Fewer jobs means less tax as busi­nesses shut down

The New Age (Free State) - - INSIDE1 - BERNARD SATHEKGE bernards@the­newage.co.za

BUSI­NESSES are find­ing the eco­nomic en­vi­ron­ment tough, with an in­creas­ing num­ber clos­ing up shop.

While dev­as­tat­ing for the com­pa­nies and their stake­hold­ers, this also cre­ates a prob­lem for the state as fewer com­pa­nies and fewer work­ers mean less tax is col­lected, while more peo­ple need fi­nan­cial sup­port.

State rev­enue comes from var­i­ous streams, in­clud­ing value added tax, busi­ness tax, en­ter­prise in­come tax and per­sonal in­come tax, among oth­ers.

US car maker Gen­eral Mo­tors (GM) an­nounced it would be leav­ing South Africa at the end of the year af­ter 90 years and that Isuzu would take over some of its op­er­a­tions. Trade unions are chal­leng­ing GM’s de­ci­sion, cit­ing job losses.

The lat­est Ex­pe­rian Busi­ness Debt In­dex (BDI) re­leased yes­ter­day re­vealed a scary pic­ture of busi­ness debt stress lev­els, which de­te­ri­o­rated in the first quar­ter of 2017, dur­ing which a num­ber of com­pa­nies ap­plied for busi­ness res­cue. Stuttafords is one such com­pany.

Now, ac­cord­ing to the lat­est BDI, or­gan­i­sa­tions have had to guard against low growth fol­low­ing last year’s hopes of an eco­nomic re­cov­ery. In­stead, GDP for the fourth quar­ter was weaker than ex­pected.

The Ex­pe­rian BDI is an in­di­ca­tor of the over­all health of busi­nesses and the po­si­tion of debt set­tle­ment be­tween busi­nesses in the econ­omy. The zero line on the BDI dis­tin­guishes be­tween im­prov­ing and de­te­ri­o­rat­ing busi­ness debt stress lev­els.

The other main find­ings from the Ex­pe­rian BDI first quar­ter re­sults was that the av­er­age out­stand­ing debtors’ days in­creased in the quar­ter, partly due to sea­son­al­ity and the down­turn in busi­ness con­fi­dence. This down­turn, cou­pled with gen­eral anx­i­eties sur­round­ing po­lit­i­cal volatil­ity and the Cabi­net reshuf­fle in March, could see busi­nesses less will­ing to make sig­nif­i­cant cap­i­tal in­vest­ments.

The BDI for the first quar­ter of 2017 was - 0.081. This rep­re­sents a marginally lower level than the re­vised - 0.069 in the fourth quar­ter of 2016 and re­flects a slight de­te­ri­o­ra­tion of busi­ness health, with or­gan­i­sa­tions hav­ing to guard against low growth fol­low­ing last year’s hopes of an eco­nomic re­cov­ery.

Si­mon Rus­sell, man­ag­ing direc­tor of Ex­pe­rian South Africa, said or­gan­i­sa­tions that were able to in­no­vate and find cre­ative ways to nav­i­gate this tough en­vi­ron­ment were the ones who would sur­vive and re­tain mar­ket share.

Charles Meyerowitz, co-founder and CEO of Lamna, a spe­cial­ity fi­nance com­pany, said busi­ness res­cue meant that com­pa­nies’ cash­flow was un­der pres­sure and they were un­able to pay their cred­i­tors on time.


WORST OF TIMES: Busi­ness debt stress lev­els de­te­ri­o­rated in the first quar­ter of 2017.

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