Only ending corruption can fix the fiscus

Corruption is the biggest line item in South Africa’s budget, but may not be formally reflected. Government malfeasance consumes large amounts of public revenue, causes leakages in most departmental and state-owned entity budgets and has ballooned the country’s debt.

Many ordinary South Africans appear to fail to grasp that corruption is overwhelmingly responsible for the country facing the dire prospect of running out of money, with the government receiving lower than expected revenue, and public services possibly being cut. Even payments to service national debt — now 16% of government spending — are high because systemic corruption has forced the state to increase debt.

Finance minister Enoch Godongwana warned that South Africa risks running out of money because of lower than expected public revenue and that the government needs to significantly cut public services.

He raised the alarm during a speech at the annual Drakensberg Inclusive Growth Forum, held under the auspices of the Kgalema Motlanthe Foundation. Godongwana said that without drastic public sector cuts, “South Africa will not have cash by the end of March [2024]”.

This week the finance minister presented the medium-term budget policy statement, which gave an alarming picture of public finances over the next three years. From the statement it is clear they are at their worst since the end of apartheid. Corruption is directly responsible for this.

The South African Revenue Service trying to squeeze more revenue out of ordinary citizens and companies is the wrong strategy in attempting to rectify the status quo. The priority should be to reduce public sector corruption.

Citizens, civil society organisations, opposition parties and ANC members and supporters should force the government to seriously tackle it to increase public revenue, prevent service delivery cuts and reduce debt.

Yet sadly, many South Africans cannot see the link between corruption and the country running out of money, cutting public services and reducing revenue. The corrupt are often admired, celebrated as heroes or seen as “lucky”.

Power shortages are due to long-standing corruption at state power utility Eskom. The collapse of the public transport and logistics sector is because of corruption at state logistics company Transnet. The decimation of public infrastructure is because of corruption. The corrupting of these essential entities and others has battered the economy, collapsed businesses, caused investment flight and seen highly skilled professionals emigrate, undermining economic growth and reducing public revenue.

Even South Africa’s foreign policy has been captured, in that it corruptly supports Russia or African dictators for ideological or self-interest reasons, unleashing capital flight or causing the oppressed fleeing autocratically-ruled African countries such as Zimbabwe to put pressure on this country’s revenue, public resources and public finances.

In 2016, then government chief procurement officer Kenneth Brown said as much as 40% of the government’s then annual R600bn budget for goods and services was being lost to corruption. It is now worse and the public procurement budget is higher for the same reason.

As a further example, the National Treasury, in its budget policy statement this week, said the government expects to collect R56.8bn less tax than it anticipated at the time of the February budget, largely because energy shortages and logistics constraints have curtailed mining companies’ profitability.

Godongwana pledged three reforms to increase public revenue: stabilising public finances, fasttracking growth-enhancing reforms and reconfiguring the structure and size of the state. All are necessary. However, none will be effective unless corruption is reduced. The way to increase revenue is to tackle public corruption. Focusing on other reforms, albeit necessary, will at best only marginally boost the coffers.

Unless systemic corruption is tackled, South Africa is likely to run out of money.