EDDIE M RAKABE | The hidden ‘dysfunction tax’ that all citizens pay

South Africans are paying an extra tax burden that is never announced in budget speeches. This tax is neither legislated by parliament nor debated in public hearings. It is not collected by Sars either. Yet everyone, irrespective of class, race, income level and creed, pays it every day. The tax is a silent cost imposed on citizens by the state that fails to deliver basic public services consistently. It is a dysfunction penalty.

The dysfunction penalty is not to be confused with state failure, despite the strongly held negative perceptions about the country’s fortunes within the broader polity. South Africa is not a failed state in the true sense of the concept, in which a government lacks authority and legitimacy, is unable to exercise authority over its territory and is often mired in political instability.

Fundamental institutions crucial for political and economic stability remain intact. Elections are held timeously in five-year cycles. Courts continue to uphold the constitution. Taxpayers remit their dues as expected, enabling the state to provide social service and pay eligible social grant beneficiaries on time. However, and by its own admission, the state has increasingly portrayed a chronically persistent inability to execute its responsibilities, and went as far as classifying certain municipalities as dysfunctional.

Gauteng premier Panyaza Lesufi is on record stating that South Africa has commercialised the public good and consequently subjected citizens to a high cost of living. This is a perfect illustration of the dysfunction penalty. It does not emanate from total state collapse, but from a partial, uneven and sometimes selective breakdown of the delivery architecture. The state remains functional enough to be extractive and assert minimal authority, yet is inadequately capacitated to deliver services consistently. This condition can be more corrosive than outright failure because it normalises inefficiency, the kind that people adapt to and budget for, rather than resist.

The effects of normalised inefficiency are everywhere. Water shortages in Johannesburg and other secondary cities push households and businesses into hygiene risks, business disruption and frustration, while the cities attempt a physics-defying manoeuvre of replacing thousands of kilometres of water pipe networks, essential for urban systems, with mafia-infested water tankers.

In his state of the nation address last month President Cyril Ramaphosa observed that poor planning and inadequate maintenance of water systems by municipalities are the main reasons taps run dry, directly linking the dysfunction to everyday hardships.

One way or another, everyone pays the dysfunction penalty, but not equally. Unlike traditional income tax, the dysfunction penalty is regressive. The poor absorb the cost burden disproportionately.

Unmet healthcare expectations, long queues and a shortage of hospital beds evinced by floor-sleeping patients turn waiting times and admission in public hospitals into currency of care. School and university admission blunders delay and derail opportunities to improve the quality of life for both parents and students. Recurring floods and other natural disasters impose severe physical and economic hardship on citizens, amplified by planning and maintenance neglect.

A combination of high property prices and shortage of affordable housing in cities like Cape Town, normalised by spatial and regulatory dysfunction, prices locals out of their own city while punishing mobility. Broadly, the housing crisis countrywide reinforces the dysfunction penalty through high transport costs, indebtedness, informal housing growth and social fragmentation.

One way or another, everyone pays the dysfunction penalty, but not equally. Unlike traditional income tax, the dysfunction penalty is regressive. The poor absorb the cost burden disproportionately. The middle class encounters a slow burn through debt, stress and declining quality of life. The affluent buy insulation while continuing to honour their tax bills, albeit at great risk to tax morale.

Like nature, dysfunction leaves no vacuum. It creates markets. As the state retreats or fails, private providers step in, not necessarily to fix the problem but to sell a flashy façade of quasimunicipal enclaves or distinct statehood. Gated residential estates replicate many of the core functions performed by the state, sometimes autonomously from existing municipal systems, as part of adaptation to normalised inefficiency.

Similarly, private security firms resemble quasi-military platoons complete with armoured vehicles, air support and fire response units. Exorbitant private student accommodation enables rent extraction from desperate students. The private healthcare system makes dignity and survival dependent on unlimited medical aid savings accounts.

As the Gauteng premier acknowledges, households spend inordinate amounts on self-provision, buying solar panels, medical aid and security, turning basic survival public services into long-term financial burden.

At the same time the state is working against itself. The government constantly talks a language of reform, the most recent being Operation Vulindlela, while relentless corruption and institutional decay erode trust. Municipalities depend largely on property rates and service charges for revenue, but when service delivery falters residents stop paying, businesses relocate and the revenue base shrinks.

The government constantly talks a language of reform, the most recent being Operation Vulindlela, while relentless corruption and institutional decay erode trust.

New investment deals and mega projects are announced while water, rail and logistics systems underperform. The state emphasises fiscal consolidation and tax compliance, only for the resources to be wasted through irregular expenditure, inflated prices from procurement inefficiencies and poor project workmanship.

It tries to be redistributive, developmental and growth focused, but lacks the administrative coherence to optimise all the interventions simultaneously. This is institutional self-sabotage, adding to the dysfunction penalty endured by citizens.

The result is a vicious cycle. As public service provision declines, the cost of coping privately increases. As the private sector monetises failure, inequality deepens. The public loses trust and abandons compliance. The state responds by prioritising expansion and becoming more extractive, while failing to preserve what already exists.

The water & sanitation ministry has already hinted at a staggering price tag of R400bn needed to fix water infrastructure across municipalities amid the ongoing Johannesburg water-shedding debacle. The president also referred in the Sona to a newly introduced R54bn incentive for metros to reform their water, sanitation and electricity services.

This is the epitome of politically managed decline, where dysfunction is normalised and masked by promises of bigger budgets. But the real danger is not collapse. It is stabilising at the lowest equilibrium where failure is permanent, profitable and politically rewarding. At this level, spending becomes a proxy for action, replacing governance as the catalyst for performance.

South Africa’s most regressive tax is not income tax and VAT. It is the silent, cumulative cost of a state that cannot fully translate the generous tax revenue into meaningful public value for everyone. Citizens know what they are already paying, and some people pay with their lives — as the Madlanga commission has revealed.

The question is, what will it take or cost for the state to abolish the hidden tax on its citizens? Thankfully for South Africa, the cost should take no more than commitment to institutional realignment. This is a small price to pay for an overburdened citizenry on whom the state relies for its continued legitimacy.

• Rakabe is researcher in the political economy faculty at the Mapungubwe Institute for Strategic Reflection. He writes in his personal capacity.