Tax rev­enue

Finweek English Edition - - IN THE NEWS -

In the re­cent medium-term bud­get pol­icy state­ment, fi­nance min­is­ter Nh­lanhla Nene made it very clear that South Africa would be fac­ing a rev­enue short­fall at the next Bud­get in Fe­bru­ary 2015, and this didn’t in­clude bailouts for Eskom, San­ral and SAA. What he didn’t give a lot of de­tail on was how he would raise the money to cover this short­fall.

Nene men­tioned gover nment aus­ter­ity and cur­tail­ing civil ser­vant sa l ar y i ncreases. Im­por­tantly, t he ca­pac­ity to bor­row more is se­verely cur­tailed, mean­ing that the most likely out­come is go­ing to be tax in­creases.

Rais­ing VAT is a non-starter and cor­po­rate tax in­creases are also highly un­likely. We may see another in­crease in the cap­i­tal gains tax and maybe even the div­i­dend with­hold­ing tax rates, but at the end of the day, most of the bur­den of the short­fall will be shoul­dered by in­di­vid­ual tax­pay­ers, mostly those in the higher tax brack­ets.

That said, there has been a ru­mour c i rc ulat i ng t hat t he gov­ern­ment could sell its stake in Vodacom that it in­her­ited when Telkom spun off the Vodacom stake. This 13.9% hold­ing is cur­rently val­ued at around R28.2bn, and that cer­tainly would help plug the rev­enue short­fall.

But what of other JSE listed as­sets the South African gov­ern­ment owns? It has a 39.76% stake in Telkom worth around R12.2bn, but seem­ingly the gov­ern­ment con­sid­ers this a strate­gic stake.

We also find three stakes held by the In­dus­trial De­vel­op­ment Cor­po­ra­tion ( IDC). Set up in 1940, the IDC is owned by gov­ern­ment and su­per­vised by t he depar t ment of eco­nomic de­vel­op­ment. So any­thing it sells may not get trans­ferred di­rectly to Na­tional Trea­sury. It may also be used as se­cu­rity for loans the IDC has in or­der for it to lend money.

The IDC has stakes in three listed com­pa­nies: Kumba Iron Ore (12.9% val­ued at R11.7bn), Sa­sol* (7.9%, R27.9bn) and ArcelorMit­tal South Africa (7.9%, R1.2bn).

Col­lec­tively, th­ese f ive stakes are worth just over R81bn. This should be enough to plug some two years of tax rev­enue short­fall while gov­ern­ment gets the econ­omy back on track.

The big­ger is­sue, aside from po­lit­i­cal will to exit th­ese stakes, is that Kumba and ArcelorMit­tal are both un­der price pres­sure. This is un­likely to change any­time soon and while we may be ac­cused of sell­ing the fam­ily sil­ver, the big­ger ques­tion is why gov­ern­ment wants to con­tinue hold­ing th­ese stakes.

As a last thought, th­ese JSE-listed as­sets, val­ued at over R80bn, gen­er­ate div­i­dends of around R3.7bn a year. Nice, but still worth sell­ing the stakes and plug­ging the hole.

*The writer owns shares in Sa­sol.

Nh­lanhla Nene

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.