The Government Receives Less Money in Taxes if There is Increased Load-shedding
Days without power: Because of the growing number of power outages, companies have been forced to look for substitute outlets for power supply, such as generating units.
The South African government doesn’t appear to view the now-regular electricity blackouts that last for up to four hours each time as the single greatest threat to South Africa’s reasonably secure young democracy or the country’s economic growth.
This will only serve to make matters worse for the already stagnant economic growth, and it may soon threaten both the socialist agenda of the government and the economic stability of the nation. Both are of the utmost significance in assisting the government in overcoming the negative effects of the apartheid era and positioning the country for continued economic growth.
Based on the Council for Scientific and Industrial Research, the amount of load-shedding that occurred in September 2022 was greater than the total amount that occurred throughout the entire year of 2020. It is reasonable to conclude that it has reached unprecedented record levels given the fact that blackouts have become more frequent since then and that, as of this December, we are now regularly undergoing stage five and six load-shedding.
Economists believe that the economic harm caused is greater than R4 billion per day and that the growth of the economy could have been stifled by approximately 10% as a result. Based on the results of a survey conducted on representatives of the Selfstandige Sakegemeenskap Sakeliga, the majority of the companies questioned reported that power outages were associated with significant estimates of lost revenue and property damage.
The cost of repairs could either be swallowed up by the companies themselves, which will result in higher insurance premiums, or, if the damage is not repaired, it will hurt the companies’ levels of productivity.
The damage to the government’s revenue should be reaching unparalleled and extremely high levels, as indicated by the opinions of economists, various business organizations, and surveys that have been carried out.
This problem is made even worse by the reality that the sector of the small, medium, and micro enterprises, which are responsible for the majority of employment in the informal sector, is the one that is struggling the most.
There is a possibility that these smaller companies will have to shut their doors, which will cause a rise in the rate of unemployment and will place added strain on the economy and socio-economic problems in this country.
The Gathering of All Primary Sources of Tax Revenue
The statistics on revenue that were publicized by the Treasury and the South African Revenue Service (Sars) indicate that approximately 89% of tax revenues are contributed to the government’s overall revenue. During the 2019-20 fiscal year, these tax revenues came from a personal income tax that was 39%, a corporate income tax that was 16%, a value-added tax (VAT) that was 26%, a fuel levy, import taxes, and other taxes that were 13%.
The amount of money collected in taxes did not change significantly between the fiscal years of 2016–2017 and 2020–21, with only a one percent rise or fall occurring over the five years. This indicates that tax revenues for the 2018-19 fiscal year were approximately R1 287 trillion, and they are projected to be approximately R1 355 trillion for the 2019-20 financial year, which represents revenue growth of less than 1%.
In a country like South Africa, where many social needs need to be addressed, revenue from a tax increase of one percent or less should not be acceptable. Where is the government going to get the money to pay for the rising costs of providing high-quality education, social grants, the National Health Insurance program, health care, and infrastructure?
The creation of additional jobs has the potential to increase the amount of tax revenue collected. This will lead to a rise in consumer expenditure as well as a rise in investments in production capability, both of which will result in an increase in tax income, which should facilitate the government to boost its investments in infrastructure developments. All of these things mean that there will be significant growth in personal taxes, corporate taxes, and VAT, which together make up more than 80 percent of all tax revenues.
However, these tax revenues are in dire trouble as a result of Eskom’s incapability to supply reliable power over the past 15 years. The South African government is jeopardizing its efforts to achieve the goals it has set forth for the country’s population.
It is unfathomable how the government is unable to see the impending crisis that is caused by the shortage of reliable power generation, given the rise in social upheaval, the theft of crucial infrastructures such as electrical cables and railway tracks, and recent natural disasters like floods.
Short-term benefits in increases in fuel tax revenues are not self-sustaining because the price of petrol is dependent on a variety of factors that the government is unable to regulate, and the income is slated for specific expenses such as remuneration to victims by the Road Accident Fund.
It does not take a genius to deduce that increased tax revenue will result from a growing economy and a greater number of available jobs. This will decrease the need for additional government loans, which the treasury estimates to be R500 billion for the financial year 2020-21.
The South African Treasury confirmed in 2021 that the country’s annual debt service costs amounted to R303 billion, and these costs may rise to as much as R1 trillion over the following three years.
This indicates that South Africa is spending approximately 20 cents (20%) of each rand to maintain its liabilities at present. The South African Revenue Service (SARS) needs to increase tax collections to lower the country’s reliance on debt, but this task is made much more difficult when economic growth is below average.
The solution proposed by the government is to create a national energy crisis council and to give approval for the innovation of energy by independent power companies. At the same time, Eskom will implement an innovative marketing concept that will ask South Africans to decrease their consumption of electricity.
When will the government finally come to its senses, acknowledge that this is the most serious crisis the country has faced since 1994, and begin to address Eskom’s ineffectiveness for the benefit of all of us and the destiny of South Africa?
Days without power: Because of the growing number of power outages, companies have been forced to look for substitute outlets for power supply, such as generating units. The South African government doesn’t appear to view the now-regular electricity blackouts that last for up to four hours each time as the single greatest threat to South…