This article was first published on The Citizen on
25 January 2023
Government is siphoning off ever more of our hard-earned gains
I saw a video on TikTok, by @moneytribe21, on how quickly the petrol tax has outpaced average incomes over the last decade and wondered if that was specific to petrol or whether it was a broader phenomenon. Since I already had information on general tax as a percentage of national income going back to the early 90s, all I had to do was find national income per capita (in 2021 Rands adjusted for purchasing power parity) for some relevant dates, and I could make that broader comparison. I picked three periods – 1991-92, 2001-02, and 2020-21, and averaged the two years in each period. In 91-92 the GDP per capita (GDPpc) was R106234, and the average general tax per capita was R29016. In 01-02 the GDPpc was R143065 and the average general tax per capita R44686. In 20-21 the GDPpc was R232108 and the average tax R85834.
What happened over the 9 years between 91-92 and 01-02 was that South Africa ended up 34,7% richer. Government took 42,6% (more than 2/5th s) of the gain, whereas citizens took home under 2/5th s of the benefit. Over the 9 years between 01-02 and 20-21 South Africa got 62,2% richer. Government, via general tax, took 46,2% (almost half) of the gain, and the citizen’s after-tax income was barely half of it. The net effect over both periods is that South Africa got richer by 118,5%. General tax accounted for 45,1% (just under half) of the net gain, and after-tax income barely half of the net gain, in national income. In short, since the early 90s almost half the improvement in South Africa’s material welfare has been appropriated by government and barely half realized directly by its citizens, and the rate at which government is appropriating income relative to the public has steadily increased.
By international standards the fraction of government spending on unproductive causes is very high. For example, in the latest budget government salaries will amount to almost 1/3rd (this is the worst in the world for an economy this size), bailing out SOEs about 1/7th, and interest on debt amounts to a further 1/7th of total government expenditure. Very little gets returned to citizens in the form services, investment, or development.
In effect, the government is allocating a large and steadily increasing share of South Africa’s income to the short-term consumption of people who aren’t doing much productive now and won’t be expected, or helped, to be productive in the future. This lowers our prospects of solving current and future problems substantially. Sooner or later, we will lack the ability to keep subsidising them, and having no means to provide an alternative they will bear the brunt of these problems. When it comes to it desperate people usually end up revolting. Does anyone, rich, poor, black or white, want that? Isn’t it time for the government to start paying more attention to developing the productive capacities of this country and its people?