RUFARO MAFINYANI: SA’s problem is not a lack of money — it is where the money goes

The government’s trillion rand investment over three years arrived with the customary fanfare — a Keynesian economic injection promising transformation. On paper, it’s textbook economics: inject capital, create jobs, build infrastructure, stimulate upstream and downstream industries, and watch the multiplier effect work its magic. 

But what if, rather than triggering economic take-off, this investment is merely a kick to a snail, directionally correct but tragically mismatched in velocity and structure? 

Let’s begin where every economist feels safest: with the numbers. SA currently spends more than R1.1bn per day in interest payments — a staggering figure that doesn’t even touch the principal. Add to this the structural unemployment rate hovering above 32% (Stats SA, 2024), and one begins to question whether we’re attempting to irrigate a desert with a coffee mug. 

The multiplier effect assumes that every rand spent circulates multiple times, fuelling job creation and consumption. But history suggests otherwise. The post-2010 infrastructure boom did little to create lasting value. Group Five, Basil Read — once titans of construction — crumbled as soon as the taps slowed. Downstream suppliers collapsed. Medium-sized firms evaporated. Why? Dependency on cyclical government contracts. 

Historical data tells a sobering story: SA’s major infrastructure pushes have shown diminishing returns. According to the Development Bank of Southern Africa, the R800bn infrastructure programme from 2009-2014 initially boosted GDP by 0.7%, but this dropped to just 0.2% by the programme’s end, while creating only 150,000 jobs against a target of 500,000. For every R1m invested, fewer than three sustainable jobs materialised. Movement, yes. Circulation, no. This stimulus feels like trying to power a city with a fireworks display: it will create sparks, but not systems.

Even the velocity of money — defined as the ratio between GDP and money supply — is a flawed celebrant of shallow activity. If R10bn cycles through a few concentrated sectors before retreating into financial markets, the average citizen sees no benefit. It’s economic sleight of hand. 

SA’s problem isn’t a lack of money — it’s where the money goes. Despite a sophisticated financial system we have a narrow tax base (only 7-million personal income taxpayers supporting 60-million citizens) and a market that cannot absorb mass production because it lacks mass purchasing power. 

The convergence point — the structural solution that can unblock multiple problems simultaneously — lies in enabling mass, decentralised value-added production. Not glossy innovation hubs or mega-contracts, but thousands of small producers integrated into robust, demand-led supply chains. 

What we can learn from similar economies 

Vietnam offers a compelling example: from agrarian poverty to the world’s second-largest garment exporter, largely through special economic zones (SEZs) designed for SMEs — not just corporations — with shared infrastructure and low entry barriers.

Bangladesh built an SME funding bond system backed by reinsurance, making productive capital widely accessible and investable. Ethiopia’s industrial parks followed a similar principle — risk-distributing models that used government as an enabler, not a spender. 

These systems were not defined by spending scale, but by how effectively institutions made it profitable to build, produce, and hire. 

In various development conversations globally, new ideas have emerged — each seeking to make capital more compatible with productive manufacturing without requiring more public spending. 

Innovative funding conduits allow co-operatives or value-chain consortiums to raise capital directly from local investors through regulated community bond mechanisms, paired with partial state guarantees or credit enhancements to reduce downside risk. The credit enhancements are offset by reinsurance offered by various reinsurers — which will in turn issue bonds against their exposure.

Re-insurers that do business with the state would be more than willing to participate. The result? Risk gets systematically distributed down to granular components within the financial markets. Evidence from Malaysia’s SME financing framework shows such structures can reduce default rates by 30% through improved alignment of incentives and more engaged monitoring. No net government exposure. 

Skills, innovation and the challenge of time 

Another silent constraint is the time it takes to build human capability. We often hear calls for investment in science, technology, engineering and maths education (Stem), and training and vocational pipelines. All absolutely vital. But scale and speed matter.

The pipeline from education to experience is long: learners need to pass Stem subjects, enter technical colleges, then gain practical work — often in industries that are shrinking. This is compounded by the emergence of artificial intelligence (AI). Even if we fully commit to these paths now, the system’s latency means they will not immediately absorb millions.

Hence the logic of convergence supports a parallel strategy: mass micro-manufacturing that can use rapidly trainable, semi-skilled labour in real production contexts, offering more immediate economic traction. 

Statistical comparisons between countries show that those with higher proportions of hard technical skills (mechanical, electrical, manufacturing, engineering) relative to soft tertiary disciplines tend to exhibit stronger innovation capacity and industrial growth.

Not just velocity — circulation with purpose 

The issue isn’t spending, it’s structure: R1-trillion can produce infrastructure, but unless circulation is redesigned, the stimulus will pass through the economy like water through cracked concrete. 

Imagine a township with five viable manufacturing firms — processing steel, textiles or food — linked to predictable markets. These businesses don’t collapse when tenders expire. They adapt, they export, they employ and they circulate. That’s not just growth — that’s metabolic health. 

This is not about arguing for big government or the free market. It’s about architecture; about creating the conditions where capital naturally flows towards what society needs. Not by decree, but by design. 

The R1-trillion investment is not wrong; it is incomplete. Until we fix circulation, we are just nudging a snail. 

• Mafinyani is risk advisory and financial modelling partner at DiSeFu, a specialised financial technology and risk advisory firm operating in the Sub-Saharan Africa region.