Dark days: As the power cuts increase, businesses have had to find alternative sources of electricity, such as generators
The government does not seem to regard the now regular power blackouts lasting four hours at a time as the single biggest risk to South Africa’s economic growth and to its relatively stable young democracy.
This can only exacerbate the existing lack of economic growth, and may soon undermine the government’s social agenda and the country’s economic stability. Both are extremely important in enabling the government to redress the legacy of apartheid and prepare South Africa for a prosperous future.
According to the Council for Scientific and Industrial Research, there was more load-shedding in September 2022 than during the 12 months of 2020. Considering that blackouts have escalated since then and that this December we are now experiencing regular stage five and stage six load-shedding, it is reasonable to conclude that it is at unprecedented record levels.
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 Selfstandige Sakegemeenskap Sakeliga member survey, most of the businesses surveyed stated that blackouts came with notable estimated losses in revenue and damage to property.
The repair costs will either be absorbed by the businesses or will translate to higher insurance costs or, if not repaired, will have detrimental effects on productivity.
Based on economists’ views, various business organisations and surveys conducted, it is obvious that damage to government revenue must be reaching unprecedented, elevated levels.
This is exacerbated by the fact that it is the small, medium and micro enterprises sector, which provide jobs in the informal sector, that 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 effect on the
collection of all main sources of tax revenues.
According to revenue statistics published by the treasury and the South African Revenue Service (Sars), government revenue is made up of about 89% of tax revenues. These tax revenues consisted in the 2019-20 fiscal year of personal income tax at 39%, corporate income tax at 16%, value-added tax (VAT) at 26%, the fuel levy at 6%, and customs duty and others at 13%.
In the 2016-17 and 2020-21 fiscal years, tax revenue remained stable, with an increase or decrease over the five years of only 1%. This means that in the 2018-19 fiscal year, tax revenues were R1 287 trillion and in 2019-20 about R1 355 trillion, representing an increase in revenue of less than 1%.
An increase of 1% or less in tax revenue should not be acceptable in a country such as South Africa where many social needs must be addressed. Where will the government find money to pay for the increasing need for quality education, social grants, National Health Insurance, health and infrastructure?
More tax revenues could be raised from the creation of more jobs. This will result in more consumer spending and more investment in production capacity, which will result in more tax revenues that should enable the government to increase its investment in infrastructure projects. All these mean real growth in personal income taxes, corporate income taxes and VAT, which constitute more than 80% of tax revenues.
But these tax revenues are seriously compromised by Eskom’s inability to provide reliable electricity over the past 15 years. The government is sabotaging itself in achieving its stated plans for the people of South Africa.
With increases in social unrest, theft of crucial infrastructure such as electricity cables and railway tracks and recent natural disasters such as floods, it is incomprehensible how the government is failing to see the crisis looming caused by the lack of a stable electricity supply.
Short-term gains in increases in fuel levy revenues are not sustainable because the price of fuel is dependent on many factors the government cannot control, and the revenue is earmarked for certain expenses such as compensation to victims by the Road Accident Fund.
It is not rocket science to deduce that more jobs and a growing economy will result in more tax revenue. This will reduce the need for more government borrowings which, according to the treasury, was R500 billion for the 2020-21 fiscal year.
In 2021, the treasury confirmed that South Africa spends R303 billion annually to service debt, and this expenditure could increase to as much as R1 trillion over the next three years.
This means South Africa is currently spending about 20 cents (20%) in every rand to service its debt. To reduce the need for debt, Sars must collect more tax revenues, but its job is made much harder when the economy is not growing at a healthy rate.
The government’s solution is to establish a national energy crisis committee, and approve the development of electricity by independent power producers while Eskom asks South Africans to reduce the use of electricity — a unique marketing concept.
When will the government wake up and realise that this is the country’s biggest crisis since 1994 and sort out Eskom’s inefficiencies for all our sakes and for the future of South Africa?
The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.