The folly of creating businesses whilst tolerating a criminal-friendly environment

The South African enterprise world remains in critical condition despite numerous initiatives to cultivate entrepreneurship and new businesses since the real causes undermining its well-being are not addressed.  One of the fundamental causes for a struggling enterprise world is the fact that SA is more criminal-friendly than enterprise friendly.

Mooi River LEGO

We’ve seen that:

Comfortable in this paradigm, Government embarked on an interventionist road to transform the economy in accordance with its perceived reality. It launched a range of black enterprise incubation programs with massive grants, prescriptive procurement strategies, BEE, industry charters, interference with IP and a commitment to even expropriate without compensation.

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Salary offer to civil servants: stark contrast to leadership in Botswana & the Netherlands

A higher than inflation salary increase for the public sector against the growing mountain of losses recorded in Company tax returns, does not signal an urgency for effective governance and economic stability to change from an environment where crime offers better returns than business. Important players in Government (and the ANC) appear not to grasp decisions and actions have systemic consequences.

SARS CIT assessments

South Africa’s public service salary bill consumes, according to Prof Jannie Rossouw of Wits Business School, about 45% of tax revenue. A 2017 OECD report found South Africa’s public service wage bill exceeded 14% of GDP: substantially higher than the benchmark of OECD and Emerging Market countries.

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Investment ambassadors can try, but SA company losses exceed taxable income

Pres Ramaphosa’s announcement that four special ambassadors – including well respected Trevor Manuel – are to roam the globe in an aggressive pursuit of foreign investment  “… like a pack of lions”, appears to be premature. It would have helped these ambassadors if they could have had a better story to tell than one of a business environment with stagnating profitability and growing losses where:

  • only 25% of firms have earned sufficient to be liable for company tax;
  • firms with a taxable income below R10 million decline at a rate of 31 per week;
  • a mere 635 companies are responsible for 77% of company tax;
  • from 2009 to 2015 company losses as submitted to SARS increased by 85% and for the last two years were higher than the taxable income assessed.

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