A tax-free upswing could be coming SA’s way, says Oasis boss

The South African economy has ample opportunity to secure levels of growth and fiscal stability that will give finance minister Enoch Godongwana enough room to avoid announcing new taxes or an increase in VAT.

This is according to Adam Ebrahim, CEO of property investment firm Oasis Group, who told Business Times that if reforms gain momentum from a wave of positive economic news by 2026, “more expansion announcements” — along with demand for goods and services — will lift the economy over time, and ease its dependence on debt.

“If you look at the stalemate around the budget, which was very painful, it was one of those points about how to work together. But if you look at the latest numbers coming out of Sars, they’re doing an exceptionally good job in collecting money, bringing more people into the loop, and focusing on people who haven’t paid,” he said.

“And so, I don’t think we’re going to see a rise in VAT from here. If you then start getting a bit of economic growth, then I think we may have passed the point of raising tax rates. And I’d anticipate that, as the economy grows, as the tax [base] grows… we could see improved budget deficits; a substantial primary surplus… we stabilise our debt… with the changes with inflation targeting, the cost of money, the cost of debt capital, and the cost of equity capital reduce very dramatically. If you get that, you start seeing stability in the currency. So, you start getting into a virtuous circle.”

Ebrahim’s remarks come as South Africa was finally removed from the Financial Action Task Force’s (FATF) greylist last week

He believes the synergy of the GNU needs to be replicated at a provincial and local level, where coalitions have been unstable. This instability typically undermines delivery but he said friction in these spheres of government should eventually give way as reforms gain momentum.

It was also vital to bring stability and the highest levels of governance standards to Gauteng, which commands more than 30% of the country’s economy, he added.

If we can support Operation Vulindlela with a GLU and a GPU, then we’re going to get momentum. So, Operation Vulindlela will produce momentum of its own at local government, and I think, after the local government elections, we’re going to get a turbocharged tailwind at local government. If we do that, the whole country grows much faster.

Vulindlela filtered through to local government, that could create an ideal environment for capital, he added.

“If we can support Operation Vulindlela with a GLU and a GPU, then we’re going to get momentum. So, Operation Vulindlela will produce momentum of its own at local government, and I think, after the local government elections, we’re going to get a turbocharged tailwind at local government. If we do that, the whole country grows much faster.”

Danie Dorfling, sustainability lead and senior marketing co-ordinator at Moore Infinity, said while South Africa’s removal from the FATF was an undeniably positive development, more was needed to put the country on a stronger fiscal footing. “I wouldn’t be as optimistic, although I definitely share his sentiment. I think South Africa is uniquely positioned, as per the IMF data, that we should be getting — in terms of FDI and portfolio flows, about 7.6% in terms of direct investment into South Africa.

“So, there are definitely tailwinds post greylist that we’re going to experience. But I don’t think it will be to such an extent that the economy is going to flourish in the next year or so. I think we should take a long view of about five years to really see the change in reforms coming to action.”

Dorfling said IMF historical data shows that when a country leaves the FATF greylist, there is an influx of capital, but not in the short run. “There needs to be, not just a swing in investor confidence, but also a swing in the data that’s required to really push the legislation.”

Dawie Roodt, economist at Efficient Group, said he agreed that Godongwana was unlikely to announce any new taxes, including VAT, next year, but said this was more a function of how firm other parties in the GNU were in preventing the tax from going through this year. “A couple of good things have been happening recently, certainly the removal from the greylist is a very good thing.

“Another good thing is inflation, that is basically inflation targets are set at 3% now, and it seems to me that we’re not doing too badly to achieve that, or getting close to that.”

He said data such as debt-to-GDP, revenue, the budget deficit, and expenditure will have bigger implications for the fiscus in the short- and medium-term “because the economy is just not growing fast enough”.