LETTER: Time has come for hard measures
Cost-cutting might hurt in the beginning, but it is the only solution for SA’s long-term recovery
By now the government must surely have concluded that it hasn’t the competence to operate business-related organisations. Every state-owned operation has failed, which is why they suffer horrendous losses year after agonising year. And it is not just millions involved; it’s many, many billions — money the country cannot afford to lose. Yet our failed government agrees to allocate billions to state-owned enterprises (SOEs) from a seemingly bottomless pit to a seemingly bottomless pit.
Where will it come from? Thanks to ANC ineptitude and corruption, SA’s creditworthiness has slipped to rock-bottom, so borrowing on the world’s capital markets is no longer an option. Higher taxes? Corporate and individual tax rates are extremely high. Raise them and you impair the economy further. Besides, higher tax rates would further erode the shrinking skills and tax base that is fleeing the country due to the government’s failure to offer anything closely resembling a brighter future.
Cost-cutting is evidently the sole option. Privatise wherever possible, discontinue nonessential services such as the SABC, slash the public sector’s bloated salary bill, and stop crowding out the private sector. Yes, doing so would raise unemployment. However, such a strategy would stave off the looming insolvency trap staring the nation in its face. The immediate result would cause hardship, but the longer-term result is certain economic recovery, prosperity and a drastic decline in jobless numbers.
The government must act now — before the need to go, cap in hand, to the IMF, which would in any event impose just such measures as a quid pro quo for its assistance. Greece is an instructive example.