The extent to which South Africa’s stagnating economy could impact its ability to maintain its main source of revenue has raised concerns among experts in the economic sector. As it stands, roughly 29 million people receive grants of one kind or another.
This includes 18 million who rely on government social grants and another 11 million who receive the R350 Social Relief of Distress (SRD) grant. Meanwhile, there are approximately 7.4 million people who earn a taxable income according to the Department of National Treasury.
Although there are different ways in which the government earns money through taxing citizens, income tax is considered the government’s most important source of revenue.
Chief Economist and founder of Efficient Group, Dawie Roodt, says that while the government may in some way be open to the idea of a Basic Income Grant, the country’s debt levels are too high and government may have to either reduce spending or find alternative ways to get the required funds.
I can tell you as an economist, that currently, the debt levels of the state are so high that we must be very careful because we’ll get into deep trouble. So the bottom line is either the state must get more money somewhere or they must cut spending, simple as that.
The Finance Minister is responsible for managing Fiscal accounts, which for example include the total tax is taken, total state spending and how much money the finance minister is borrowing as well as the total debt levels.
The country’s government debt currently stands at $273.11 Billion or above R4.6 Trillion. Roodt also warns that the economy will likely become more vulnerable if the government tries to get more money from its relatively small tax base.
Many of the taxpayers that the government highly depends on have left the country due to the current state of its economy. He also points out that even as one of the country’s trading partners, China, loosens its Covid restrictions, lack of energy security and damaged rail infrastructure will greatly affect the country’s slow economic growth.
