Johannesburg – South African consumer confidence is at its second lowest level in the past thirty-five years. This comes as no surprise as other indices from the World Bank show that South Africans don’t trust the economy and the government.
The only time consumer confidence has been lower was during a quarter in 2021. Economist, Dawie Roodt, chalked up the 2021 low to it being lockdown. He is of the opinion that this low is the true low. The World Bank indices shows Roodt that South Africans and investors don’t trust the South African economy.
Government is only partly to blame for low consumer confidence
The price of fuel, food and living continues to skyrocket. While people blame the government for the rising costs, Roodt believes it is not so simple. The rising costs cannot be blamed on the government. What they can be blamed for is being unprepared.
“You can’t blame them [the government] for everything. There are some things that we are on the receiving end of. Rising oil prices is affecting everyone in the world. Rising food prices, especially grain prices going up. That is the reality. Also, when these things go up and you are ill prepared for that or you have a weaker government or a destructive government, which we have in South Africa, the impact is much greater.”
Petrol expected to reach a record high in July
Rising prices are impacting the consumer but not equally.
There is no doubt the rise in food prices is impacting the everyday consumer. There are some that feel it much worse than others. Roodt pointed out that for the rich, rising food costs would not bother them. It would take a toll on the less fortunate.
“What I have seen, the more productive people, the people who earn more money will be affected by other things. An increase in food prices will not really affect the wealthy that much because they don’t spend all their money on food. It will really impact very heavily on poor people.”
While food price increases might not impact the wealthy and middle class, it does not mean other things won’t. What will impact the rich is the rising interest rates, said Roodt.
“We got high inflation and with that rising interest rates. Typically, middle income and high-income people are more affected by high interest rates. Those people are typically the investors, the employers in your economy.”
Reintroduced tax law forcing the wealthy to leave the country
The cost of losing high income earners
The major difference between high income earners and those who earn less is choices. The rich have many choices available to them while the less fortunate don’t, said Roodt. It is because of them having these choices that they leave the country taking with them the valuable tax they pay.
“Quite often the wealthier people choose to leave South Africa. I can tell you those people are the ones who are mostly the taxpayers. Poor people also pay taxes, but it is the wealthy, in the high-income brackets that are the big taxpayers. Whenever we lose them, we lose substantial revenue to the Minister of Finance. The bulk of taxes goes to the poor. It is the poor that is being affected when rich people leave the country and stop paying taxes.”
Personal and Company Income Tax
Personal Income Tax (PIT) is the biggest contributor when it comes to taxes. It makes up 40% of total revenue. From those that pay PIT, about “130,000 pay 29% of the total Personal Income Taxes, nearly a third”, said Roodt. The 130,000 individuals make up less than 1% of the total figure.
Company Income Tax (CIT) is the third largest contributor when it comes to taxes. It makes up 17% of total revenue. “There are 770 companies that pay ⅔ of the total company taxes. Less than a thousand companies pay ⅔ of all company taxes”, said Roodt.
The only way forward for Roodt is to grow the economy. By growing the economy, it will help to increase consumer confidence, invite investors, and stop the wealthy from leaving. If it is not done soon enough, the government will soon find themselves having no money to spend and looking for alternative ways to keep the country running.
