South Africa: Mtbps - End Budget Cuts, Stop the Bleeding - and Crack Down On Illicit Financial Flows

analysis

South Africa has one of the most corrupt private sectors in the world. This has a devastating impact on the tax base. The wealth lost to profit-shifting and illicit financial flows has been estimated as being up to 4% of South Africa's GDP per year - nearly R200-billion in 2019 alone.

It is telling how quickly the nation's focus has shifted from the government's economic recovery plan to the upcoming Medium Term Budget Policy Statement (MTBPS), despite the fanfare accompanying the former's launch last week.

Everyone knows that having been given the carrot by President Cyril Ramaphosa, we now anxiously await the stick from Finance Minister Tito Mboweni.

To anyone who has been paying attention, it is obvious that the budgetary framework of this MTBPS will be punishing.

In their mission to close "the hippopotamus' mouth" - Mboweni's term for the gap between the government's revenue and its expenditure - Treasury is looking towards massive cuts to state spending.

In July's supplementary budget, these cuts were estimated at around R230-billion over the next two years, not including the plan to cut the public sector wage bill by R160-billion over the next three years.

In addition, Treasury is planning to institute...

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