Province faces R5bn tax hole, growth of only 1%

THE WESTERN Cape economy is facing an estimated R5 billion hole in tax revenue over the next three years while the economy is set to grow a mere 1%.

All eyes were on Finance MEC Ivan Meyer, who delivered the 2017 Medium Term Budget Policy Statement in the provincial legislature yesterday.

He said economic growth in the province was largely dependant on what happened in the rest of the country.

“The economic performance has impacted on the South African Fiscal Framework with a tax revenue shortfall of R50.8bn forecast for 2017/18 and the budget deficit estimated at 4.3% of GDP. In the Western Cape we anticipate a R5bn shortfall over the next three years. This will impact on all of us.

“At this stage our figures are just estimates, but we will have final clarity in February next when the national minister of finance delivers his budget speech.”

The allocations to municipalities totalled R2.4bn for the 2017/18 financial year, Meyer said.

He painted a somewhat grim picture as the province is plagued by social ills, crime, a drought and avian flu.

“The Western Cape economy cannot escape the risks facing the national economy. The current drought and water crisis pose significant downside risks to the economic outlook.

“However, the Western Cape economy can benefit from the global upswing through export demand and continued focus on priority sectors,” he said.

Crime remained a serious concern for the socio-economic outlook in the province with violent crime being a permanent threat to citizens.

He said the uncertainty of the impact of the water crisis might affect the construction sector as water is a key input in the production process and might also impact on the cost of infrastructure delivery.

“The current drought is posing an enormous risk on the agricultural industry. The sector’s water allocation has declined by 30% since March.

“With the past winter season not having delivered the expected rainfall to sufficiently increase dam levels, it is expected that further restrictions of 50% will be imposed and in some cases even to 85% of normal allocation,” he said.

An estimated 17 000 employment opportunities were at risk in the agricultural sector.

Avian flu was also one of the major challenges. Meyer said 12 commercial egg-laying operations had been forced to cull about 2.7 million layers. The impact of this would still be felt over the short to medium term with food prices driven upward.