Letter: Tie SA’s foreign loans to policy reform

1 July 2020 - If nothing else, the emergency budget should have made clear just how serious SA’s debt position is. The finance minister’s image of debt as a ravenous hippopotamus is a salutary, and accurate, one. What SA borrows must be repaid.

If nothing else, the emergency budget should have made clear just how serious SA’s debt position is. The finance minister’s image of debt as a ravenous hippopotamus is a salutary, and accurate, one. What SA borrows must be repaid.

Borrowing is a necessary part of economic management, and in times like these a critical one. But unless it is part of a sustainable recovery strategy it will compound rather than alleviate the country’s malaise.

For this reason it is a matter of prudent and rational self-interest for SA that sourcing loans must be tied to policy reform that encourages investment and steers the country to the growth and job creation that has eluded it. This is why the Institute of Race Relations has approached the major contributors to the IMF to put our analysis of SA’s trajectory to them.

This means counterproductive and investment-killing measures such as expropriation without compensation must be dropped. Racial empowerment policy that drives rent-seeking must be replaced by a system that incentivises investment and provides support to the country’s poor. Bailouts for sclerotic and mismanaged state-owned enterprises need to come to an end.

Failing to do these things will mean the debt the government intends to take on will at best buy a little time, but make the reckoning that much more painful when it comes — as it inevitably will.

Hermann Pretorius
Institute of Race Relations 

https://www.businesslive.co.za/bd/opinion/letters/2020-07-01-letter-tie-sas-foreign-loans-to-policy-reform/

© 2018 South African Institute of Race Relations
CMS Website by Juizi

Terms & Conditions | Privacy Policy | Accuracy Guarantee | Sponsors & Donors