knocking The burden of proof lies with the taxpayer. Failure to maintain records, declare all income or keep tax affairs in order places individuals and businesses at real risk. The VDP is one of the few remaining proactive avenues allowing taxpayers to resolve historical non-compliance, avoid excessive penalties, and protect themselves against criminal liability.
Eyewitness News
05-06-2025
- Business
- Eyewitness News
Why innovative financing is critical to closing Africa's infrastructure gap now
Kopano Mohlala 5 June 2025 | 9:53 Acclaimed journalist Crystal Orderson, who specialises in economic and political affairs concerning the African continent, joins 702's Bongani Bingwa to discuss Africa's infrastructure challenges and opportunities. Listen Below: "The infrastructure deficit is massive." Crystal Orderson, Journalist The African Development Bank estimates that the continent needs between $130 billion and $170 billion annually to close this gap. However, Orderson notes that there are pockets of investment in various sectors, including minerals and metals, transport, logistics, water and sanitation, and digital infrastructure, but this is country-specific. 'This is, of course, driven by specific population growth, urbanisation, and energy needs, but those are in specific countries.' - Crystal Orderson, Journalist One promising yet underutilised source of funding is African pension funds. Financing fund managers indicate that these funds hold tremendous potential. In 2020, African pension funds managed approximately $500 billion in assets, with projections suggesting this could grow to R7.5 trillion by 2025. Yet, less than 3% of these assets are allocated to infrastructure. 'There needs to be a confidence vault that these pension funds should invest in infrastructure, because that's where the growth could lie for countries.' - Crystal Orderson, Journalist Much of this capital remains tied up in low-risk government bonds or foreign markets, primarily because of a lack of domestic investment confidence. Nonetheless, there are positive examples. In South Africa, the Government Employees Pension Fund has allocated funds for infrastructure, and in Kenya, the Retirement Benefits Authority has committed nearly 10% of its portfolio to infrastructure development. There are two key investors in major projects across the continent: The African Infrastructure Managers Fund invests in northern, eastern, western, and southern Africa, having garnered assets worth approximately $3.2 billion, with a focus on specific infrastructure projects across the continent. The African Development Bank, which has been investing in Africa's agricultural sector, announced that $ 500 million has been invested in small-scale farmers and agribusiness. Another success story is Ethiopia's thriving coffee sector, which reached $2 billion in exports in just 10 months. 'Over a third of women are actually part of the coffee industry and make up 75% of the labour sector.' - Crystal Orderson, Journalist With support, Ethiopia's government has been able to successfully invest in the country's small-scale farming activities. One of the most compelling examples of successful infrastructure financing is the 480-kilometre railway line connecting Nairobi to Mombasa in Kenya. The Mombasa-Nairobi Standard Gauge Railway was completed in 2017, and the project was financed through a combination of public-private partnerships and international funding sources. Orderson recalls how, in the past, a trip between these two major cities entailed a 12-hour journey along potholed roads and through traffic jams. Today, the railway not only transports over 30,000 passengers daily but also efficiently manages large volumes of cargo through Kenya's ports. 'It's quite interesting because you had funding coming together, and it has been a game-changer. Now you can take a ride in the morning and arrive in Mombasa at the beach during lunchtime.' - Crystal Orderson, Journalist She says Africa has the capital - but what it needs is confidence. "It takes political will - with the private sector and multilateral institutions to come together to make a difference." - Crystal Orderson, Journalist With the right partnerships, creativity, a suitable environment, and innovative thinking, pension funds can be effectively utilised to finance large-scale infrastructure projects. That includes attracting private capital through blended financing structures and public-private, which are crucial to bridging the gap. Catch up on episodes of the RMB Africa Focus that you may have missed here.
Eyewitness News
03-06-2025
- Business
- Eyewitness News
Budget 3.0: SARS will have to go all out to justify massive cash injection
CAPE TOWN - The South African Revenue Service (SARS) will have to pull out all the stops to justify a massive cash injection through the latest iteration of the national budget that seeks to bolster its ability to collect more taxes. SARS Commissioner Edward Kieswetter said since the failed March budget, he's already been training additional debt collectors to reach the goal of collecting at least another R20 billion in taxes over the next year. ALSO READ: While the finance minister has had to cave to political pressure to scrap a planned value-added tax (VAT) increase to fund government expenditure, raising the fuel levy as of June will not be enough to close the fiscal gap over the medium term. Tabling the third version of the national budget on Wednesday, Minister of Finance Enoch Godongwana said he was giving SARS R7.5 billion over the next three years to improve its effectiveness in collecting more revenue and to modernise its systems. Godongwana estimates that as much as R35 billion more can be collected. Kieswetter said since April, he's employed an additional 500 debt collectors. Another 250 will be added to SARS's payroll in June. 'Our estimate is that this should at least give us R20 billion. We are targeting a debt collection of the overall composite debt of R120 billion.' One of SARS's targets will be the illicit tobacco trade. Kieswetter said there will be regular progress reports to Treasury, and by the mid-term budget in October, a level of confidence can be assessed.
