South Africa’s economy is facing crisis risks (Part 2)

The economic downturn is often attributed to the causes before President Ramaphosa succeeded Jacob Zuma in February 2018. Admittedly, President Ramaphosa was unable to save himself by making commitments, such as creating jobs – which were beyond the ability of the Government.

Realizing why these commitments are not exactly the key factors to blame and assess the cause of the status quo, as well as the next direction for South Africa.

Unfortunately, aside from the blame, the majority of policy discussions consist only of vicious disagreements. This is related to the time the government was held by the African National Congress (ANC) through the “Growth, employment and redistribution” strategy (GEAR), which was held by coalition partner right to oppose and criticize. The GEAR strategy is primarily intended to reduce the levels of debt that the new democratic government must receive from racism.

Left-wing commentators have long advocated expansionary fiscal policy, which means a significant increase in government spending. The group also asked the State Treasury to implement a “austerity” policy after 2008. This is not logical. First, after 2008, South Africa actually adopted a “counter-cyclical” approach: Government spending grew faster than revenue – the cause of national debt began to escalate.

Second, increasing government spending in the direction of the proposal, albeit in the best scenario, is a highly risky strategy. In the context of South Africa’s public finances, the increase in spending, which has not brought about significant economic growth and tax revenue, will lead to a serious decline in public finance. That could harm future generations.

The risks seem bigger than this benefit will never be mentioned by populists, because this school simply “mimics” the arguments that have existed in previous periods.

The fact is, although the State Treasury tried to maintain government spending to support the economy after the global financial crisis and then tried to stabilize debt levels by using the ” financial consolidation, ”but that could not work either.

The economy has not recovered and it is attributed to systemic corruption and government failures under President Zuma. Public debt targets are often not met. At one point, the debt of the South African Government was expected to stabilize below 45% of GDP, but now it exceeds 60% and is likely to reach 70% of GDP within the next few years.