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Article posted by: White Nation correspondent Cape Town   November 12  2018





SOUTH AFRICA’s persistent economic woes are well documented. Between the failure of SOEscorruption in government, and the inefficient use of tax money, South Africans find themselves paying more tax for less in return.

This is according to Efficient Group chief economist Dawie Roodt. “The fiscus in South Africa is the most redistributional in the world,” said Roodt. “And we’re well ahead of any other country.” Roodt said that this is the case because South Africa has such a skewed income distribution – a few people earning a lot, and a lot of people earning a little. The South African tax system is also structured in such a way that you pay a higher percentage of tax if you earn more money. What might be more galling to “wealthy” South Africans, however, is the extra hidden taxation that they pay.

The hidden tax on wealth

According to Roodt, someone who earns R10 million per year likely pays around R6 million in taxes. These taxes include income tax, corporate taxes, VAT, and other smaller taxes such as sin taxes, road tolls, and fuel levies. However, wealthy South Africans also incur additional costs – including private education, private healthcare, private insurance, and private security services – due to the poor quality of the relevant government services. This is true for South Africans lower down the income ladder, too, as those who can afford private healthcare, schooling, and security almost always select it over the alternatives provided by the government. And even if these people don’t use inferior public services that the government offers, they are still forced to pay for them through taxes. This “hidden ” tax – needing to pay for these services not just through tax money, but again through their remaining income – means that many South Africans are paying for services twice over.

The flaw in redistribution policies

The implementation of aggressive taxation policies by the South African government has a clear goal: to redress inequality in South Africa by taking from the haves, and giving to the have-nots. However, according to Roodt, this tactic isn’t working. Despite all of the redistribution, inequality is not coming down in South Africa, said Roodt. Unemployment also continues to rise in South Africa, along with government debt. He suggested that this is because redistribution doesn’t actually help poor people to improve their financial positions. This means that while South Africans are being charged more taxes for the purpose of helping the poor, the poor aren’t being helped sufficiently.

An environment for creating wealth

The problem with South Africa’s economic environment, said Roodt, is that the government is trying to do too much. Instead, they should do less if they want the country to improve. “I cannot think of one single thing that the ANC government has done well,” Roodt said. “Education is a total mess, crime is a disaster, services have collapsed completely – the list goes on and on.” Roodt suggested that if the government doesn’t have the capability to run its departments well, they should rather leave it to the private sector. However, for the foreseeable future, it seems that income-earning South Africans will continue to sponsor the government’s provision of inferior services, all the while paying their additional “hidden taxes”.

The corrupt government’s middle finger to South African taxpayers

South Africa’s economy is in serious trouble, but this has not stopped the government from spending billions on salaries for ministers and public servants. Government debt is up to 55.8% of GDP, and Finance Minister Tito Mboweni has stated that an acceptable figure is below 50%. The local economy has also suffered from slow to no growth in recent years, and the country was recently classified as being in a technical recession. Interest rates are also expected to rise in the coming years to contain rising inflation. Despite these clear signs of economic trouble, South Africa continues to maintain a massive public sector wage bill, and one of the largest cabinets in the world. The public sector salary expense will account for nearly R550 billion of the government’s spend in 2018 – nearly a third of South Africa’s total budget.

Massive cabinet

South Africa supports an enormous 72-member cabinet – over double its nearest BRICS peer – which requires millions in salaries. Other BRICS nations – consisting of Brazil, Russia, India, China – come nowhere close to South Africa in this regard, despite having larger economies and populations. Brazil has a cabinet consisting of 30 members, Russia has a cabinet of 23 members, and India and China both boast 27-member cabinets. Compared to other significant world players, South Africa looks even worse. Super-powers like the USA and the UK, with 33-member and 23-member cabinets respectively, outperform South Africa by a large margin. Other big economies with smaller cabinets include Japan with 24 cabinet members, and Australia with 29 members. Despite all of these factors, South Africa’s government continues to maintain its large cabinet – which is funded by local taxpayers. The graph below shows South Africa’s cabinet size compared to those of other countries.

Cabinet Size

Big salaries

The salaries paid to South Africa’s large cabinet contribute to a significant part of the government’s annual wage bill. As shown in the table below, ministers are well taken care of financially.

Cabinet Member Salaries – 2018
Deputy President R2,825,470
Minister R2,401,633
Deputy Minister R1,977,795