BL ACK M A N AGEMEN T F ORUM
CHANGING OUR ECONOMIC TRAJECTORY
T
he South African economy is underperforming along with government finances 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 fiscus 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 fiscal 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 difficult 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 find 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 fiscal 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 fiscal policy. Minister Mboweni mentioned in his 2020 MTBPS that “we are at a moment today not too dissimilar to 1994 and we must recover. As we rose to that fiscal challenge then, so will we rise to this one”. But the government’s current response to the largest depression in a century is inadequate.
Raising debt for economic development of the country should be of greater priority than raising debt to bail out SOEs.
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 of the past 26 years including inflation targets, inapt structural reforms and austerity measures have not catapulted South Africa into a promising and progressive economic dispensation. Andile Nomlala Innovation and the development of new institutional arrangements are key in establishing a new economic settlement that takes South Africa and its people forward post-COVID-19. Efforts must
Innovation and the development of new institutional arrangements are key in establishing a new economic settlement that takes South Africa and its people forward.
8
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 we continue on our current stagnant path.
IMAGE: SUPPLIED
We need a robust and reformed macroeconomic and fiscal policy, writes Andile Nomlala, president of the Black Management Forum
EMPOWERMENT
BMF - Economy.indd 8
2020/11/27 3:49 PM
