Godongwana budget must save small businesses as well as the poor, DA urges

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Enoch Godongwana, Minister of Finance.

  • MP DA Dion George said the party supported a conditional basic income grant funded by fiscus growth rather than tax hikes.
  • George said businesses needed urgent support and relief after national lockdown restrictions and that could include tax relief.
  • MP DA Ashor Sarupen said continued support from public entities was not sustainable and private participation should be at the center of their rescue.

DA MP Dion George said one of the biggest priorities of Finance Minister Enoch Godongwana’s upcoming budget speech should be support for small businesses rocked by the ongoing national Covid-19 restrictions and support for households the poorest in South Africa.

Godongwana is set to deliver his first budget speech as finance minister on Wednesday in a joint session of parliament.

The budget is expected to be in line with President Cyril Ramaphosa’s remarks during his latest State of the Nation (SONA) address, which highlighted public enterprise reform, efforts to cut red tape for businesses and a one-year extension of R350 Social Relief. of distress Grant.

Among trade formations that have presented their demands to Godongwana, the National Liquor Traders’ Association has called on the minister to introduce a zero percent increase in excise duty on the alcohol industry, after the industry been rocked by a 2020 alcohol ban.

George said the opposition party had proposals that would position South Africa for “post-pandemic economic resilience”. revenue for taxpayers and a reduction in the fuel tax.

George said small, medium and micro-enterprises (SMMEs) had the potential to be the biggest generator of jobs, but were instead the biggest victim of the country’s economic headwinds. Supporting these companies would boost job creation, which would position South Africa for recovery from the Covid-19 pandemic and reverse the tide of underperformance of the past decade, he said.

“We know the liquor business has been through a tough time, especially after the absurd liquor ban. I think there is a need to provide some kind of relief. The question of whether it zero percent excise duty should be looked into,” he added. said George.

“Achievable” Basic Income Grant

George said the DA supported the idea of ​​income support for the unemployed as an “economic floor” to soften the blow of poverty on the most vulnerable. He said a basic income grant would be more feasible because spending increases because of growth rather than tax hikes.

“As economic growth materializes, a basic income grant would become affordable. “, said George.

Part of the R100bn tax overrun could be used for the Distress Welfare Grant, but infrastructure is crucial to look at.

“You can’t just rely on pension funds to do that because it just doesn’t make sense,” George said.

Standing Appropriations Committee DA MP Ashor Sarupen said Ramaphosa’s announcement of preparations for a state-owned enterprise to house all commercial state-owned enterprises was “ill-informed” and would not address systemic challenges that weighed down on these parastatals.

“Only through a systemic program of private sector participation will SOEs no longer be a burden on the taxman and make them competitive in the market,” Sarupen said.

Private investment in public enterprises

Sarupen said public entities (PEs) have not shown enough improvement in financial management and governance as the Land Bank has still not concluded negotiations with creditors and is still rocked by the executive instability while other entities have indicated that they will continue to need financial assistance. .

“We will not see major allocations to public companies [in this budget]but it is suspected that they will put in place a large contingency reserve and when they establish the adjustment budget, they will use the contingency reserves to bail out state-owned enterprises,” Sarupen said.

George said state enterprises were “desperately bankrupt” and the idea of ​​creating an entity that would run the government’s parastatals made no sense. He said private sector participation would attract investment and skills to struggling entities.

“We’ve seen models around the world that haven’t worked. We’ve seen models that haven’t worked in Russia, where state-owned companies have only served to enrich a small number of people. We know there is a lot of skill in the private sector and is sitting on funds amounting to 1 trillion rand and we want to unlock that in the economy,” said George.

“Corruption Tax”

George said the DA would also propose a “corruption tax”, where any company found guilty of corruption should be charged an “additional tax” on a percentage of its turnover, because the “sentiments around corruption count”.

He said very few South Africans have an incentive to save because taxes hinder sustainable and meaningful saving. Barriers to savings should be removed and small business investment should be accompanied by tax relief.

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