Message to Ramaphosa – There’s no public money, there’s only taxpayers’ money
Margaret Thatcher’s speech at the Conservative Party conference on 14 October 1983 should serve as a warning ahead of President Cyril Ramaphosa’s State of the Nation Address (SoNA) this week.
Prominent issues which are likely to dominate Ramaphosa’s speech include load-shedding, problems at Transnet, economic growth, high unemployment, and social grants.
In the past, the government’s solution was to throw money at the problems in the form of bailouts, additional funding, and increased grants.
Instead of forcing state-owned enterprises to become self-sustaining, the government used bailouts to compensate for corruption, mismanagement, and incompetence.
Instead of addressing high unemployment and poor economic growth through business-friendly policies, the government used grants to ensure people could put food on the table.
However, there is a problem. The government is running out of money to meet its growing list of financial obligations.
South Africa’s debt-to-GDP ratio is at an all-time high, and the country is running out of taxpayers to fund growing public spending.
To put the challenge in perspective, looking at the number of grant recipients versus taxpayers in South Africa is valuable.
29 million people in South Africa receive monthly grants, including 18 million welfare grant recipients and 11 million receiving a R350 grant.
National Treasury revealed that South Africa only has 7.4 million individuals with taxable income, a quarter of the number of people who receive grants.
Efficient Group chief economist Dawie Roodt warned that the tax burden is getting heavier on a smaller number of individuals.
The economy is not growing, and many taxpayers are leaving the country, which places tremendous pressure on South Africa’s finances.
Roodt said he is very concerned about South Africa’s economic situation because so many people rely on the State for income.
“The State cannot afford this anymore. The tax base is simply not strong enough to carry it,” Roodt said.
Advice from Margaret Thatcher
With general elections looming in 2024, it is tempting and politically expedient for Ramaphosa to make big promises of extensive public spending to gain votes.
A basic income grant, increased social spending, and job-saving bailouts sound great in a country where nearly half of adults don’t have jobs.
Former United Kingdom Prime Minister Margaret Thatcher warned against such lavish spending because of the impact on society.
In her speech at the Conservative Party conference forty years ago, she said people should not forget a fundamental truth about state spending.
“The State has no source of money other than money which people earn themselves. If the State wishes to spend more, it can do so only by borrowing your savings or by taxing you more,” she said.
“It is no good thinking that someone else will pay—that someone else is you. There is no such thing as public money; there is only taxpayers’ money.”
Thatcher highlighted that prosperity would not come by inventing more and more lavish public expenditure programmes.
“No nation ever grew more prosperous by taxing its citizens beyond their capacity to pay,” she said.
With government spending out of control and taxpayers stretched to their limit, Ramaphosa will do well to keep Thatcher’s warning in mind ahead of his speech on Thursday.