The Citizen
02-06-2025
- Business
- The Citizen
This is where we would be if SA sustained an economic growth rate of 4.5%
It is enough to make you weep when you read how much better off South Africa could have been with economic growth of 4.5%. If South Africa had sustained an economic growth rate of 4.5% per year, in line with its emerging market peers, its GDP would have been just under R12 trillion in 2024 instead of the actual R7.5 trillion. Government revenue could also have been around R800 billion higher than it is. Investment strategist at Investec Wealth and Investment International, Osagyefo Mazwai, notes that although South Africa has grown over the last 15 years, averaging economic growth around 1% a year, the population has grown at a higher rate of around 1.3%. He points out that there has been a structural break in South Africa's economic performance compared to the rest of the world, with a stark dislocation in gross domestic product (GDP) per capita. 'In essence, people are worse off than they were in 2010, suggesting that economic policy has been ineffectual in addressing poverty, unemployment and inequality. 'On a per capita basis, the rest of the world is 50% richer than the average South African. Growth of 1% will not lead to the envisaged goals of lifting people out of poverty and meaningfully addressing the problems of unemployment and inequality.' This chart compares nominal GDP over the period with what it would have been if the South African economy grew at 4.5% a year to illustrate the point on the opportunity cost of foregone growth in policy formation and execution: ALSO READ: Experts say no way SA can achieve economic growth of 3% this year How does economic growth of R12 trillion sound? Mazwai says if the economy grew at 4.5%, South Africa's nominal GDP would have been just below R12 trillion in 2024, a significant number, especially considering the benefits that could have been derived from a vastly larger GDP. He points out that South Africa's economic growth rates similarly had an effect on government revenue. 'Government revenue in 2024 alone could have been around R800 billion higher, while just a few weeks ago, South Africa faced a budget impasse due to a shortfall in funding, needing to raise R75 billion in the medium term to cover the shortfall. 'That shortfall is insignificant considering how much more could have been raised had the economy grown more in line with emerging market peers. 'The cumulative figure of revenue foregone is scary, at around R5 trillion over the last 15 years. 'That is material, considering the fiscal constraints facing South Africa and demonstrates the need to ensure economic growth to boost the fiscal war chest and further enable the capacity of the state to deliver services.' ALSO READ: IMF's bad news about economic growth for SA, thanks to Trump tariffs What economic growth of 4.5% could have meant Mazwai says these statistics put this into perspective: The R5 trillion lost would be enough to clear almost 90% of South Africa's gross national debt and bring the debt-to-GDP ratio down to just below 10%, compared to the currently expected 77% ratio this year. Eskom needs R390 billion over the next decade for transmission lines, a fundamental pillar of creating greater capacity in the energy sector. Electricity is the backbone of any structural improvement, especially considering the government's goals to build domestic manufacturing capacity and create meaningful employment opportunities. The R390 billion would be a drop in the ocean had growth been 4.5% over the last 15 years. Transnet needs R160 billion to upgrade rail and port infrastructure. Our logistics networks are key in connecting the economy across its internal nodes, but also key in building additional capacity to meet the demands of external markets. Again, R160 billion would have been a drop in the ocean had growth been in line with our peers. Eskom has debt of R400 billion. With economic growth at 4.5%, the government could have bailed Eskom out 12 times. Transnet has a debt of R140 billion, and the government could have bailed out Transnet many times, too. Social grants will cost the fiscus around R266 billion this year. With economic growth of 4.5%, these would have been more than affordable and potentially materially higher than what marginalised citizens receive now, also considering that many more people would have been absorbed into the labour market. ALSO READ: Fourth quarter GDP improved but economists say its still not great – here's why With higher economic growth, South Africa would have functioned better Mazwai says these statistics are significant because they show how South Africa could have been in a better position to address the prevailing needs of the state. 'Granted, if the economy was growing at 4.5% the assumption is that Transnet and Eskom and some of the other structural enablers of the economy would have been functioning properly. 'The numbers indicate the potential for vastly greater capacity to invest in the productive elements of the South African economy, such as in infrastructure, education, healthcare and the salaries of teachers, nurses and doctors.' He also notes that business confidence has been unusually correlated with the performance of state-owned enterprises (SOEs) in the post-pandemic environment, and therefore, SOE reform momentum must be sustained or increased. 'Business confidence is the key leading indicator of economic growth and employment creation. The unemployment rate would be closer to around 20% compared to the current 32.9% had the economy been growing at 4.5%. 'In other words, a third of those presently unemployed, according to the narrow definition of unemployment, would have jobs.' ALSO READ: Absa foresees economic growth of 2.1%, but Trump and budget can disrupt it But there have been some victories so far for the economy However, Mazwai says none of this should detract from some of the victories seen of late, such as: The formation of the government of national unity (GNU) and subsequent political stability and increased policy certainty, although the recent budget impasse showed that these are nonetheless fragile. The increased momentum of Operation Vulindlela in addressing the various structural impediments in the economy. The next steps are critical for addressing water infrastructure and local government inefficiencies. Improvements in the electricity supply and logistics network. Mazwai says there has been some stagnation in the recovery of SOEs, which may be cause for concern, although the worst of SOE performance appears to be behind us. However, he says a reacceleration in trend improvement is important for business confidence to grow. ALSO READ: Economic activity still moving sideways but optimism increases Recovery in PMI could mean higher economic growth 'We recently saw a modest recovery in the S&P Global Purchasing Managers Index (PMI), to a neutral level of 50. There must be a trend improvement in PMIs, which are typically linked to economic outcomes. 'Should PMIs continue to improve, the economy should continue on its path of recovery. This will likely be driven by the continued success of Operation Vulindlela.' Looking at GDP projections, Mazwai says data released so far suggest that while growth was likely weak in the first quarter, a persistent upward trend in PMIs can result in a marked acceleration in growth outcomes. 'PMI improvement will largely be a function of continued improvement in SOE performance. At present, the economy, by our estimates, is tracking at 1.3% for the year, which is well above the 0.6% seen in 2024 and 0.8% in 2023. 'This can then lead to more meaningful employment creation and a trend reversal in GDP per capita from the pattern of decline since 2011.' ALSO READ: World Bank has simple answer to improve South Africa's economic growth What SA can do to keep momentum going to grow He suggests that South Africa follow these steps to keep the momentum going and put South Africa on a firmer growth trajectory:
