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VOLATILE SACU RECEIPTS DERAIL BUDGET MOMENTUM

20/02/2023 06:32:00 Mhlengi Magongo

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MBABANE – The decline observed in SACU receipts last year may have an effect to this year’s budget, according to an economist.

Eswatini currently has internal trade agreements with the Southern African Customs Union (SACU) European Free Trade Area, SACU-MERCOSUR Preferential Trade Area, African Growth and Opportunity Act (AGOA) and Africa Continental Free Trade Area (AfCFTA). Economist Thembinkosi Mavimbela said SACU was the main contributor to the country’s revenue and a decline could decrease the latter. He said the budget deficit for financial year 2022/23 was projected at 4.8 per cent of GDP, amounting to E3.8 billion and this deficit was expected to further increase this year.

“The economic destructions caused by the shutdowns and unrest will have an effect in the projections expected this year. This will make it difficult for trade to record growth as expected,” he said. Mavimbela mentioned that businesses owing Eswatini Revenue Service (ERS) tax was evidence to the challenges faced by the local business sector.

The government has been running persistent fiscal deficits while SACU remains the main source of revenue for Eswatini. This was as a result of volatile SACU receipts causing large swings in revenue collection coupled with inadequate response in government expenditure controls. In the last financial year, SACU receipts declined from E6.38 billion in 2021/22 to E5.82 billion in 2022/23 which is equivalent to 8.88 per cent in the current year.

In the previous quarter, E2.9 billion was received from SACU receipts compared to E3.2 billion in the year 2021/22. This reflected the decrease of SACU receipts expected this year when compared to last year. The Minister of Finance, Neal Rijkenberg, said SACU receipts were expected to rebound and average over E7 billion in the medium-term.

Grow

He said in the 2023/24 financial year, SACU receipts were expected to grow by 67.2 per cent to E9.66 billion from E5.8 billion, followed by E7.09 billion in 2024/25 and E7.12 billion in 2025/26, assuming some of the SACU receipts were put in the proposed SACU Stabilisation Fund. “In tandem to that, total domestic tax collection is expected to increase over the medium-term by an average 6 per cent, amounting to E12.98 billion in 2023/24 followed by E14.95 billion in 2024/25 and E14.81 billion in 2025/26,” he said.

The minister exclusively mentioned that the projected increase in domestic revenue collection in the medium-term was largely attributed to a number of proposed revenue measures forming part of the efficiency gains and favourable economic growth. He said the government was working tirelessly to ensure that revenue enhancement reforms were put into place, the strategy includes the establishment of the SACU Stabilisation Fund, wherein draft regulations are already with the attorney general.

One of the exporters to the SACU region, Vusi Matsebula, said the challenge was tax-related. He said they tripled tax when they made sale abroad, which affects their revenues.“The tax is the main issue and it continues to affect our revenues, we kindly urge the government to revise the manner of tax as it is crippling,” he said. Matsebula also mentioned that unionising based on commodities would also help their business succeed and trade at equivalent sums.

Business Eswatini Chief Executive Officer (CEO) Nathi Dlamini afore thanked the Eswatini Revenue Service (ERS) and the Ministry of Finance for listening to their plight as businesses of Eswatini. He said tax was one of the main challenges affecting the private sector, and the introduction of Tax Amnesty by ERS was a golden opportunity for the private sector. Dlamini said he was grateful that tax amnesty was attained immediately after the Tax Indaba where the issue of compliance was discussed.

He said when he approached the ERS, they were able to honestly engage following the discussions they were all in attendance of. He said he could not wait to send a message of attaining one objective of the tax indaba to business people. Dlamini requested for more discussions on the issue of capital gains and other taxations that are a challenge to businesses.