TAX TALK: Gordhan and Marcus fight the good fight

THREE years ago, Pravin Gordhan faced Parliament as minister of finance for the first time to deliver the medium-term budget framework speech.

Trevor Manuel had thrown him the biggest hospital pass since Naas Botha played the game. South Africa was officially in recession.

The recession of 2009-10 lasted only nine months. Some said the global credit crunch would soon be just a blip on the radar screen.

The definition of a recession is two consecutive quarters of negative real (after-inflation) growth.

At present South Africa is reporting real growth of about 3% — better than most countries, but not enough to address the backlog in delivery.

Growth in tax collections is about 8% a year, a far cry from the glory days of Manuel when 12% was standard, driven by higher growth and inflation rates.

Consumers are sulking at home, strangled by massive energy costs that cannot be compensated for by the lowest interest rates in decades. The International Monetary Fund forecasts little hope of improvement.

Reserve Bank governor Gill Marcus faces a black hole in the balance of payments, or current account, as international investors remain jittery and have to repay $4-trillion in their own debts. Interest rates cannot be increased to lure back investment. That would simply strangle the economy.

The economic outlook is as grim as it was in 2009. Christmas Day 2012 has been reduced to a bring-and-braai, if you are lucky. Those who still have work are bragging. A quarter of all South Africans, nearly 13-million, are unemployed or economically inactive.

We cannot blame it all on President Jacob Zuma. Actually, South Africa did remarkably well in the wake of the global credit crunch. No taxpayers’ money was spent on bail-outs and subsequent retrenchment packages.

Despite all our self-inflicted problems, the major downside indicators are international. It is sickening to reflect that, while some executives were paid millions for causing the credit crunch, Africa suffers for it years later.

But Africa is not for sissies! Somehow we will get through. And we are just damn lucky to have Marcus and Gordhan doing their best.

Originally published in the Sunday Times: Money & Careers Tax Talk column.


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