A nation at the crossroads.
“South Africa is quietly suffocating under the weight of economic stagnation and industrial decline. Once the proud engine of Africa’s manufacturing ambition, we now face a dangerous reality: Factories closing, skilled labour emigrating, and foreign investment choosing more tax-friendly jurisdictions,” said Prof Theuns Pelser, Executive Director at TWIMS, in a recent LinkedIn post.
“If South Africa is serious about economic renewal, it must start with a clear and unapologetic fiscal strategy: Lower corporate taxes, especially for domestic manufacturing firms,” continued Pelser.
Global lessons in competitive tax reform
“At present, South Africa’s corporate tax rate stands at 27% – among the highest in emerging markets. Compare this with Ireland’s 12.5%, which turned it into a global hub for manufacturing and tech investment. Or consider the United States’ proposed “Made in America” plan, which aimed to cut domestic corporate tax rates to 15% to boost onshore production and job creation (Moore, 2024).”
“You can’t tax your way into prosperity – only growth can fund national ambitions.” – Stephen Moore, The Washington Times, 2024.
“Tax incentives aren’t a race to the bottom – they are a competition for capital, and South Africa is losing.”
Schumpeter’s warning: The tax state destroys itself
“The Austrian economist Joseph Schumpeter foresaw the dangers of unchecked fiscal expansion. In The Crisis of the Tax State, he warned that when governments rely too heavily on taxation, they morph from enablers of growth into extractive, bureaucratic machines.”
“The fiscal apparatus becomes a tool of social engineering… the state taxes not to sustain itself, but to reshape society in its image.” – Joseph Schumpeter, 1918.
“This is not merely theory. Today’s South African government is constrained by its bloated public sector wage bill, escalating debt service costs, and a shrinking pool of productive taxpayers. Instead of broadening the base through growth, it is overburdening compliant businesses.”
Manufacturing deserves preferential treatment
“The consequences of de-industrialisation are severe: Weakened trade balances, job losses, and reduced technological capability. Manufacturing’s share of GDP has fallen from 21% in the 1980s to under 13% today (DTIC, 2023). Yet, no tax strategy differentiates between a local manufacturer and a reseller of imports.”
“It’s time to implement a tiered corporate tax structure. Lower rates – perhaps 15% – for manufacturers and industrial exporters would: Attract new investment into SEZs and industrial parks; Spur job creation and upskilling; and support localisation and export competitiveness.”
Growth, not extraction, will fund the future
“Critics argue the country “can’t afford” a tax cut. But this is a false choice. A dynamic tax policy creates more taxable activity, not less. Ireland, Singapore, and even post-Brexit UK are proving that targeted tax cuts increase investment and, in time, revenue.”
“It is production that sustains taxation – not taxation that sustains production.” – Adapted from Ludwig von Mises, Bureaucracy, 1944.
Conclusion: Let us be bold
“South Africa faces a choice: Continue taxing a shrinking economy into deeper dysfunction, or stimulate industrial activity by rewarding production over patronage. Schumpeter’s warnings, echoed by modern economists, remind us that a bloated tax state ultimately destroys its own foundations.”
“Let us act decisively. Reclaim our industrial future. Slash taxes for manufacturing. Grow the economy – don’t squeeze it dry.”
