Banele Ginidza

Chairpersons of various Parliamentary economic committees have advised the government to explore more efficient channels for savings before resorting to a controversial increase in value-added tax (VAT).

This comes as finance minister Enoch Godongwana on Wednesday will table the 2025 Budget Review in Parliament after it was posptponed on 19 February as the political parties rejected the 2 percentage points increase from 15% to 17%.

During a pre-budget breakfast media meeting on Monday, leaders from the Standing Committee on Appropriations (SCoA), Select Committee on Appropriations, Standing Committee on Public Accounts (Scopa), and Standing Committee on Finance (SCoF) voiced their collective concern regarding the nation’s fiscal health.

Sonzezo Zibi, Scopa chairperson, said the government property portfolio costs too much in rental expense, citing payment of premiums on commercial space rentals which, in Pretoria and Kwazulu-Natal, based on market benchmarks, it was estimated that about a third of monthly expenditure was on leases the cost of which is above market norms.

Zibi emphasised that the government could realise substantial savings by addressing inefficiencies in its spending rather than subjecting already strained consumers to a further 2% VAT increase.

He said the government had a low-hanging fruit in the form of reducing diplomatic corps emoluments, plugging water leakages, effectively managing the property portfolio, and enhancing the revenue capabilities of South African Revenue Service (Sars).

Highlighting alarming statistics, Zibi reported that the government’s property portfolio significantly inflates rental expenses, with about R600 million to R1.2 billion potentially savings over three years if market-based benchmarks were adhered to.

The expenditures, particularly noted in the Commercial Business Districts, consume a disproportionate amount of the budget, taking up nearly 90% of expenditure above market norms across six provinces.

"Most of the expenditure above market is in the CBD and main centres, and just under 90% of the expenditure above market was in six provinces. Just under 80% of these leases in the CBD and main centre that are above market," Zibi said.

On the diplomatic corps, Zibi said South Africa has the best paid diplomats in the world were paid a full salary and got free housing along with other benefits and a cost of living allowance, which about 8 years ago, ranged between R600 000 and R1.3m per person per year.

"That is 60% more than US diplomats gets paid. It's 50% more than what the United Nations pays its own staff. We have got missions allover the world, there is no relationship between what they are earning in trade relations and the amount we spend on our diplomatic service. You have got countries that are richer than us with one ambassador in South Africa servicing half the SADC region," Zibi said.

Meanwhile, Dr Joe Maswanganyi, chairperson of the SCoF, drew attention to the untapped potential of South Africa’s digital economy, citing an annual R800bn that could be realised through enhanced enforcement by the Sars.

"We have to strengthen enforcement and compliance, mordenise the tax infrastructure, there is lot of money which is not taxed more especially because of the advent of technology. We have been raising this issue," Maswanganyi said.

"Sars has said they have limitations because certain decisions must be taken at the Organisation for Economic Co-operation and Development (OECD), but as a sovereign State we have to look at the issue of the digital economy, which is making a lot of money today."

Addressing the role of local municipalities, Mmusi Maimane, chairperson of the SCoA, advocated for a revision of the city budget structures.

Current regulations mandate that municipalities generate 90% of their revenues independently, a model that he argued is no longer viable given their capability to raise only 60%.

"The White Paper on local government already indicates a 90 to 10 split, which is no longer sustainable. Municipalities have said they are only capable of raising 60% revenue, the shortfall has to be funded in one form or another," Maimane.

"Either you say in the revised White Paper on local government that you will increase the 10% Municipal Grant cognisant that much of it is underspent by municipalities who don't have the capacity to do so or you figure or you find a different mechanism for municipalities to accrue or raise that finance."

Dr Nombeko Mbava, chairperson of the Financial and Fiscal Commission (FFC), raised concerns regarding the integrity of the budget process.

She argued that insufficient consultation has diluted the legitimacy of the budget allocations, stressing the need for Parliament to facilitate thorough engagement with the FFC to ensure compliance with constitutional mandates.

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Parliament's economic cluster wants more belly fat instead of 2% VAT hike