Edward Kieswetter, commissioner of the South African Revenue Service (Sars), says the recognition that tackling state capture in SOEs is a whole-of-society problem, not just a government problem, is the strongest signal yet that the scourge that bankrupted the country might be seriously addressed.
“For the first time, partly because there's a desperate realisation by government that they have not delivered at the rate the public expects, and because the ruling party is now facing for the first time an election that is not slam dunk — that sense of desperation on the one hand and urgent pressure on the other hand has brought many of the actors within government to the point where they say: 'We need help.’”
For the first time since he was persuaded to return to government in 2019 to take on the challenge of fixing a revenue service destroyed by state capture, there is a sense of urgency over South Africa’s national crisis and the need to build effective partnerships between government, civil society and business.
“I've never seen since my return to government such a level of readiness, despite the political undertones and soapbox commentary you hear for its own purposes, and such deep conversations taking place between civil society, business and government in the most serious way.”
The fact that the government, not without “huge resistance”, is talking about building a holding company similar to those in Singapore, China and Malaysia, which will have oversight of SOEs in place of the department of public enterprises, speaks to this, he says.
Kieswetter, who has contributed to a recently launched business-backed guide on tackling the capture of SOEs, says the failure to fix SOEs — Sars being a standout exception — or deal with the criminal syndicates devastating Eskom and Transnet “has accelerated an openness to say we have to do something differently”.
“This is not about the government or the ANC, it's about South Africa. And we all have to roll up our sleeves wherever we can or we may as well switch the lights off,” he says, with unintended irony.
Progress in tackling the criminal syndicates has been “painfully slow” because of the absence of effective law enforcement, but he sees hope in the fact that the private sector “is putting up its hand and offering to strengthen the system”.
The national crisis committees effectively being run by the private sector definitely have, I think, increased the probability of meaningful progress at last
“The national crisis committees effectively being run by the private sector definitely have, I think, increased the probability of meaningful progress at last.”
He takes as a measure of his own success in turning Sars around the steady increase in tax revenue.
So how frustrated is he that we're facing a possible R74bn tax revenue shortfall this fiscal year?
“I don't give vent to frustration easily, it's a waste of energy,” he says.
“We're running behind because the macroeconomic assumptions on which the expected revenue was modelled have not materialised. GDP is significantly down from where we thought it would be, the impact of load-shedding and the logistics crisis is only now really being quantified, and they all turned out to be worse than what we expected.”
The question is how the shortfall should be managed. He is opposed to the across-the-board austerity measures envisaged by the National Treasury.
“We've had extensive conversations about that, encouraging them that they have to make some of the tough decisions to reconfigure the cost of government.”
Short-term savings measures won't work unless the government moves to make its employment profile more effective, efficient and productive, thus reducing the salary bill or achieving more from the same salary bill.
“The prudent budgeting principle is to say: we're in a financial drought, where do we make revenue-generating investments, where do we make tough decisions about cutting back on consumptive expenditure, how do we create infrastructure that will grow the economy and grow jobs?
“That's the narrative that I'm trying to inject into the debate about how do we manage the shortfall.”
Is he concerned that already hard-pressed taxpayers will be hit with another increase?
“To the credit of the minister and the colleagues in Treasury and Sars, we do not believe that's the best way to strengthen our fiscal position.
“It will affect compliance behaviour and you can't afford that. What we saw when VAT was put up 1% to pay for free education was a proliferation of VAT fraud and people fiddling with their taxes more readily, and criminal syndication thriving in order to get access to the tax take.”
Any increase in tax rates would more likely hurt the economy than benefit it.
“Our biggest challenge now is government expenditure, not indiscriminately hiking taxes.”
He says he's not overly concerned that local tax revolts may morph into a national tax revolt as more people get fed up with the government stealing and wasting their hard-earned money without delivering anything in return.
“My biggest concern is a proliferation of syndicated crime. This is of more concern to me than little fires of tax revolt.”
Might such a brushing off of local tax revolts come back to haunt him?
“I'm not saying they're not concerns, they're just not my biggest concerns.”
Criminal syndicates are costing the country hundreds of billions every year, he says.
“We're aligned with the Davis tax committee which says the value at risk from syndicated crime is easily between R200bn and R300bn a year.”
This also speaks to a lack of high-profile prosecutions. Is this a reflection of how much work Sars still needs to do to fix its once world-class forensic investigative capacity?
“Sars is significantly underfunded to make the investment in modern technology and data science required for us to make a meaningful impact.”
He says he believes the “gatvol” factor leading to tax revolts “will have more political than financial consequences”.
Has he been telling the government to terminate the policy of cadre deployment, which has led to the collapse of services and the threat of growing tax revolts?
“I have been against cadre deployment my entire life. I have always been a proponent of building a capable state based on meritocracy, not loyalty to a party,” he says.
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