Business closures, job losses will hammer revenue in the months ahead, Kieswetter warns

While the South African Revenue Service has already been
counting its losses as a result of the coronavirus’ economic impact, impending
joblessness and business closures would hammer revenues even harder, commissioner
Edward Kieswetter said on Tuesday.

Kieswetter was speaking during a media briefing which took
place on the same day he told a joint sitting in Parliament that the combined
impact of SA’s struggling economy and the lockdown could mean a loss of up to
R285 billion in tax revenues this year.

Kieswetter told Parliament the combined impact of Covid-19
and sovereign credit rating downgrades was expected to lead to a potential
reduction in revenue collections of between 5{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} and 15{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}.

The commissioner added that while April is not a significant
month for corporate tax collections, indications were that there would be a
significant slowdown in collections and that the downward spiral in various
sectors was set to continue.

Many jobs, businesses won’t come back

“The early indication is that this downward spiral will
continue and will be reflected throughout the economy, except in places like
electricity, gas and water, and areas that have continued to be active during
this period. We expect the number of companies who will apply for business
rescue will continue to grow in this country,” said Kieswetter.

Kieswetter said the full impact of the novel coronavirus and
the subsequent lockdown would bear out over the next few months, but that this
would also depend on how South Africa manages the lockdown and phases in
economic activities.

“A major concern that we have from a revenue
perspective is not only a downward trend in economic activity, but a loss of
economic capacity from businesses closing down and jobs that are lost, and many
of these businesses and jobs will not return,” Kieswetter said.

On Tuesday morning, Deputy Minister of Finance David Masondo
told parliamentarians, in the same meeting, that Covid-19 had disrupted some of
National Treasury’s plans and that these disruptions would be factored into annual
performance plans of Treasury and its entities.

“There is work going insofar as the State Bank is
concerned. Perhaps we should just make sure that it is in the APP (annual
performance plan) along with the sovereign wealth fund. I am sure that when we
put together the APP, those matters will be in the document,” said
Masondo.

Masondo said, under the current situation, the South African
Reserve Bank has undertaken monetary measures, including a credit guarantee
scheme and reduced repo rate by 200 basis points, which he supported,
“even though the Reserve Bank did not need approval to do so”.

“It is the independent responsibility of the Reserve
Bank to print or supply money, using different instruments, to achieve priced
ability in the interest of balanced economic growth. Growth is now unbalanced
due to Covid-19 and other pre-Covid constraints,” said Masondo.

National Treasury director-general Dondo Mogajane told
Parliament that there was still a commitment to supporting small businesses
during the pandemic.

However, he said, regardless of the type of business,
procurement of emergency supplies to combat Covid-19 – in line with an
instruction note issued by Treasury earlier this year – would be reserved only
for businesses that are registered with the database and can deliver the
required goods and services.