Wamkelekile, Welkom
Kieswetter makes a case for institutional integrity as an economic driver
27 May 2026 | Story Myolisi Gophe. Photos Lerato Maduna. Voice Cwenga Koyana. Read time >10 min.
South Africa’s fiscal stability, social spending and even the withdrawal of proposed VAT hikes were not the product of luck or miracles, but the result of rebuilding institutional integrity at the South African Revenue Service (SARS).
This was the central argument advanced by Professor Edward Kieswetter during the Faculty of Commerce Open Lecture at the University of Cape Town (UCT) on 19 May.
Delivering a lecture titled “Institutional Integrity and the Compounding Dividend”, Professor Kieswetter reflected on the collapse and rebuilding of SARS, arguing that effective public institutions generate long-term economic and social returns that compound over generations.
Speaking to an audience of students, academics and business leaders, he described institutions as assets whose value accumulates over time – but whose destruction can be equally devastating.
“Institutional performance is not a flow – it is a stock,” he said. “Its effects accumulate; its benefits compound; but sadly, so does its failure.”
From institutional collapse to recovery
Kieswetter revisited the findings of the 2018 Nugent Commission of Inquiry into SARS, which described the institution as consumed by “intrigue, fear, distrust and suspicion” during the tenure of former commissioner Tom Moyane.
Quoting extensively from the commission’s findings, he said the dismantling of SARS had been deliberate rather than accidental.
“There can be little doubt that the catastrophe at SARS is attributable to a massive failure of elementary principles of governance, coupled with pervasive breaches of integrity,” he said.
When he was appointed SARS commissioner by President Cyril Ramaphosa in 2019, Kieswetter said he inherited an institution that had effectively been “seized” and would need to be rebuilt from the ground up.
“It was an institution that had been seized and would have to be rebuilt from its foundations.”
“What confronted me in 2019 was not a revenue authority in need of reform,” he said. “It was an institution that had been seized and would have to be rebuilt from its foundations.”
Rather than focusing on the mechanics of SARS’s recovery, however, Kieswetter used the lecture to explore what he termed the “compounding dividend” of institutional integrity – the long-term economic, fiscal and social gains generated by capable and trustworthy public institutions.
‘Not a miracle’
Kieswetter rejected descriptions of SARS’s turnaround as miraculous, insisting that the institution’s recovery was the result of deliberate strategy and disciplined execution.
“Miracles are things you can’t explain,” he said. “We can explain in minute detail what we did every step of the way over the seven years that have produced the record-breaking performance.”
He argued that tax administration should not be viewed merely as a technical or bureaucratic function, but as a “first-order macroeconomic variable” capable of reshaping a country’s fiscal trajectory.
Since the COVID-19 pandemic, SARS’s gross revenue collection has risen from R1.249 trillion to more than R2 trillion, while South Africa’s tax-to-GDP ratio increased from 22.3% to 25.9%.
According to Kieswetter, these improvements played a direct role in stabilising South Africa’s debt-to-GDP ratio at 78.9%, rather than allowing it to climb to a projected 91%.
“The debt that was never incurred because of efficient tax administration is an important indicator,” he said.
He estimated that improved compliance and revenue collection generated between R600 billion and R960 billion in additional revenue over five years. Even using conservative assumptions, he argued, at least R300 billion to R400 billion of this could be attributed directly to improvements in tax administration.
Without those gains, the government would likely have borrowed substantially more, adding nearly R1 trillion to the national debt burden.
“That’s the compounding effect of an effective, well-functioning revenue economy,” he said.
Trust and compliance
One of the lecture’s striking themes was the relationship between taxpayer trust and compliance.
Kieswetter noted that SARS increased revenue collection while simultaneously improving public confidence in the institution.
“Our service went up from 54% to over 90%, and taxpayer trust went up from 47% to 75%,” he said. “We’re taking more money from people, but they trust us more.”
He argued that institutional legitimacy was essential for sustainable governance and democratic stability.
“Taxpayers are entitled to expect the delivery of goods and services for the return of their tax money.”
“Tax administration exists to fund the social contract,” he said. “Taxpayers are entitled to expect the delivery of goods and services for the return of their tax money.”
