Government headache for businesses in South Africa

 ·20 Feb 2024

Senior management in South Africa spends nearly 10% of its time dealing with the requirements set out by government regulation – which limits not only businesses, but also the taxman.

Referencing its PwC EMEA Private Business Attractiveness Index 2023 in its latest Economic Outlook, PwC said that South Africa had the 23rd most attractive private business environment out of 33 counties by the index – an improvement from 25th in 2022.

This improvement highlighted the country’s Economic Reconstruction and Recovery Plan (ERRP), which, as part of structural reforms aimed at helping the economy recover from Covid-19 pandemic, aimed to make it easier for private businesses to operate in the country.

This could be seen in the regulatory reforms and incentives that allow businesses to invest in renewable energy installations, which has seen rooftop solar capacity increase from less than 1,000Mw in 2021 to roughly 5,200 MW.

On a tax and regulation front, PwC looked at several indicators, such as corporate and indirect tax rates, South Africa ranked 21st out of 33 countries.

A key variable in the context of compliance is the amount of time that senior management has to spend dealing with government regulations, with senior management in South Africa spending 9.7% of a typical week dealing with requirements like tax compliance.

This placed South Africa 17th out of 33 countries for the category.

“The ranking suggests that there is room for improvement when it comes to the paperwork and red tape involved in tax and other regulatory compliance,” PwC said.

“This, in turn, could help SARS increase tax compliance and reduce the tax gap.”

In November 2023, Finance Minister Enoch Godongwana said that the SARS would continue to enforce compliance in areas, such as debt collection, fraud prevention, curbing illicit trade, voluntary disclosures, and encouraging honest taxpayers to comply voluntarily.

“Nonetheless, South Africa’s tax gap (the difference between taxes legally owed and taxes collected) is still an estimated R300 billion,” PwC said.

“Collecting this would almost erase the 2023/2024 fiscal deficit, planned in the MTBPS 2023 at R347 billion.”

Read: New number plates for Gauteng – relief for drivers as ‘launch’ date approaches

Show comments
Subscribe to our daily newsletter