Tighter belts won’t help, Mr Zuma!

Wednesday, 24 October 2012

Reality is an illusion induced by absence of alcohol, a wise man once said.

Truth be told, through the years since I first heard that quote, I never thought him to be wise, merely drunk.

Now, I've had a change of heart.

I was having a pleasant Saturday afternoon chat with friend and fellow writer Ndumiso Ngcobo who commented on how impossible it is to be a political satirical writer in South Africa today because our reality defies absurdity.

He has a point. Where else in the world can you have a politician going into a McDonald's and buying a work of art with his official credit card without budgetary approval for hanging in his office, and believe that that's okay?

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Where else in the world can you have a Minister of Intelligence whose wife is convicted of drug smuggling? Think about it – the guy has access to the entire apparatus of state security, and does not know that his wife is recruiting drug mules?

(Yes, I know she is now his ex-wife. Where else in the world would that be raised as a defence?)

Or our Finance Minister (as I pointed out last week) who was “surprised” when ratings agencies downgraded us. (Coming soon: Bill Cosby “surprised” to discover that he’s black.)

Last week, we had the case of the bodyguard of the president’s nephew who drove a BMW 740i to a KFC in Umbilo, and got confronted by gunmen who didn’t know how to drive the car.

So the bodyguard explained it to them. The newly empowered hijackers then drove off with the car.

Over the weekend, the Sunday Times had as its front page lead “Mbeki blasts Zuma”. Read down to the second paragraph and it says “Mbeki did not name Zuma but...”

I think you are getting the picture.

So when our president convenes an emergency meeting of interested parties to come up with solutions to our current economic implosion, one is already predisposed to expect a Quixotic pronouncement.

And he did not disappoint. Zuma said tough times called for tough measures and so senior executives should tighten their belts as part of “building a shared commitment to prosperity and growth.

"[We] call on CEOs and executive directors in the private sector and senior executives in the public sector to agree to a freeze on increases in salaries and bonuses over the next 12 months, as a strong signal of a commitment to build an equitable economy.

"[We] call for an informed national conversation on income inequalities and how best to address them."

Now I expect you are as puzzled as I am as to how a freeze on pay increases for executives will lead to economic growth – it’s kind of like trimming a tree in Sandton in order for grass to grow in Soweto.

And then, the penny dropped. This is not about actually fixing anything; it’s to soften the blow for striking workers by saying “You can’t have a pay increase because we’re not taking pay increases either”.

I wondered how long it would take before the bean counters realised what a pathetically stupid idea this was. It did not take long.

Yesterday, a team from SA Revenue Services released tax statistics in parliament showing that tax revenue collection has not really recovered from the 2009 slump.

SARS is expecting the effects of the wildcat strikes of the past months to show up in December, January, and February through lower company profits.

So here’s why the pay freeze for the private sector is pathetically stupid – if high-income earners do not get a pay increase, the amount they are paying in tax will not increase.

Think about it: If highly paid people get a pay increase, that automatically implies an increase in tax revenue generated from them.

If lowly paid people (earning less than R6 000 per month) get pay increases, there is almost no overall increase in tax revenue.

Last year, there were only 63 408 people in this country who earned R1 million or more.

Together, they paid R43,042 billion in taxes.

If they get a pay increase of 10 percent, that’s an additional R4,3 billion in taxes for the year ahead.

Now, thanks to our president, that R4,3 billion won’t be there.

I really need that drink...