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What we need now is a robust fiscal policy
CHANGING OUR ECONOMIC TRAJECTORY
We need a robust and reformed macroeconomic and fiscal policy, writes Andile Nomlala, president of the Black Management Forum
The South African economy is underperforming along with government fi nances and households stretched to the limit. Load shedding continues to wreak havoc and thousands of job cuts are set to worsen unemployment with the expanded unemployment rate currently sitting at 42 per cent as reported by the recent Stats SA Quarterly Labour Force Survey for the second quarter of 2020.
Thus the 2020 Medium Term Budget Policy Statement (MTBPS) and the strategic framework that informs it has been presented amid a very grim economy. Pressure on the country’s fi scus is increasingly growing, and key priorities based not only on the review of the 2020 MTBPS by Minister of Finance Tito Mboweni, but also other preceding fi scal policy pronouncements, need to be more adequately addressed.
STATE-OWNED ENTERPRISES (SOEs)
Government needs to seriously consider measures to redirect expenditure to productive spend.
The current trajectory of expenditure is showing movement in servicing debt that has been allocated to bail out SOEs. The servicing of debt for productive spend is a better position to be in. Through productive spending, you will inevitably increase tax revenue as new money will be created in the system through a multiplier effect.
Raising debt for economic development of the country should be of greater priority than raising debt to bail out SOEs. It becomes diffi cult to say we are going to be prudent if we keep giving more money to SOEs that are struggling. Especially when much of this continued struggle stems from corruption and incapacitated leaders who have led SOEs into the current crisis they fi nd themselves in. And continued funding of SOEs without insisting on pre-conditions such as clean audits as a requirement for emergency funding, are detrimental to government’s goal of consolidating fi scal spending.
CURBING EXPENDITURE AND REDIRECTING FUNDS TO INVESTMENT
Wasteful expenditure should be shifted to investment spending.
Key to curbing wasteful expenditure will be to review the whole political system from the ground up. The local government layer is crucial for delivering services to both business and civil society. Tighter measures ought to be introduced to ensure that these basic services are delivered in line with the economic goals of the country.
Overall, a critical foundation to change South Africa’s economic trajectory lies in a robust and reformed macroeconomic and robust and reformed macroeconomic and fi scal policy. Minister Mboweni mentioned in fi scal policy. Minister Mboweni mentioned in his 2020 MTBPS that “we are at a moment his 2020 MTBPS that “we are at a moment today not too dissimilar to 1994 and we must today not too dissimilar to 1994 and we must recover. As we rose to that fi scal challenge recover. As we rose to that fi scal challenge then, so will we rise to this one”. But the then, so will we rise to this one”. But the government’s current response to the largest government’s current response to the largest depression in a century is inadequate.
THE NEED TO FORGE A NEW ECONOMIC MODEL
South Africans need to discard old ways of thinking about the economy.
The failed neoliberal economic policies The failed neoliberal economic policies of the past 26 years including infl ation targets, inapt structural reforms and austerity measures have not catapulted South Africa into a promising and
Innovation and the development of establishing a new economic settlement that takes South Africa and its people forward post-COVID-19. Efforts must be made to create a sustainable and prosperous economic future for all South Africans. The key pillars that should be included in a robust macroeconomic policy framework for South Africa are education, health, infrastructure, transformation, and sustainable development.
As Minister Mboweni aptly mentioned in his address, government cannot change South Africa’s economic trajectory on its own: a robust social compact between government, business, labour, and civil society is required to catapult South Africa into better socioeconomic prospects.
However, we need a robust foundation lest
progressive economic dispensation. Andile Nomlala
new institutional arrangements are key in new institutional arrangements are key in we continue on our current stagnant path.
Innovation and the development of new institutional arrangements are key in establishing a new economic settlement that takes South Africa and its people forward.
