Letter: To grow the economy requires doing exactly what Duma Gqubule dismisses - Businesslive

29 March 2022 - Duma Gqubule calls on the government to open the spending taps, in the hope that this will ignite GDP growth and draw private investment along in its slipstream ( “Stop the charades and start stimulating the economy”, March 28). The message must be music to any politician’s ears, for what could be more appealing than being given carte blanche to write cheques that cash themselves?

Duma Gqubule calls on the government to open the spending taps, in the hope that this will ignite GDP growth and draw  private investment along in its slipstream ( “Stop the charades and start stimulating the economy”, March 28). The message must be music to any politician’s ears, for what could be more appealing than being given carte blanche to write cheques that cash themselves?

But the reality is different. You have to earn the money you want to spend, and the government is finding that investors are unenthusiastic while the main source of revenue — SA’s beleaguered taxpayers — is maxed out.

If you want to spend more than you earn, you have to borrow to make up the difference. But already SA owes more than R4.3-trillion, with its debt-servicing costs growing at an alarming rate and its credit rating junked. By 2024/2025, the government will spend R1bn a day servicing its debt, according to Treasury projections. Today, it is already spending more on servicing debt than on the army, police, courts and home affairs combined.

Besides, government started opening the spending taps years ago, in the aftermath of the global financial crisis, coincidentally at the time Jacob Zuma became president. Budget deficits have averaged a lavish 4.9% since 2009 (5.3% if you include the -10% outlier of 2020, the year of Covid-19). The result has not been growth. It has been a stagnant economy, record unemployment and an orgy of looting exposed in all its gory detail by brave investigative journalists and the Zondo state capture commission. More spending will produce more of the same.

Instead, to grow the economy requires doing precisely what Gqubule so cavalierly dismisses: increase business confidence not through fancy investment conferences (here I agree with him), but by deregulating and reducing red tape as a starting point.

Businesspeople are predictable because their motivation is known: give them an opportunity to turn a profit by offering the public a better product at a better price, and they’ll go for it. Remove the obstacles that prevent them from doing what they are good at, and you will be rewarded with a growing economy.

This means upholding property rights instead of undermining them; opening up global markets for SA companies instead of plumping for localisation, protectionism and industry master plans; replacing race-based empowerment with a means-tested alternative, such as the Institute of Race Relations’ (IRR's) Economic Empowerment for the Disadvantaged; appointing civil servants and employees of state-owned enterprises on merit instead of party loyalty or race; and enforcing accountability for underperformance and corruption instead of turning a blind eye, as is currently the case.

These are reforms that cost no money yet would produce bountiful returns. In contrast, asking the government to spend more money — as appealing as it might sound to those in power — would produce more debt and increased opportunities for corruption and patronage.

John Endres
Institute of Race Relations

https://www.businesslive.co.za/bd/opinion/letters/2022-03-29-letter-to-grow-the-economy-requires-doing-exactly-what-duma-gqubule-dismisses/

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