The South African government could receive less tax revenue in the next financial year as a result of economic stagnation due to heightened power cuts.
This was a warning from a tax expert at CMS South Africa yesterday, an international law firm and tax consultants, as Eskom ramped up its rotational load shedding to Stage 6 over the weekend due to a number of unplanned breakdowns.
CMS South Africa head of tax Bernard Mofokeng and senior tax consultant Nico Alberts in a note said it was shocking that the government did not regard the now regular power blackouts lasting four hours at a time as the single biggest risk to economic growth.
Economists estimate the damage to the economy at more than R4 billion a day and that growth to the economy may have been stunted by about 10%.
According to the Sakeliga member survey, most of the businesses surveyed stated that blackouts came with notable estimated losses in revenue and damage to property.
Mofokeng and Alberts said more tax revenues could be raised from the creation of more jobs but this was seriously compromised by Eskom’s inability to provide South Africa with reliable electricity over the past 15 years.
“Based on economists’ views, various business organisations and surveys conducted, it is obvious - at least to us and perhaps some people in government - that damage to government revenue must be reaching unprecedented, elevated levels since the dawn of democracy,” they said.
“This is exacerbated by the fact that it is the SMME sector, which provides jobs in the informal sector, which is suffering the most.
“A number of these small businesses may have to close which will lead to an increase in the unemployment rate, and this will put additional pressure on government coffers.
“There are also job losses in the formal sector which will have an impact on the collection in all main sources of tax revenue.”
The tax experts also said this can only exacerbate the existing lack of economic growth, and this may soon undermine the government's social agenda and the country’s economic stability.
They said Eskom continually gives the country empty promises that they are improving the reliability of their coal fleet.
“As we have learned over the years, when it comes to electricity solutions and Eskom, there will be a huge price to pay for South Africans, one way or the other,” they said.
While government’s inaction and Eskom’s inability to manage its coal fleet continues, tax revenues continue to suffer, and South Africa’s coffers are running empty at an alarming rate.
Finance Minister Enoch Godongwana on Sunday admitted that the government had “dropped the ball” on Eskom because it focused on fixing the troubled power utility rather than on fixing power to the grid.
Godongwana said that between 2019 and to date, the government had put R230 billion into Eskom.
“I am not sure if Eskom is the right vehicle for this, but we need new capacity. I don’t care who delivers that new capacity, whether it is someone from Mars, it is immaterial. What I want is electricity in the grid,” Godongwana said.
BUSINESS REPORT