Salt in the wound for fed-up taxpayers in South Africa

[Nat Quinn]

South African taxpayers are becoming fed up with paying ever-increasing rate hikes with no service delivery from the government to show for it.

Speaking to ENCA, Frank Blackmore, a lead economist at financial service firm KPMG, said that most South Africans would not be bothered with price hikes – such as the electricity price increase that took effect from 1 April – if there was adequate service delivery as a result.

However, this is simply not the case.

Blackmore said that with revelations of the former Eskom CEO Andre De Ruyter and alleged corruption at the embattled power utility, taxpayers will reach their limit in willingness to pay for increases.

As allegations of corruption swirl around Eskom, National Treasury has made the stunning move to exempt the power utility from having to disclose irregular and wasteful expenditure, effectively blocking these financial insights from public view.

Meanwhile, from the start of this month (1 April), Eskom customers are now expected to pay more. Standard electricity customers will see an 18.65% hike on their electricity bill. Customers face a further 12.74% price hike in April 2024.

Municipal customers have yet to receive their increases, but Nersa has approved an 18.5% hike from 1 July 2023. Municipalities may absorb some of the hikes, as in the City of Cape Town, where the hike has been reduced to 17.6%.

The hikes, approved by the National Energy Regulator of South Africa, aim to assist Eskom in improving its current financial standing – an important part of which will now be obscured from public view through National Treasury’s exemptions.

Blackmore said that when looking back at electricity prices from 2008, electricity tariffs are roughly five times higher – something that could be overlooked if electricity was actually accessible.

Instead, South Africans are expected to pay more for electricity while grappling with near-permanent load shedding, and will also be blocked off from seeing whether the group is putting the added funds to good and legitimate use.

Fed up taxpayers

The latest Afrobarometer for 2023, which surveyed 1,600 adults South Africans between May and June 2021, found that most South Africans (53%) would prefer to pay higher taxes if it meant that the government provided more services.

40% said that they would prefer to pay lower taxes, even if that means there would be fewer services. 8% of respondents agreed with neither or refused to respond.

The graph below shows the distribution of responses:

Respondents to the survey were asked which of the following statements is closest to their view:

1. It is better to pay higher taxes if it means that there will be more services provided by the government.

2. It is better to pay lower taxes, even if it means there will be fewer services provided by the government.

However, economist and academic professor Daniel Meyer said that service delivery, among other key economic indicators, is hanging by a thread in the country.

The professor, using his own methodology rooted within the Fragile States Index, found that South Africa’s “failed state” score is slightly below 5 out of 10, indicating a moderate situation.

However, he warned that the outlook for the country on the downside, saying that if things continue on the current trajectory, South Africa will be a failed state by the end of the decade.

The country’s Auditor-General (AG), Tsajani Maluleke, said that there are still major shortfalls in service delivery across the country despite a gradual upward trend shown across a handful of provinces.

In November2022, Maluleke said that service delivery, good performance and financial discipline are not evident at the auditees with the greatest impact on the lives of everyday South Africans.

 

 

source:Salt in the wound for fed-up taxpayers in South Africa (businesstech.co.za)

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