OPINION | SA must diversify its revenue sources, not depend on taxes

A national budget is often dismissed as a series of promises and colossal figures recited by the country’s minister of finance. Yet, for many South Africans, the annual budget represents an instrument that can be used to redress historical injustices, create job opportunities and secure a more equitable future.

A “good budget” tackles health care, housing, education and infrastructure, balancing industry-specific incentives with broad-based grants. Though this year’s national budget has been marred by delays and fundamental disagreements over financing methods, its significance remains undiminished.

SA’s post-apartheid journey has been defined by a mission to heal a deeply divided society. Early efforts like the reconstruction and development programme invested billions of rand in housing, health care and education, resulting in the construction of millions of homes and marked improvements in basic services.

Today, the National Development Plan 2030 continues this legacy with ambitious allocations such as R259bn for education in the 2023/24 budget. These funds are earmarked for upgrading infrastructure, training teachers and expanding early childhood development.

Despite these substantial investments, nearly 63% of South Africans – about 38-million people – live below the upper-middle-income poverty line. Unemployment remains stubbornly high, fluctuating between 32% and 33.5%. A renewed focus on unlocking human potential could set the stage for more sustainable progress.

Initiatives like the National Student Financial Aid Scheme and the Youth Employment Service programme aim to equip young people with the skills necessary to break the cycle of poverty. However, modest GDP growth has limited job-creation impact: a 1% increase in GDP generates only 30,000 to 50,000 new jobs – far too few to absorb a rapidly growing labour force.

International examples reinforce the need for robust human capital investment. Singapore’s SkillsFuture programme and Germany’s dual education system illustrate how focused educational investments can yield measurable economic outcomes. In SA, financing practical skills transfer is imperative. Such efforts would ensure that citizens are job-ready or able to launch businesses, enhancing SA’s global competitiveness.

To secure a role in the global economy, the country must strategically invest in sectors that build a competitive advantage – especially manufacturing, industrial capabilities and technological innovation, with renewables emerging as a key area.

China’s meteoric rise offers a blueprint for transformation. Over the past 40 years, China has shifted from low-income status to becoming the world’s second-largest economy by embracing a series of reforms. In contrast, many of SA’s industrial and special economic zones remain under-utilised “white elephants”, while small business initiatives often remain more rhetorical than effective.

A decisive reallocation of budget resources towards structural reforms and industrialisation could spark medium to long-term growth and enhance global competitiveness.

Recent projections by the World Bank suggest SA’s GDP may grow by 1.8% this year, possibly rising to 2% in the medium term, despite government targets of 3%. At such modest growth rates, the transition to high-income status could take as long as 60 years. Meanwhile, global indices consistently rank SA as a laggard in competitiveness.

Social grants have served as a vital safety net for more than 28-million citizens, yet they cannot drive long-term economic expansion. The recent budget impasse underscores the risks of a consumptive budgeting approach.

Data from the SA Revenue Service (Sars) reveals that just 100 companies contribute 90% of the nation’s tax revenue, indicating an overreliance on taxing a narrow base. SA must urgently diversify its revenue sources and shift from its reliance on taxing its way out of sticky situations.

To mitigate these risks, the National Treasury must reconfigure fiscal financing by expanding revenue streams beyond taxes. Proposals include increasing tariffs, licensing fees and service charges and establishing a dedicated revenue-generation programme.

Such a programme, modelled after reforms at Sars, could initially generate an estimated R500bn over the medium-term revenue and expenditure framework, potentially rising to R1-trillion annually by the fifth year and boosting total revenue to R3-trillion.

• Holeni is group chief adviser at Ntiyiso Consulting Group