According to Kieswetter, approximately 91% of South Africa’s government expenditure is funded through tax revenue – a significantly higher proportion than in many advanced economies.
He warned that weakening revenue institutions ultimately threatens the state’s ability to fulfil constitutional obligations related to dignity, equality and socio-economic rights.
“Our democracy would be unfunded if we did not have a well-functioning tax authority,” he said.
Avoiding the VAT increase
Kieswetter also linked SARS’s improved performance to the government’s eventual withdrawal of proposed VAT increases during the turbulent 2025 budget cycle.
Initially, the government proposed increasing VAT from 15% to 17%, before later retreating to a phased increase and eventually abandoning the plan altogether, following political disputes within the Government of National Unity and legal challenges.
Kieswetter revealed that SARS had approached the National Treasury with a proposal to increase collections instead.
“We went to the minister and said, if you give us a billion rand more, we commit to give you R20 billion in return,” he said.
“Poor people suffer more when consumption taxes, particularly VAT, increase.”
SARS subsequently exceeded its revenue target by R28.8 billion, enabling the government not only to withdraw planned VAT hikes, but also to restore inflation adjustments to personal income tax brackets and medical tax credits.
Kieswetter argued that avoiding the VAT increase protected households from inflationary pressures and prevented disproportionate burdens on poorer South Africans.
“The bottom four income deciles spend approximately 75% of disposable income on consumption,” he said. “Poor people suffer more when consumption taxes, particularly VAT, increase.”
He estimated that the avoided VAT increases protected household disposable income by between R110 billion and R280 billion over the medium term.
A warning against complacency
In the final section of his lecture, Kieswetter warned that institutional integrity should never be taken for granted.
He described capable public institutions as fragile democratic assets that require constant protection from corruption, political interference and public indifference.
“South Africans should never take such institutions for granted,” he said. “Never be indifferent to it. Don’t stand by when those with a corrupt intent seek to capture it for their narrow interest.”
He also urged citizens – particularly those with privilege and economic means – to embrace both tax compliance and civic accountability.
“I urge especially privileged South Africans to pay this privilege forward by being an honest and compliant taxpayer,” he said. “But then demand that these precious resources be deployed to serve society’s best interest.”
For Kieswetter, the true legacy of institutional integrity lies not only in stronger balance sheets or stabilised debt ratios, but in the long-term social cohesion and opportunity it creates for future generations.
“This compounding dividend is the true value such institutions leave to the next generation,” he said.
As expected, questions from students, academics and young professionals sparked a robust discussion on taxation, state capacity, economic policy and the future of public institutions during the question-and-answer session that followed the lecture.
One of the central themes was the challenge of attracting and retaining skilled professionals in South Africa’s public sector. Responding to a question about how SARS compares with institutions elsewhere in the world, Kieswetter said the organisation competes for talent from the same pool as the private sector but has managed to retain employees through a strong sense of purpose and institutional culture.
Kieswetter also reflected on broader structural problems within South Africa’s education and training pipeline, arguing that the country has neglected vocational and technical pathways in favour of university-only routes.
“In the next wave of artificial intelligence, your jobs may just be irrelevant. You’ll end up in jobs that don’t exist yet.”
“My first job was as a labourer,” he said, recounting how he worked as an apprentice and later returned to improve his mathematics and science results after the disruptions of the 1976 student uprisings. “Many of those who apply to university would be better served to learn a skill.”
He warned that the future world of work, shaped increasingly by artificial intelligence, will require adaptability and practical capabilities. “In the next wave of artificial intelligence, your jobs may just be irrelevant. You’ll end up in jobs that don’t exist yet.”
The discussion also turned to the efficiency of government institutions and whether the operational successes of SARS could be replicated elsewhere in the state. Kieswetter argued that the “compounding benefit” of efficient institutions extended far beyond tax collection.
“The compounding benefit of an efficient home affairs administration, immigration department, trade and industry, every other aspect of government, is incalculable,” he said. “Efficient government is what we should insist on.”
Another major focus was SARS’s ambitious tax modernisation programme. Asked whether VAT modernisation was realistically achievable within five years, Kieswetter outlined the evolution of tax administration from manual submissions to automated systems powered by artificial intelligence and data integration.
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