Vavi looms large in SA’s future

It is such a drag listening to dinner-party talk about the kids, diets, the latest bikes and Justin Bieber. What about our future in South Africa?

Of course, Jacob Zuma will serve two terms as president. But who will replace him? What will that do to our lives? Some say it will be Kgalema Motlanthe.

The more negative call is that Julius Malema will make the biggest comeback since Lazarus.

Recently I had a brush with the National Union of Metalworkers’ meeting in Durban. You could feel the power! Perhaps one day the red T-shirts, matching caps and cellphones could challenge the green, yellow and black of the ANC.

Currently there are in excess of 65 million cellphones in South Africa. About a quarter are web-enabled.

In another four years, nearly every voter will carry a web-enabled phone. Come elections, the strongest social-media presence will win.

Cosatu and its affiliates will have the upper hand in social media over any political party. So long as the tripartite alliance sticks together, that’s good news for the ANC. But what if it doesn’t?

Zwelinzima Vavi is no Malema. He is clever, sophisticated and has youth on his side. He is already very vocal when it comes to taxes.

There is far more to it than just Cosatu being anti the Gauteng toll roads. We already see the influence of the union federation on fiscal strategy. It says no to a VAT-rate increase. It wants National Health Insurance, so we will get it (eventually), even if the tax base cannot afford it.

In the second term of Zuma, the ANC will have to march to Vavi’s drum or there won’t be another term for the ANC. This will cost far more than the current growth rate in tax collections (8% to 9% a year) can afford.

While Pravin Gordhan remains minister of finance, he will do everything possible to contain the national deficit. But what if he is overruled by democracy, and the national deficit climbs above 4% of GDP? Does that result in increased interest rates?

Vavi won’t allow that! So the rand will weaken. That’s an acceptable consequence to Vavi. And if South Africa does not borrow, taxes will have to increase. And the only tax increases that will not incur the wrath of Vavi will be corporate income tax and personal income taxes (but only for the wealthy).

Originally published in the Sunday Times Tax Talk column.

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