SACU revenues shrink further

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. . . as govt explores alternative sources of income

Bereng Mpaki

SOUTH African Customs Union (SACU) revenues to the fiscus are set to decline from 23 percent to 17 percent of gross domestic product (GDP) in the 2016/17 financial year.

This was disclosed by Finance Minister Dr ‘Mamphono Khaketla during her national budget presentation last Friday in the National Assembly.

She said the total revenue target for the 2015/16 financial year was M14.405.7 million, of which SACU recorded M6 398.2 million.

However, in the 2016/17 budget, Dr ‘Khaketla projected a total revenue of M15.473.8 million, of which SACU receipts accounted for M4.593.8 million.

“Revenue performance remains vulnerable to external shocks, largely due to the country’s dependence on SACU receipts, which constitute 32 percent of government’s revenue,” she said.

“The deterioration in the country’s share of SACU receipts is as a result of a combination of lower than  projected  performance  in  2014/15, which  will  result  in  a  negative  adjustment  of  about  M1.075 million   in   2016/17, and a   projected   decline in economic performance in the customs union in 2016/17.”

The minister also said real GDP growth slowed down to 3.7 percent in 2014/15 following a growth of 4.2 percent in 2013/14. “The slowdown in economic performance could   be   attributed   to   corrosion   in   secondary industries ensuing from a decline in the manufacturing sector (down by 10.9 percent) and construction (down by 10 percent),” said Dr ‘Khaketla.

“In addition, tertiary industries registered a low growth in 2014/15 affected by a slowdown in financial intermediation and health services. The primary industries on the other hand, recorded a higher growth of 9.7 percent from 4.2 percent in 2013/14 attributed to a major growth of 15.5 percent in the mining and quarrying industries.”

She said the government would look to other revenue sources to mitigate the effects of the reduction of SACU inflows.

“Macro-fiscal stability continues to be at the centre of government’s development agenda. Furthermore, the Coalition Agreement signed at the onset of the current government continues to bear relevance in attaining this stability,” said the minister.

“Our actions as a nation should be geared towards achieving faster economic growth through institutional reforms, effective use of our natural resources, infrastructure development, and foreign and domestic private sector investment.”

Dr Khaketla said the government would implement a raft of interventions to boost its non-tax revenue collection.

“Although tax revenue is projected to continue to grow in the medium-term, the growth is not sufficient to offset the declines in SACU revenue,” she said.

“This consequently poses a threat to macro-fiscal stability and debt sustainability, and government’s ability to provide a consistent and predictable support to growth.

“The changing global economic environment therefore calls for intensified efforts to promote domestic revenue mobilisation – both tax and non-tax revenue.”

To mobilise domestic revenue, Dr Khaketla said the LRA had been restructured to improve its administrative capacity and client focus. Other interventions include:

  • The Ministry of Public Works and Transport will introduce personalised number plates, which will cost more than ordinary number plates;
  • The Ministry of Public Works and Transport will revise the cost of registering vehicles, obtaining drivers’ licences, and other payments made in the ministry;
  • All ministries have been asked to review the various fees and fines by at least the inflation rate, and rates should be automatically increased annually by the inflation rate to mitigate huge increases. This will be gazetted through regulations by each ministry. These revised fees will be published during the first quarter of the 2016/17 financial year;
  • The oil levy will be increased by 2 cents;
  • The government will also explore modalities of increasing the border toll fee to differentiate fees paid by local and foreign registered vehicles.

The minister said private sector growth was also on the government’s priority list.

“Another way of providing impetus to domestic revenue is to provide a conducive platform for the private sector to thrive,” she said.

“As a starting point, government has decided that the construction industry has to be revitalised. To this end, government will earmark some of its sites on prime land in Maseru, to begin with, which will be made available to the private sector to develop on behalf of government.

“Another proposed method of generating revenue without resorting to borrowing, will be to ring-fence a portion of the royalties that government receives from the mining and/or water sectors, and use these to raise funding that can be used exclusively for capital projects. This again will reduce the burden of debt whilst creating jobs for the private sector.”

 

 

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