RUFARO MAFINYANI: Innovation over austerity — charting SA’s fiscal destiny

A precipitous edge, and whispers of possibility; SA teeters on a fiscal precipice. State debt soars past R4.3-trillion, municipal coffers bleed, and unemployment casts a long shadow, engulfing more than 30% of the workforce. Yet amid these stark realities, whispers of possibilities hang heavy in the air. Next week’s budget speech presents an opportunity to turn the tide, not through the familiar drudgery of austerity but with a spark of audacious innovation. 

The wealthiest 10% clutch nearly 70% of the wealth, while the average working person grapples with rising food prices and interest rates, squeezing disposable income to its limits. This translates to trillions in capital sitting idle in financial markets yearning for investment opportunities, or worse, flowing out of the country seeking greener pastures abroad. 

This trend spells disaster for domestic growth. Depressed effective demand dampens the incentive for businesses to invest in local production, further solidifying our dependence on imports. A staggering 80% of basic manufactured goods flood our shelves from overseas, draining R1.2-trillion from the economy annually. We import everything, from clothing to pharmaceuticals, leaving our factories silent and our youth jobless. 

Austerity measures, often touted as the magic bullet, risk suffocating this fragile hope. Slashing public spending and raising taxes on already burdened citizens will only deepen the recessionary spiral. Instead, we need a bold new symphony, where innovation takes centre stage, driving growth and redistributing wealth. 

Our current tax system, heavily reliant on a narrow base of individual and corporate income, creaks under the weight of growing demands. We need a new orchestra, where diverse instruments — innovative technologies — harmonise to produce a richer, fairer melody of revenue collection. 

Artificial intelligence (AI) can empower the SA Revenue Service (Sars) to analyse vast data sets, identifying tax evasion in real time. AI-powered algorithms can sift through financial transactions, pinpointing anomalies with laser-like precision. This approach isn’t fantastical — countries such as China and India are already reaping the rewards of AI-powered tax administration. 

Furthermore, cloud technologies and blockchain can streamline tax filing and reduce administrative burdens. Estonia, the e-nation pioneer, showcases the power of cloud-based tax systems in boosting compliance and efficiency. 

Struggling municipalities

Let’s tap into the private sector’s dynamism, not through privatisation but through strategic commercialisation. The SA Post Office could be transformed into a vibrant hub, partnering with delivery services and e-hailing platforms, offering last-mile solutions, parcel collection points and even electric vehicle charging stations. This would inject market efficiency and innovation, benefiting both the post office and its partners, while creating new jobs and opportunities. 

We cannot ignore struggling municipalities. Innovative financial models can be their lifeline though: 

• Sale and leasebacks.  Lease underutilised municipal assets such as stadiums or parking lots, generating upfront revenue and long-term income streams. 
• Commercialisation. Explore joint ventures with private companies to manage water services, waste management or public transport, injecting efficiency and financial sustainability. 
• Smart public-private partnerships.  Develop mutually beneficial partnerships for infrastructure projects, leveraging private sector expertise and capital while ensuring public control and accountability. 
• Inventive debt recovery.  Implement data-driven debt collection strategies, using credit bureaus and mobile/micro payment platforms to improve collection rates without overburdening residents 

Our import dependence is a gaping wound. We need to nurture domestic production, not through protectionist walls but through targeted incentives that could include green energy zones offering accelerated depreciation and preferential electricity tariffs for companies producing renewable energy technologies such as solar panels and wind turbines. 

Public procurement prioritisation would entail using the state’s purchasing power to guarantee demand for locally manufactured goods, catalysing new investments in production capacity, while loan guarantees could derisk investments in promising manufacturing ventures through government guarantees offset by state contracts or third party insurers and reinsurers. 

Demands leap

The AI revolution holds immense promise for SA. AI robots can fill critical skill gaps, accelerate prototyping and innovation, and boost productivity and competitiveness. Investing in robotic training programs and fostering collaboration between research institutions and manufacturers can unlock the potential of these transformative technologies. 

Bridging the industrial development gap requires more than just brick and mortar; it demands a leap into the future powered by AI and robotics. These technologies offer an unprecedented opportunity to level the playing field, shortening the learning curve and propelling SA’s industrialisation forward. 

This is not science fiction; it’s the reality already transforming manufacturing giants such as Siemens and ABB. In Thailand, Next Instruments deployed AI-powered robots to assemble hearing aids, achieving 99.9% accuracy and a 50% reduction in production time — even with inexperienced operators. 

Assuming an AI-powered robotic system could achieve similar production efficiency gains (50% faster production), let’s explore the potential impact on RDP housing. The University of Johannesburg printed a model house in just eight hours. With AI robots this could be reduced to four hours, potentially enabling the construction of multiple houses per day on a single printing site. 

Scaling this up, imagine several printing sites equipped with AI robots operating 24/7.  Assuming 10 sites with three robots each operating for 16 hours daily and producing one house per robot every four hours, the potential output could reach more than 30 houses per day, translating to about 11,000 houses per year. 

With faster production and reduced waste, potential cost savings per house could be significant. Even a conservative estimate of 10% savings on the current estimated cost of R400,000 per house translates to R40,000 saved per house. This could be used to build additional houses or offer further affordability benefits to beneficiaries. 

• Mafinyani is risk advisory & financial modelling partner at Decentralized Secured Finance, a specialised financial technology & risk advisory firm operating in the Sub-Saharan region.