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ARE WE CASH COWS?

28/03/2018 07:51:00 By Thabiso Dlamini

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GOVERNMENT will kick-off the 2018/19 financial year with a E4.3 billion financing gap. In other words, government spent E4.3 billion that it did not have in 2017. In fact, deficits have become a norm in Swaziland since the serious fiscal crisis the country experienced in 2010/11.

Looking back at the past three years, government has managed to increase external debt by 18 per cent, and even more concerning, managed to rev up domestic debt by more than double (135 per cent) in just three years! Total debt, thanks to our government, is now at 20.2 per cent of GDP as of February 2018. The country owes one fifth of its GDP!
So it’s not surprising, therefore, that government is all out trying to cash in on everything and everyone in the country. The problem is it keeps spending money on things it cannot afford and then comes back the following year demanding even more from the very same people it ransacked the previous year.

Non priority spending on things that really have no real benefits to the economy has stifled economic growth and created serious vulnerabilities in the economy. Picture this: government has to fork out E8 billion a year, that is, more than half a billion every month, to pay civil servants. And each month it is a frenzy reshuffling government’s financial commitments just to have money to pay all its workers. The civil service wage bill is not the only account government has to juggle in order to manage its cash flow challenges.

There is also the issue of arrears due to all the payments it has not been able to honour to businesses that supply goods and services to it. Currently, government has an outstanding amount of E3 billion it needs to pay to these businesses. If it does not, some of them will be forced to lean out their activities, shut-down or lay off workers. Even though government does not face real consequences for not paying its debts, businesses that default on their debts have to face the music in high interest rates, being blacklisted, and getting a bad reputation in the business sector.

All around Swaziland, there are cranes erecting new building structures and excavators and bulldozers paving new roads among other capital projects. These projects are also draining cash from the system, claiming another E3 billion of government’s wallet. Going forward, government intends to cap domestically financed capital projects at E5.6 billion, and in the 2018/19 fiscal year, will increase capital expenditure by E36 million. So where will all these monies come from? You already know it: a bulk of the money will be collected through taxes yet the tax base in Swaziland is not really growing.

The country is not churning out new businesses and new jobs fast enough to keep up with government’s spending. It means the same people and businesses working their hearts out everyday will carry the burden of government’s frivolous spending.

So coming into the horizon, SACU revenue is expected to further decline by 18 per cent, government expects to increase the amount of VAT collected by 20 per cent, individual tax to increase by 22 per cent, and company tax to increase by seven per cent. Yes, in all these increases individuals will suffer the most, as their individual taxes will face the highest hike. Government will also increase the cost of living through fuel tax, by introducing a levy on income earned by banks, and by increasing user fees which will translate to more expensive passports, licences and personal identification documents. At least the banks are up in arms about the levy on their profits.

Even if government taxes banks, they can easily increase bank charges such that more money will mysteriously disappear in our bank accounts through the notorious ‘service fees’. Better yet, with all the amount of money government is milking from us, we will be pushed to survive on personal loans, and therefore more money to the banks.

As individuals, there is nothing we can really do about PAYE, and just as well, we will continue to shell out more money to get basic services from government when we apply for passports and licences, among other basic services. What do we get in return as a thank you note for all the tax and fees we pay to live and to support the economy in Swaziland? Zilch! Nil! Nothing!

In other countries, citizens look forward to tax credits on their income tax returns, and even tax holidays for that matter! People are encouraged to work even harder the following year because of all the incentives/credits the tax systems provide to the ordinary person who is just trying to survive. Our government is just building a legacy of indebtedness and it seems the more we aspire to develop as a nation, the more debts accumulate for future generations. This cow is running dry!