NTSAPHOKAZI MADYIBI: SA needs bold thinking, not a budget without vision

Finance minister Enoch Godongwana's budget speech was underwhelming and uninspired. It failed to present a clear vision of how SA can drive real economic growth. Instead, the increase in VAT places yet another burden on an already struggling working and middle class: people who are barely making ends meet as it is. Raising VAT does not solve the fundamental issue of low economic growth; it only deepens inequality and financial hardship.

Since 1994 the ANC has pursued a state-centric, welfare-driven governance model aimed at redressing historical injustices. While state-driven development is not necessarily a problem, it becomes unsustainable when a country is not productive — when it does not create enough goods, services and industries at scale (for global trade) but instead relies on consumption, imports and old economic structures.

Today SA has more people dependent on social grants than those actively contributing to the economy through work and taxation. This imbalance has created a crisis: slow economic growth, deepening poverty, failing infrastructure and rising unemployment. And yet, despite all the talk about growing the economy, no political party has presented a bold and practical plan to achieve real economic expansion.

The structural economic legacy holding us back

To understand why SA continues to experience low economic growth, we must acknowledge the structure of our economy. We inherited an economic model from apartheid that was built around four dominant sectors: mining, manufacturing, agriculture and financial services (which largely existed to manage funds from these industries). These sectors were controlled by a small minority, while the black majority participated largely as cheap labour.

When the ANC came into power it failed to reimagine the economy to include the millions of black South Africans who were now looking for work. Instead of transforming the structure of the economy it kept it largely intact, resulting in an economic system that continues to exclude many.

Fast forward to today, and SA remains reliant on these legacy sectors, even as they decline. While there has been growth in services such as telecoms, banking, real estate and tourism, these are consumer-driven industries, not production-based ones. This shift away from production has resulted in fewer job opportunities, particularly for people with lower skills.

It is short-sighted to believe that economic growth can be achieved simply by raising VAT or increasing corporate tax without addressing the deeper issue: our economy is not designed to appreciate and promote entrepreneurs and opportunities. Instead of taxing more, we should be asking: where are the new industries? Where is the real economic transformation?

Government has taken the easy way out by increasing VAT, thinking that more revenue will solve the country’s problems. But economic growth doesn’t come from squeezing more taxes out of the same pool of workers and businesses — it comes from expanding the economy so that more people can participate. It is encouraging that the SA Revenue Service has been allocated a budget to boost tax collection efforts, which may provide short-term revenue relief. However, this does not address the economy’s deeper structural issues.

What’s even more concerning is how government spending is allocated. Instead of making bold, long-term investments in education, entrepreneurship and industries that can create jobs, government is focused on short-term fixes and inefficient spending (maintaining outrageous security details for ministers and increasing wages despite non performances). Opposition parties calling for increased corporate tax also fail to acknowledge that tax hikes alone will not fix the economy. How many more tax increases can businesses and individuals absorb before they collapse under the pressure?

Building an entrepreneurial state

Real economic growth comes from productivity — the ability of a nation to produce goods, services and new industries (for trading globally and regionally). Countries that were once poor have successfully transformed their economies by making bold decisions and investing in new industries.

Take China as an example. Not too long ago it was considered a developing nation, but through strategic government investments in entrepreneurship and industry turned it into a global powerhouse. Today, China-manufactured cars are common on SA’s roads, not because of luck but because China prioritised production, innovation and industrial expansion.

SA must learn from this. Instead of just talking about supporting entrepreneurs, government must actively invest in an entrepreneurial state — one where people are empowered to innovate, create businesses and build industries that will employ millions. We cannot continue relying on old industries while expecting new outcomes.

If we are serious about economic growth we need to change the way we think about development. Instead of increasing taxes on an already struggling workforce, government (and politicians) should focus on:

• Structural economic transformation. Moving beyond legacy industries and investing in new, high-growth emerging sectors. Sectors such as the green economy, ocean economy, and digital transformation present many opportunities.
• Entrepreneurial investment, coupled with investment in education can create an environment where innovation and industrial expansion thrive.
• A shift from consumption to production. Prioritising industries that create products, services and jobs rather than just expanding consumer-driven services.
• A smarter approach to taxation. Focusing on economic expansion rather than overburdening workers and businesses with endless tax increases.

SA cannot afford to keep making the same mistakes while expecting different results. If we continue down this path we risk a future where there are no employees left to tax, no businesses left to regulate — only a nation dependent on welfare, with no real economic foundation.

It’s time to reimagine SA’s economy.

• Madyibi, a former public candidate at Rise Mzansi, is founder of citizen engagement organisation Vuka Politics.