Free State taxpayer base dwindles while number of grant beneficiaries skyrocket

The below speech was delivered by the Leader of the Official Opposition, Roy Jankielsohn (MPL), during the debate on the Second Reading of the Appropriation Bill 2015/16 in the Free State Provincial Legislature today.

Honourable Speaker,

The Department of Economic Development has a huge responsibility as it is also the umbrella department for three entities, namely the Free State Tourism Authority, the Free State Gambling and Liquor Authority, the Free State Development Corporation and last year they got a tail to its name – Small Business Development.

We need to appreciate this mammoth task, but we also need to look at the department and its role in the economic development of the Free State in a critical manner.

The Free State has a very low growth rate of about 1.5%. We know that this has to increase to at least between 6% and 8% if we are to see a meaningful change in our provincial employment figures and economic outlook.

Currently the Free State’s economy is stagnant with an increasing number of people in the province becoming dependent on social grants.

In 1998 we had 98 000 people on social grants, in 2010 it had increased to 850 000, and today we have 954 833 people dependent on grants in the Free State alone.

We support the use of grants to assist those who are in a poverty trap, but most people in the Free State would like a job so that they can help support their families themselves.

Out of a working age population of 1,8 million people, only 755 000 are employed.

More shocking is that out of these 755 000 employed people in the Free State, only 228 788 persons meet the minimum threshold to recover income tax revenue from.

That calculates to about 3.3% or R6,6 billion in assessed tax revenue from the Free State to the total national tax contribution.

Speaker, only 228 788 people in the Free State pay income tax out of a population of almost 2,7 million.

This means that every single income tax payer in the Free State technically funds four social grant beneficiaries.

These statistics prove that our provincial economy is shrinking and that a small group of Free Staters are working very hard to help the millions who are struggling to make ends meet and have become dependent.

These same taxpayers, many of whom are farmers, are constantly harassed and threatened by government. Now their attempts to create a light at the end of the tunnel are being switched off by Eskom.

Load-shedding and labour unrest have a huge negative economic impact on the provincial economy due to lost revenue. Perhaps we can request the unions to negotiate with Eskom so that load-shedding and strikes take place at the same time. This could perhaps lessen the impact somewhat.

What government must realise that these few taxpayers are all that is preventing South Africa’s so called “Arab” Spring.

But we have heard that the talk in the corridors of power is that the governing elite have a Cuban contingency plan for the “South African Spring”. It is alleged some of the money paid to Cuba is being laundered to banks in Cuba and the Cayman Islands.

When the mud hits the fan the ANC will board flights to Havana to stay in villas along palm tree lined Cuban beeches.

The billions of rands lost to corruption and bad financial management, is the trend in ANC-led governments throughout South Africa, and really is a crime against humanity. It is in fact counter-revolutionary to the extreme.

Recently the Institute for Internal Auditors indicated that R700 billion has been lost to corruption in South Africa in the last 20 years.

Transparency International have worked out that it is 20% more costly to invest in a relatively “corrupt country” than an “uncorrupted country”.

We can presume that an uncorrupted country is one in which the politicians allow “the people to eat first” from the pot of state resources, not an “it is our turn to eat” approach.

The DA in the Free State believes that the following principles apply to any plans to redress economic imbalances through growth and employment:

  • Economic growth is the foundation for the creation of economic opportunities and successful economic development.
  • Economic growth is primarily driven by private sector businesses operating in a market environment.
  • The role of the provincial government is to create and maintain a stable and secure enabling environment for investors, businesses, entrepreneurs, and workers.

In order to achieve these objectives, the province will have to prioritise the following important growth sectors in the provincial economy:

  • agricultural development, food security, and bio-fuel development;
  • minimising the impact of the mining sector and harness the existing potential;
  • expand and diversify manufacturing opportunities;
  • harness and increase tourism potential;
  • take drastic steps to improve service delivery and infrastructure, and
  • implement steps to curb corruption and prosecute, not redeploy, corrupt cadres.

Speaker, we also need to briefly deal with the entities that report to this department.

The last AG report of Free State Tourism Authority exposed some serious problems relating to financial and supply chain management. This needs to be rectified.

The Free State Development Corporation has recently started to shown an increased amount of political will to sort out its books.

This has included agreements with municipalities regarding outstanding debt, attempts to improve and maintain occupancy rates of premises under its control, dealing with their large debtor backlog, and their leading role in the Industrial development Zone development.

Speaker, we would like to see a more active role by this legislature in assisting the Free State Gambling and Liquor Authority to obtain compliance in terms of reports and other issues from both municipalities and the SAPS regarding liquor licence applications and closure of illegal liquor outlets.

We need to applaud the recent interventions by the Department regarding the assistance to informal businesses.

The Centre for Development Support at the University of the Free State indicated in 2012 that the estimated turnover of the informal retail sector in Mangaung Metro was about R431 million per annum.

The most income was generated from sales of items such as bread, airtime, alcohol, paraffin, milk, cigarettes and cold drinks. As many as 69,6% of households purchased bread from Spaza shops in Mangaung amounting to R65,6 million per annum.

It is expected that 80% of white collar jobs will vanish or change totally or unrecognizably in the USA within the next 15 years and 70% of school seniors indicated that they wanted to own their own business.

This appears to be a worldwide trend that South Africa will have to follow. Our schools will have to adapt curricula to accommodate this trend if South Africa is to become competitive in the future.

The Free State must create opportunities for individuals to become entrepreneurs and informal entrepreneurs to enter the formal economy as taxpayers.

Speaker, the Free State has the potential through our location, educational institutions, and entrepreneurial spirit to become an economic success story in South Africa. We only need to harness this potential in positive ways.