SA's Economic Reconstruction and Recovery Plan: Economists' reaction

The president spoke about building a new economy in the wake of Covid 19. It’s important to bare in mind the most important change from pre-COVID-19 South Africa, was a lockdown-induced tax collapse of R304 billion. Additional funding from the World Bank and other international financial institutions only amounted to about R80 billion in additional resources, not close to the tax revenue deficit. The ban on cigarette and alcohol sales alone cost the fiscus R10-billion over four months in excise taxes, and created an extensive black market in smuggled goods This means that government is, for all intents and purposes, spending money that it does not have and has little prospect of generating through tax revenue in the short to medium term. Losses incurred by firms who are fortunate enough to survive the COVID-19 pandemic over the lockdown period, will be carried over to subsequent years. The sheer scale of the brazenly callous COVID-19-related tender corruption that saw political elites benefit while huge numbers of the populace starved, will further undermine tax legitimacy and morality. Tax compliance which sat at just under 70% in 2013, fell to 65% in 2019 and is set to plummet further, as middle class taxpayers who are facing suspended services or degraded service quality and rolling blackouts, bear the brunt of increased administrative prices, become increasingly disaffected and “gatvol”, which may culminate in a tax revolt. Hopefully e-toll resistance is not a portent of things to come. The precarious balance between the proverbial “rock” of procyclical fiscal policy and the “hard place” of debt unsustainability is a difficult one to strike. Did the president strike that balance today? Michael Avery got the reaction from Gareth Ackerman scion of the Ackerman retail dynasty and Chairman of Pick n Pay. Peter Attard Montalto of Intellidex Tony Ehrenreich, Deputy Parliamentary Coordinator of Casatu
& George Glynos, co-founder at ETM Analytics