One mooted option has been to increase value-added tax (VAT), but this is no time to increase VAT. A VAT increase has the unintended consequences of hurting low-income households more and if you do not get the underlying consumption growth, you are not likely to collect more revenue.

The South African Revenue Service (SARS) must instead modernise VAT collection. In a recent paper, SARS argues that unlike other categories of taxes, like personal income tax and customs, VAT has not kept pace with digitisation and updated technology such as e-filing. It is now time to bring VAT collections into the modern age.  

Another way of increasing tax revenues without increasing tax rates is to focus on compliance. Addressing base erosion and profit shifting by multinationals has long been perceived, both in South Africa and internationally, to be a fruitful potential source of additional tax revenues. Indeed, we are seeing significant transfer pricing audit activity from SARS. However, this is not a short-term fix as transfer pricing cases are complex and take a very long time to resolve.  

In July last year, President Cyril Ramaphosa unveiled a six-point Energy Action Plan with short term and long-term measures to address energy supply challenges. The plan entailed improving Eskom fleet performance, speeding up procurement of new capacity and increasing private investment. It also included purchasing power from neighbouring countries while encouraging households and businesses to adopt solar and sell energy back to the grid.

The President has since noted that the regulatory reforms in the energy sector have since led to 12 000 MW of projects committed by private investors. But the time lag between commitment and projects coming on stream is key.

Government has also unveiled the details of the enhanced (additional 25% deduction) renewable energy incentive for rapid private investment in renewable energy assets. The incentive is a brief stimulus intended to accelerate over a two-year window from 1 March this year. The investment is critical for bringing into use additional, renewable energy capacity.  Under the current fiscal constraints, it is not expected to be extended.  

Under the enhanced incentive, the generation capacity limit has been removed to allow for larger power generation projects to access the incentive. However, the long lead times for such projects, particularly due to regulatory requirements, means the two-year investment window may be too short. 

The President has now advised that following the introduction of the incentive and financing mechanism, the amount of roof top solar installed has now doubled to 4500 MW over the past year.  

The SA public debt, including the Eskom bailout announced in February 2023, means that loan debt will rise from R4.73 trillion in 2022/23 (71.1% of GDP) to R5.84 trillion (73.6% of GDP) in 2025/26 and will decline thereafter.
 
Government is now said to have entered “discussion about discussion” on a possible $1 billion to address Eskom and Transnet challenges. The MTBPS must outline how this debt is to be managed and brought within an acceptable level without cutting spending in linked to social upliftment or economically enabling areas such as infrastructure.  
 
Government seems determined to implement the National Health Insurance (NHI), over a period of a decade, despite industry objections. And yet the platform on which the NHI is to be built, the public hospital system, has not been adequately addressed. What looks set to happen now is that this process will be characterised by litigation at every stage. 
 
At the National Budget in February 2023, government announced that it will unveil, at the upcoming National Budget (February 2024), which state-owned enterprises (SOEs) are to be sold or kept. The MTBPS must give an update on this process and what thinking guides it – does government sell only those SOEs that fell prey or could fall prey to state capture? Can you sell a profitable entity? And previously proceeds of privatisation were used to reduce debt, what will the proceeds be used for this time?  We now know from the President that Eskom and Transnet will not be privatised but will have competition and private sector concessions introduced.
 
Lastly, in February, government announced a R910 billion infrastructure programme over the next three years. However, the person meant to drive that process, Dr Kgosientsho Ramokgopa has since been deployed as a minister of electricity, with no replacement announced. This means that an area that is crucial for driving economic growth now faces the risk of being neglected. Government cannot afford to lose time and attention on such an important area.