Why SA’s ‘stimulus’ is all wrong
Rather than spending more, SA should address its fiscal problems by using the expertise of the private sector and stimulating the economy in ways that will not cost taxpayers a cent
Reports that the government intends to spend R40bn-R60bn more to bail out state-owned enterprises (SOEs) and stimulate the economy at a time when there is no fiscal room to do so, suggest it is bereft of ideas.SA’s problems are too complex and deep-seated to be solved by knee-jerk, populist measures like those proposed by President Cyril Ramaphosa after last weekend’s ANC lekgotla.The government would amend the constitution to allow land expropriation without compensation, he announced, as well as introduce a fiscal stimulus package to support growth.Normally news that a country is introducing a fiscal stimulus would cause its currency to strengthen in anticipation of faster growth. That the rand dived instead reflects not only the market’s negative reaction to the land reform announcement but deep scepticism over the state’s ability to use public spending to boost growth.There are two reasons to be sceptical: the government doesn’t have any additional funds to mount a meaningful st...
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