21 October 2019: Despite the ongoing uncertainty around when the medium-term budget policy statement (MTBPS) will be revealed, Minister Tito Mboweni has his work cut out for him. Addressing pressing national issues such as rising debt levels, ailing state-owned entities, and sluggish economic growth will therefore be top priority for Treasury.
This is according to Mike Teuchert, National Head of Taxation at Mazars, who predicts that Mboweni will talk more to his economic stimulus plan. “Mention of this plan is almost a certainty, but hopefully this will encompass a clear and practical strategy for facilitating real economic growth in the coming months. It may also foreshadow some of the possible decisions that are going to come out of the NEC, based on the recent representations that Mboweni has made to the council.”
The other big thing that Teuchert believes South Africans should be looking out for in the MTBPS is an update on the country’s debt levels. “People will be eager to know where we are in terms of our debt to GDP, the expectation here going forward and the likely outcome of the under-collection of revenues – will this give rise to further borrowing or be funded in another way?”
In terms of revenue collection, it is widely believed that Treasury is not going to meet its targets, Teuchert notes. “The question then is, if targets are missed, what is going to give – are we going to see a reduction in expenditure or more borrowing?
“This is a core issue that has stemmed from the current state of the economy and the poor state of revenue collection in South Africa,” he adds.
“One of the things that we are aware of is that revenue collections are down from previous years. We are also concerned that the imminent changes to how foreign employment income of South African residents will be taxed may create a negative environment, increasing the prospect of higher emigration levels in the future – especially of higher-net-worth individuals.”
On a positive note, Teuchert believes that the new Commissioner of the South African Revenue Service (SARS) does seem to have more of a practical and impactful approach when it comes to revenue collection. “The new SARS commissioner, Edward Kieswetter, is focusing on driving better compliance among taxpayers by making the actual process of compliance easier.
“We are therefore hearing more talk of an update on e-filing and revenue collection systems to make it easier for people to be compliant. Ultimately, while this is a long-term project, it bodes well for the prospect of getting better collections going forward.”
The other key issue that Teuchert says Treasury will need to deal with in the MTBS is the dire state of SOEs. “This will likely tie in with Mboweni’s growth plan, which has raised the possibility of losing some of the SOEs that are failing to perform or no longer fit in with the greater strategic outlook of the country. While this may ultimately be more of a political discussion than a financial discussion, we are hoping to get a better idea of what we can expect in this regard.”
Lastly, Teuchert hopes to get an update on the NHI. “Specifically, we want more details on how Treasury is planning to fund such an ambitious project. While a full update on this may only come about in the annual budget speech next year, we hope to at least get some indication in this coming mid-term budget about the direction that this funding will take,” he concludes.