South Africa Tax Agency Skill Must Be Restored, Ramaphosa Aide Says

(Bloomberg) -- South Africa’s tax agency must restore its collection capability that was weakened during the last few years of the previous administration to increase revenue and help stimulate the economy, according to President Cyril Ramaphosa’s economic adviser.

The South African Revenue Service is among the key institutions eroded during former President Jacob Zuma’s tenure, which was marred by alleged corruption. While SARS collected more than 1 trillion rand ($69 billion) annually in the last three financial years, the National Treasury estimated the country’s revenue shortfall for the year ended March 2018 at 48.2 billion rand.

“The structure is more or less fine, but we need to collect better,” Trudi Makhaya said in an interview in Bloomberg’s Johannesburg office on Wednesday. “The numbers are increasing but maybe we are missing out” on revenue, she said.

Ramaphosa replaced Zuma in February and has ordered an inquiry into the management and administration of the revenue service under Tom Moyane, whom he suspended as commissioner. That, and changes at the top management of state-owned companies, is part of his drive to fight corruption and turn around years of economic mismanagement under his predecessor.

Stimulus Package

The president has announced a stimulus package with reforms to boost the economy that’s in a recession and seeks to attract $100 billion of investment in the next five years. A lack of competition, the skills deficit and the layout of cities which has people living far from transport lines and employment are some of the key constraints that should be dealt with, according to Makhaya.

While the rand weakened after Ramaphosa’s announcement in July that the ruling African National Congress plans to change the constitution to make it easier to expropriate land without paying for it, Makhaya said a speedy conclusion to this process could minimize the risks posed by the perceived uncertainty.

“We can’t deliberate for too long. It’s key that it is resolved in the next year at least,” she said. “The best-case scenario is one where whatever is recommended provides clarity and certainty.”

The ANC, which has led South Africa since the end of white-minority rule in 1994, has struggled to reduce inequality and lower unemployment that’s at 27 percent. While it’s the continent’s most-industrialized economy, the legacy of apartheid and structural challenges still limit economic growth, according to Makhaya.

“We haven’t really overcome the legacy of apartheid in some ways, we’ve just managed to grow and stretch within those constraints,” she said. “One of the immediate priorities is to try arrest the decline and to minimize the negative overhang.”

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