Picture: REUTERS
Picture: REUTERS

Steven Friedman argues that a lot of poor people would benefit if the Covid-19 grant was extended (“Plenty of good reasons to keep the Covid-19 grant”, October 13). This is surely true. We can all agree on that.

However, the time is surely past when one can make proposals for large new expenditures without saying where the money is to come from. Given our already enormous budget deficit it would in fact be inevitable that the money for such a charitable project would come from borrowing. Stop and think about that. We would then borrow both at home and from foreigners, paying them 7%-9.5% interest simply to give that money away to finance consumption.

It is difficult to believe that anyone could seriously advocate that, particularly since such a grant, once begun, would be difficult to stop. We could try to impose new taxes to help pay for it. But we are already a heavily taxed nation and we are already pushing wealthy taxpayers into emigration. New taxes take time to devise and administer and they would probably hinder growth.

So the alternative would be to find the money by cutting elsewhere. The problem is that whenever the government does that it always cuts investment, and this would doubtless happen again. The collapse of public investment is already a major cause of our falling rate of growth.

There is no free lunch. SA already finances consumption to a degree unseen anywhere else in Africa. It pays its public servants and state-owned enterprise (SOE) managers and directors at top rates and guarantees them large pensions. It gives welfare payments to about 18-million people. It in effect gives away large amounts of money to black businessmen by forcing tenders not to be allocated on merit. And so on.

I am certainly not opposed to helping the poor but I think it behoves all of us who urge such expenditures to explain exactly how they would be financed.

RW Johnson 
Via e-mail

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