This year’s budget was boring for its lack of big numbers and promises, but it did contain good news for most South Africans, at least those lucky enough to still have jobs.
There were no new major announcements. In and of itself, this is good. During an election year it would have been tempting for a finance minister of a party in trouble to announce new initiatives to shore up its fortunes. Finance minister Enoch Godongwana resisted the temptation.
Instead, thanks to the work of the South African Revenue Service, he gave some relief to taxpayers. Significantly, he didn’t raise any taxes for companies and individuals. This suggests the government is aware of the struggles of ordinary South Africans.
At least three other announcements came as a welcome surprise. In response to a suggestion from a small business owner, Renette Oosthuizen, Godongwana announced that the threshold for registering for VAT would be raised to R2.3m from R1m.
Not only will this reduce the cost of doing business, but it will also ease red tape for small business owners and free them up to spend more time with their customers, clients, employees and suppliers. The compliance burden is an enemy that constrains small business growth. It’s worse in the local sphere of government.
The collapse of local government is one of the greatest threats to the sustainability of small businesses. The government attributes the financial distress faced by many municipalities to poor planning, weak revenue collection, poor management and service delivery backlogs.
Annual reports by the auditor-general’s office paint a bleak picture of the state of municipal finances. Only a handful achieve clean audits for themselves and their entities. Ad hoc efforts to fix local government are slow to yield desired outcomes. Even high-level interventions by the presidency have yet to produce results.
The water crisis engulfing Gauteng, which prompted the establishment of the water crisis task team, was just the latest reminder that the situation has deteriorated. The biggest sufferers are small business owners and households. Big businesses typically litigate service delivery failures or get off the grid to keep their businesses running.
Households and small companies lack the money to drill boreholes or mount costly lawsuits. Worse, when the private sector offers a helping hand to struggling municipalities, it’s not always welcomed.
Municipalities are also the worst offenders regarding noncompliance with the government policy of paying suppliers within 30 days after service delivery. A report by the National Treasury shows marginal improvements in this respect.
Godongwana also announced that small business owners who sell their businesses will be exempted from paying capital gains tax. This thoughtful measure will provide tax relief for owners who sell businesses worth up to R15m. This is especially important for businesses in distress that may be saved by a new owner.
The finance minister furthermore announced that the Office of the Chief Justice will henceforth have a separate budget from the justice department. This is a longstanding issue. Previous chief justices have campaigned strongly for years for this independence.
The separation gives expression to the idea of separation of powers. The Office of the Chief Justice, which manages the judiciary’s affairs, should be separate from the executive and parliament.
This is an important step towards realising the objective of power separation. It means the office will have to fight for its share of allocation directly from the Treasury, instead of relying on the justice department. It may still be frustrated by budget cuts, but it has a chance to plead its case directly to the Treasury.
This is a sign of South Africa’s maturing democracy and should bolster confidence in the judiciary as the country’s last line of defence. South Africa’s judiciary is well respected for its independent mind and fearlessness.
Godongwana also announced that similar measures are being considered to separate parliament from the executive. Alongside the creation of a parliamentary committee for the presidency, the separation of budgets should improve parliament’s oversight of the executive.
The presidency, which also houses several ministries, is held accountable through motions of no confidence, budget vote debates and quarterly oral and written questions in the National Assembly and National Council of Provinces.
That the compilation and delivery of this year’s budget was relatively glitch-free doesn’t mean that its aspiration will be plain sailing. It won’t. Some of the promises will require Solomonic wisdom to fulfill. These include the creation of the Credit Guarantee Vehicle. The government lacks a good track record of establishing new institutions.
• Dludlu, a former editor of Sowetan, is CEO of the Small Business Institute.
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