Budget Smudget

Malusi Gigaba wore a nice suit and pretended to be a finance minister again this week.

Some analysts told us before the budget that we were about to see VAT go up by 2-4%, that income taxes would be raised again and that the government would do everything it could to plug the hole that Jacob Zuma’s administration gouged into the national fiscus. This was a week full of opinion on what was good and what was bad, but nobody asked the most important question of all – what is government cutting back on?

When you or I use the word budget, we mean disciplining ourselves, learning to live within our means and planning financially so that we don’t end up in debt. When you or I end up in debt, people come and take our furniture away and we have to sell our prized possessions. When politicians spend a country into deficit, they just borrow more and make the taxpayers shoulder the burden of paying it back.

The overwhelming majority of the time spent delivering the budget speech was used up telling us how much more government was going to take from us, and a little time was spent quoting Kendrick Lamar. If you’re going to quote any living rapper, it’s better that it’s Kendrick Lamar than anyone else… but where was the budgeting?

We have 35 ministers and 37 deputy ministers and each of those heads up a bureaucracy of thousands, even hundreds of thousands in some departments. Not a word about cutting back on this grossly overfed, overstuffed jobs-for-pals scheme developed by the former President. Wastage on a level that beggars belief continues unabated. State-owned Enterprises alone get bailed out and declare losses even though they’re monopolies just about every year. Acting CEOs, suspended CEOs, people on disciplinary leave, and consultants plugging the holes incapable appointees can’t must add up to an enormous drain on the treasury.

Social grants are distributed to some 16-17 million people in South Africa. In 2015/16 financial year out of a total 33 million eligible tax payers, around 10% or 3.3 million people paid 93% of total income tax collected in that period. Income tax also makes up the largest proportion of all tax generated in South Africa. Even someone with a rudimentary understanding of arithmetic can figure out at first glance that this is neither fair nor sustainable.

Politicians don’t understand business or tax or entrepreneurship at all because they get paid by the state, and even if they do a terrible job (like Bathabile Dlamini) they still get paid – so it’s no wonder that Malusi and most of the people in government can’t figure out a balance sheet. As much as you rely on income and revenue, you have to cut costs to make your money grow. As a country we spend more than we have and we’re already running up a deficit. Taxing the population more will flush money out of the system – not into it, and do nothing for growth.

Look, I’m not an economist and I don’t envy the accountants who have to make the country’s books balance – but it’s clear to me that the idea of the state stealing (yes, I use the word with every connotation you can possibly imagine associated with it) half of your money every year isn’t going to last much longer. A future of disintermediation, cryptocurrencies, increasing liberty and globalisation will eventually lead to people handing less and less of their money over to the politicians – and it couldn’t happen to a nicer bunch of people.

Here’s another Kendrick quote, Malusi:

“Dreams of living life like rappers do (Like rappers do, like rappers do)
Bump that new E-40 at the school (Way at the school, way at the school)
You know big ballin with my homies (My homies)
Earl Stevens had us thinking rational (Thinking rational, that’s rational)
Back to reality we poor, ya bitch!”