Is South Africa’s ‘radical transformation‘ from a leader to a laggard in the upper middle-income countries the cause or the result of a brain drain? It is hard to tell. What is certain, is that there is an extremely strong inverse correlation.
In fact, it is so strong that one can use one statistic to deduce the other. And if high-skilled emigration is going to continue, the country’s decline towards the ranks of the lower middle-income countries will also continue.
Small enterprise in South Africa is unimportant for the Government. Whilst there is lip service to creating conducive conditions for small enterprise, the Government ignores the reality of small formal firms disappearing at an alarming rate. Small enterprise is the canary in the coal mine of a toxic business environment: they die off first before the toxic conditions are lethal for large businesses.
Government favours Big Business (for tax income) or Big Labour (watering its socialist
roots to ensure worker class loyalties). Small business cannot fulfil either
these roles. The demise of small formal
enterprises in South Africa (as recorded in SARS data) is indicative of an
utter indifference by Government to the plight of small enterprise.
That raises two questions:
Is the demolition of the small formal enterprise environment a strategy by Government to achieve its objective of radical racial economic transformation?
Is it also a strategy to plug a hole in the leaking SARS ship since, from a VAT perspective, businesses with a turnover below R1 million is a drain on Treasury?
Based on SARS data on Value Added Tax (VAT) covering the years 2007/8 to 2017/18 the devastation on micro and small businesses with a turnover of R1 million or less, is evident. The number of VAT vendors in this bracket declined by 49% from 300 299 in 2007/8 to 154 559 in 2017/18.
Is Donald Trump advising the ANC and the DA? Bashing (illegal?) immigration is a key pillar in both these campaigns and both parties are as wrong and misguided as Trump on this subject, trying to address consequences and ignoring the cause.
The ANC election manifesto promises the party will ensure “those who come to South Africa do so legally and that the country knows what they do while they are in the country”. It will take “tough measures against undocumented immigrants involved in criminal activities in the country or in cross-border crimes, including those involved in illegal trading and selling adulterated food in townships and villages”.
It is hard to spot the difference when the DA’s Musi Maimane says “securing our borders is not simply about keeping people out. It is about ensuring that all migration occurs legally and knowing who has entered the country. It is about being able to plan ahead and make sure our budgets can stretch to cover all they need to cover. It is about making it easier for those who want to enter South Africa legally – because we want legal, law-abiding people to bring their skills here and help grow our economy – but making it impossible for those who want to enter illegally.”
The landscape of incorporated South Africa in the financial and business services sector has changed dramatically: in 2007 a total of 222 532 companies in this sector submitted tax returns, but SARS Company Income Tax (CIT) data show by 2016 this figure had shrunk to 139 664: a 37% decline.
The CIT data base records a decline by almost 83 000 incorporated firms. What happened?
This sector includes banks, money lenders, short term insurance firms and independent brokers, investment advisors, business consulting firms as well as real estate services. Figure 1 shows how the number of firms were relatively stable from 2007 to 2010 before a rapid decline before stabilising again from 2014 onwards.
Is South Africa trying its best to prompt a South African version of the horrendous Christchurch massacre or an upscale repeat of the callous Wit Wolf killings in Pretoria or those by Sibusiso Madubela at the Tempe Military base in Bloemfontein?
This week’s xenophobic attacks on foreigners in Durban and the verdict by the Human Rights Commission exonerating Julius Malema from hate speech may in future be described as significant road signs pointing towards tragedies in waiting.
The formal South African Enterprise Sector is critically ill. Were the company tax returns of the 768 000 companies combined and submitted as that of a single entity (say SA Amalgamated (Pty) Ltd) there would not have been any Company Income Tax (CIT) payable to SARS for three consecutive tax years.
SARS data on Company Income Tax (CIT) confirms the private
sector is in a dismal state. In the tax years 2014 – 2016 assessed joint losses
of all companies surpassed joint taxable income by R445 billion.
SARS data on CIT from 2007 to 2016 on assessed CIT returns bring the following to the fore (see Figure 1 below):