Public finance: Don’t be fooled, it’s your money

Taxes are too high, plain and simple. All South Africans who pay tax – and all of us pay VAT – would agree. The cost-of-living crisis has battered everyone, with no sign of relief on the horizon. Meanwhile, government appears bent on filling the ship with sand.

South Africa’s relatively high tax rate and revenue collection have left citizens questioning (and looking for) the bare minimum of service delivery like waste collection, water, and electricity – the basics for a dignified life. Year after year, Eskom provides less electricity, yet it is again requesting permission from the National Energy Regulator to increase its tariffs. And one must ask, for what?

I’m writing this without electricity, as many of my colleagues have done in the past. Paying more for electricity won’t switch my lights on. Nor will it stop the corruption, sabotage, and criminality which fester inside Africa’s oldest power utility.

Spiral

The way the government spends public funds – your money – is spiralling. Loan debt as a share of GDP has increased by 47.2% between 2008/09 and 2022/23. The National Treasury simply contextualises it: “out of every R5 collected in revenue, R1 is paid to lenders”. Government’s increasingly reckless behaviour with the national credit card has allowed South Africa’s debt to reach an eye-watering R5 trillion in 2023/24. For comparison, in 2010/11, debt was a more manageable R991 billion.

One would think that given government’s high debt levels, it would be spending the money on infrastructure, or improving service delivery. No. Out of all the public entities audited in the last financial year, only 16% received a clean audit, for an expenditure budget north of R3 trillion. The Auditor General notes that “a clean audit is not always an indicator of good service delivery”. Transparency is key when spending public money.

The Treasury acknowledged the need for value for money in the 2023 Medium-Term Budget Policy Statement, but South Africans are not seeing it. Nor can they see it because they’re sitting in the dark. Literally and figuratively.

As Daily Friend writer Ivo Vegter points out, SOEs like Eskom have no incentive to produce a good quality service, because they are supported by the state, which itself does not have a benchmark, because in this case electricity supply is a monopoly. The politicians in control of Eskom themselves have no incentive to improve governance and consequence management at Eskom, because in using public money they’ve insulated themselves, arguing they provide a “vital service” to South Africans. What vital service?

South Africans are voting with their feet and using private sector solutions for vital services, like electricity and water.  At least there, they will get what they pay for. The government’s lack of service delivery affects the poorest, who cannot afford alternative service providers.

Campaign

The Institute of Race Relations’ #TaxesAreTooHigh campaign seeks to give taxpayers back their money, so that we don’t need to rely on a government that is failing in basic service delivery. South Africans have proven time and again over the past decade that they can spend their money better than the government can. If that weren’t true, we wouldn’t have access to alternative sources of energy, water, postal services, and security services, etc.

The #TaxesAreTooHigh campaign has four key priorities for government to address:

1. Cutting VAT to 11.5%, giving back R100bn to all South Africans, who can spend it better.
2. Reducing the fuel levy, making the transport of goods and services cheaper, which can cut costs for consumers in the grocery store, for example.
3. Reforming Capital Gains Tax collection and,
4. Ending preferential procurement, which stifles true competition, pushes government to fork out more money and negatively affects service delivery.

In the State Capture Commission Report, Chief Justice Raymond Zondo made it clear: “the primary national interest is best served when the government derives maximum value-for-money … procurement officials should be so advised.”  (my emphasis)

I would add by saying that government shouldn’t be advised. This should be made a requirement in Supply Chain Management and Procurement frameworks.

In fact, I can ask the same question about the Zondo Commission: did the government derive value-for-money from the R1 billion it spent, considering that two years after the publication of the first part of the Final Report none of the recommendations have been implemented?

Transparency

Transparency and responsible expenditure of public money is key to good service delivery. For example, in 2023, the City of Cape Town launched the country’s first Procurement Transparency Report, giving residents a peek behind the curtain of municipal procurement.

In the report, the City of Cape Town (CCT) illustrates the difference between the prices it pays and the market-related prices. Further, I will compare the CCT prices to the same items procured by Eskom, a national government entity, whose prices were reported on by the media:

Value-for-money is not happening in government procurement on a national level. The National Treasury can make it a priority until they go bankrupt. It is not happening.

Making public the expenditure by government on everyday items like toilet rolls and milk will allow South Africans to see if their money is being spent carefully and if every cent, as the City’s report shows, can be accounted for.

Stealing your money

Abusing taxpayer money is equivalent to the government stealing your money. Taking more than it is entitled to. I am not a libertarian and do not believe that taxation is theft. But if government is taking your money, government should be providing a service of equivalent value to the money it took to spend on it.

Demanding accountability for how their money is spent is the least that taxpayers should do. At the end of the day, taxpayers suffer the consequences of the abuse they tolerate. If government cannot stop abusing you, it is time to take a stand.

[Image: Steve Buissinne from Pixabay]

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