The government is prepared to examine tax issues in order to encourage people to increase their rate of savings, Finance Minister Trevor Manuel has said.
But, Manuel told a KPMG-Cape Talk breakfast meeting in Cape Town, the increase in the savings rate was likely to be a slow process debt now makes up 72 percent of families' disposable income.
Asked whether the government intended to tackle the high tax rates faced by many, Manuel said: "There is a South African reality that says we are a poor country. We have always been oblivious to the needs of many. There are still children who today have to go to school under trees and our government has an obligation to meet the constitutional requirement of ensuring the basics for everyone.
"If you're a poor country with the tax rates that we have and the few choices that we have, your focus has to be on allocation of resources to areas of need."
Economic transformation, he noted, generally had to happen over a longer period than most people would like the reason being that transformation should be sustainable to be worthwhile.
He highlighted the "displaced" debate on black economic empowerment as an example of the importance of properly managing economic transformation, pointing out that while some have wanted to see powerful results in the space of four or five years and many companies were trying to meet those expectations, effective transformation had to be encouraged to happen over a longer period.
High expectations aside, Manuel said he believed significant changes had been achieved in economic transformation. These include the reduction in corporate tax; retaining VAT at the level of 14 percent; and bringing personal tax relief to lower income people.
"If you want to test the sustainability of economic delivery, test it against that."
The minister emphasised that, at the end of the day, policy changes had to be sustainable. This sustainability test, he said, had a bearing on the future direction of change.
Referring to public servants' unhappiness over wages, Manuel said the government's concern at the growing public service wage bill was highlighted in this year's budget speech. He said the large wage bill hampered government's ability to increase social service spending.
"If the wage bill rises as fast as it has, quality service must be severely impacted."
Governance, he pointed out, had to be about getting the benefits through to all a situation which could leave government with a tough set of choices.