South Africa’s economy ‘doesn’t have a long time’

According to a Business Tech article published recently, chief economist at Efficient Group, Dawie Roodt believes that state spending has increased relentlessly since 2009, at a time when tax collections collapsed – and that the South African economy “doesn’t have a long time”.

“Even if we can somehow wave a magic wand and get rid of all the corruption and incompetence in the state and SOEs overnight, the perilous condition of the state’s finances will need an extraordinary attempt to save us from further economic collapse,” Roodt was cited as saying.

South Africa’s faltering economy can be attributed to:

  • Eskom’s dire financial results, with a record reported loss of R20.7-billion
  • The potential for load-shedding making a return in late August
  • The latest unemployment data: the Quarterly Labour Force Survey for Q2 2019 showed that the unemployment rate increased by 1.4 percentage points from 27.6% in the first quarter of 2019 to 29% in the second quarter of 2019
  • Rumours that international ratings agency Moody’s could downgrade South Africa’s sovereign debt to junk status abound
  • A collapse of fiscal accounts
  • Lack of economic growth – it needs to be at 6%

There are a few ways to remedy this, including:

  • Increasing taxes, such as VAT, by 11 percentage points will get in approximately R250-billion
  • Cutting state spending by a similar amount, and do away with cash-heavy initiatives like the NHI

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My Office News Ⓒ 2017 - Designed by A Collective


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