President Jacob Zuma is delivering his State of the Nation
Address (SoNA) today, 14 February 2013.
This year's SoNA is of critical importance for both South
African citizens and the foreign investment community. Moses
Kgosana, Chief Executive Officer of KPMG in South Africa, shares
his views on the SoNA ahead of the Budget Speech next week.
The SoNA is the first opportunity in the new calendar year in
which Government can officially interact with South African
citizens. It is also the most important indicator of the
country's current international, political, social and economic
situation, as well as Government's policy response in the
coming year. It sets the scene for the Minister of Finance's
budget speech, which takes place on Wednesday, 27 February 2013.
How President Zuma approaches this year's SoNA will send key
messages to citizens, business and foreign investors about
Government's approach to addressing the country's
South Africa's economic growth is lagging somewhat behind
the growth of our peers in the developing world. The IMF forecasts
for 2013 indicate that emerging market and developing economies
will grow by 5.5 percent. SA's GDP is expected to grow by 2.5
to 3 percent, well below this expected average. While one of the
most important reasons for this slower growth is our foreign trade
structure and reliance on Europe, action is needed to step up
growth and expand our trade and investment relationships with the
high growth regions of the world.
According to Moses Kgosana, Chief Executive Officer of KPMG in
South Africa, "The President used the opportunity at the World
Economic Forum in Davos earlier this year to ensure foreign
investors that South Africa is on the right track. The upcoming
State of the Nation Address and the BRICS summit to be hosted in
Durban next month, are further opportunities for Government to let
the world know that they are willing and ready to act."
Stimulating growth vs tax pressures
On a local front, one of the key challenges is doing more with a
revenue pool that is not growing fast enough. SARS has made
significant inroads into improving tax compliance, administration and other
means of boosting revenue. However, the economic pressures of the
past few years have meant that Government got less money in and
that the pressures on the fiscus are increasing. Company taxes have
been under severe pressure and slower job growth has also allowed
for less growth in personal income tax revenue than would have been
the case in a higher economic growth scenario.
The National Treasury has done a great deal to try to balance
stimulating the economy and cushioning South Africans against the
worst of the economic downturn with its slower revenue growth while
trying to keep the budget deficit under control. However, now is
the time to find ways of growing the revenue pool through creating
an enabling environment for businesses to invest and employ, rather
than increasing revenue through increasing tax rates. It is also
important for Government to ensure that South Africa's
Sovereign Risk Ratings improve as soon as possible, as the recent
downgrades are actually costing us money by making our lending more
Now is also the time to implement policy and strategy such as
the National Development Plan , the Industrial
Policy Action Plan, the rollout of the Special Economic Zones and
the Youth Wage Subsidy. Successful implementation of these
strategies will send a clear message to foreign investors and
citizens alike – not only are we able to write great policy,
we can also implement it.
Furthermore, it is important to show that Government has the
capacity and the will to react to citizen concerns such as
unemployment, poverty, income instability and periods of social
instability in a way that is decisive, honest and solution
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guide to the subject matter. Specialist advice should be sought
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
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