With 13.5-million of its 47m legal residents on state benefits, the 4,8-million
taxpayers of South Africa already shoulder an increasingly heavy tax-burden, and
the ANC-regime last year also needed to borrow an additional R80,3-billion from
foreign banks just to help pay for it all…
Susan Cilliers of Beeld newspaper reports that the number of people on state
benefits has soared to 13,5-million in 2009, costing R80,3-billion – up from
1994’s 2,8-million people on benefits costing R11,8-billion. That’s a
welfare-budget increase of 580%…
South Africa has an official population of 47-million but an estimated 6-million
more who are illegal migrants from the rest of Africa. Officials say that the
number of people needing state-benefits to survive on is also expected to
increase even more from next year.
Mrs Zanele Mngadi of the social development department said they are changing
the age criteria for child-benefits from 14 years to a child’s 18th birthday;
and will start issuing men’s state-pensions from the age of 60 instead of the
current age of 61.
Cilliers has been asking the inevitable question from experts, namely whether
4,8-million taxpayers are really enough to help pay for 13,5-million people on
state-benefits? Adn what will happen if this unbalanced situation gets even
Chief-economist Dawie Roodt of the Efficient Asset Management company told her
that ‘South Africa is a country with a great many very poor people. Those who
have just a bit more, thus also must be taxed more and more to help these poor
masses. However this always has inevitable economic implications: the more these
‘richer’ taxpayers are being milked, the less they can save and thus also
reinvest in the economic growth of the country. And if the taxes are raised too
much for certain income-groups, this will simply result in such people merely
striving to start earning less so that their tax-burden can also be lessened.’
He said important economic-wealth-provider groups which play such a huge role in
maintaining and developing the economy, the real ‘creators of wealth’ also are
the only people who also can amass savings in bank accounts. If they can no
longer save, these entrepreneurs and work-creators will also stop fulfilling
their roles of job-creation: which is to the advantage of the entire economy.
“Poor people don’t save because they use all their cash for basic needs. The
greater the tax burden placed on the wealth-creators, the less they tus also
will continue to create wealth and jobs,’ warned Roodt.
No other country in the world has such a small group of taxpayers supporting
such huge numbers of poor people:
Economist Mike Schüssler, director of http://www.economists.co.za, says an
estimated 4,8-million people are actually paying any income taxes in South
Africa now – and they have to thus also pay for the state-benefits which are
supporting 13,5million people right now.
“I know of no other country in the world where such a small group of people have
to carry such a massive burden. Moreover, our problems are considerably worsened
by the huge number of foreigners streaming across the borders who also get
state-benefits with their fradulent ID-documents”.
Richer people pay more, receive less back.
Roodt said ‘the more people earn, the more taxes they pay, and the less benefits
he receives from the State. Richer people pay for their own education and
medical services,but by paying higher taxes stlll also pay for these services
which millions of the country’s poorer people get for free. Thus richer South
Africans are suffering from double-taxation. If someone earns R1million a year
($100,000), he receives less than 5c back from the state in returned benefits
for each of his R1 paid in taxes. If you earn R30,000 a year ($3,000), you
receive ab out R15 in goods and services back from the state for every R1 paid
Many people don’t pay income taxes – but every citizen does pay value-added tax
for every product and service purchased.
Roodt says that the fact that the poor cannot save, but are being financed by
the wealthier 4,8-million South Africans thus also means that the poor can still
buy basic goods needed for their survival – and this does increase the economy’s
call for such goods. However if there the need for consumer-goods rises too
quickly this causes inflation – and this in turn will force the country to
import more consumer goods.
He said the biggest problem with the SA economy and other ‘developing’ countries
such as Brasil, that there is such a huge income gap between the small number of
tax-payers and the large number of poor people they have to support. In
countries such as Europe, there is a more equitable distribution of income.
Economics Prof. Sampie Terreblanche at Stellenbosch University estimates that
the wealthier, multiracial elite represents abourt 20 percent of the SA
population, and generates about 74% of the entire income of the country.
Terreblanche says the poorest 25-million people receive about 8% of the entire
income of the country.
Roodt slammed the government’s plans to reduce this ‘income-gap” by creating
state-funded work-creation jobs and poverty-alleviation programmes which are all
funded by the 4,8-million taxpayers.
“It’s the wrong approach – our problem isn’t really poverty, our problem is that
we don’t have enough rich people. We must get more ‘richer’ taxpayers to enlarge
the pool in which the nation’s income can be spread about more equitably.’
“The government should encourage entrepreneurial enterprises and should support
these job-creating entrepreneurs by making it easier for people to do business –
and to reduce the minimum-wage levels. If the government keeps focussing on
merely trying to ‘reduce poverty, the pool of cash which is being financed by
the wealthier 4,8-million taxpayers will simply start becoming too small
Schüssler agrees: ‘our state-benefit system will not be sustainable unless this
also leads to greater productivity. People start relying on state-benefits and
often are far less motivated to start adding value to the country’s economy as
long as they continue receiving benefits’.
Schussler said the government should start laying down stricter guidelines
before people become reliant on state-benefits: among others demanding that
children must not only attend school but that they must obtain passing grades;
that benefit-recipients also must also attend clinics to test their ability to
The government is now eating up the country’s ‘savings-pie’
The South African government is already spending far more money than it is
receiving from its 4,8-million taxpayers – and already needs to borrow the value
of about 8% of the country’s internal gross production – and this money is being
borrowed from savings in the market – savings which are put there by the
taxpayers,’ said Roodt. This massive borrowing against the IGP causes even more
inflation because there’s now less borrowing-cash available from the savings-pie
for the expansion of the economy – the government in other words, now is eating
up the country’s ‘savings pie’, he said.
The result: there’s far less savings available which can be borrowed by the
entrepreneurial sector with which to expand the economy, for instance to build
new factories and to thus also create new jobs…
“Thus by the State borrowing against the nation’s savings accounts, there’s also
less jobs and the economy thus continues to shrink, because the private sector
is being chained,’ he said.
‘Social welfare is a constitutional right …’
However, these words of warning by top economic experts fall on deaf ears at the
department of social welfare, writes the Beeld journalist.:“They are confident
that their state-benefits system will be sustainable”, she writes, quoting the
department’s spokeswoman, Mrs Mngadi’s somewhat flawed reasoning for having such
“Social selfare is a constitutional right and the fact that people have been
receiving benefits since 1994, proves that the system is sustainable,’ this
government official was quoted as saying.
Mrs Alta Cronje, manager of Epilepsy South Africa’s centre for the disabled in
Parys, said howev er they wouldn’t be able to exist without the monthly R1,010
in state benefits for each of their 82 inmates. “It’s a steady income which we
count on,’ she said. Similar sentiments are also heard from Mrs Annette Strauss,
social worker of the Anna Viljoen home for the aged in Potchefstroom.