South Africa’s high unemployment rate is being felt by the country’s municipalities, with job losses directly to blame for a severe drop in collections, says the South African Local Government Association (Salga).
Presenting to parliament, Salga’s Stella Mondlane said that the high unemployment rate has led to a steep decline in municipal revenue collection from 93% in 2019 to 20% in 2020, resulting in a R4.3 billion loss.
This is because without work and steady income, residents in municipalities do not have the means to pay their bills – hence the steep drop.
“This situation was further exacerbated by the advent of the pandemic, which led to increased expenditure demands on basic services such as water and sanitation,” she said.
Mondlane said that the association is concerned as the losses come against an increase in the cost of basic services, compounded by unpaid debt owed to municipalities by the communities they serve.
She further lamented the lack of infrastructure spending by the government, with a 7.3% increase included in the latest budget. “This increase won’t be able to address the infrastructure backlog caused by migration to cities, let alone their aging infrastructure that will now be put under duress.”
Unemployment impact on SARS
Similar concerns have been raised by the South African Revenue Service (SARS), which flagged the country’s high youth unemployment rate as a potential future problem for the country’s taxes.
The concerns are highlighted in the revenue collector’s annual performance plan for 2021/2022, which details some of the key issues facing the group and how it plans to address them.
“South Africa is a country of young people, as recent statistics released by Stats SA indicate. The same is true for our current individual tax base,” it said.
“The high, and growing, unemployment amongst the youth is a serious threat to the tax base and the overall integrity of the tax system. It has become a serious constraint to revenue growth and will cause further strain on government to increase spending on social benefits.”
Statistics South Africa’s latest unemployment numbers for the fourth quarter of 2020, showed that South Africa’s unemployment rate hit its highest point in 12 years at 32.5%.
In the fourth quarter of 2020, the official unemployment rate for young people (aged 15–24 years) was 63.2%, a 1.9% increase from 61.3% in the third quarter of 2020, AfricaCheck reported.