South Africa is taking a painkiller to cure a broken leg: economist

South Africa’s economy has now gone through twelve concurrent years of low growth, but it continues to be hampered by short-term thinking and unnecessary government intervention, says Francois Stofberg, an economist at the Efficient Group.

Stofberg said that low growth has been fuelled primarily by poor, and loose fiscal policy including wasteful, irregular, ineffective, and sub optimal government spending.

All of which has led to high budget deficits, debt levels and ultimately an impoverished South Africa, he said.

“Despite all this, the government continues to pressure private and public institutions not to go through with painful, but necessary retrenchments.

“In addition, instead of allowing businesses to fail, they throw billions of rands into many bottomless pits.”

Stofberg said that this results in a miss-allocation of scare resources (labour and capital) away from productive investments.

“This feels similar to drinking a pain killer to cure a broken leg,” he said.

“In the short-term, it feels like you’re at least doing something, but eventually it paralyzes you. The government will have to change its thinking: less government intervention is preferred.”

Government intervention for retrenchments? 

Both Massmart and Telkom announced mass retrenchments in January with more than 4,400 employees expected to be impacted across the two groups.

However, parliament has asked government to urgently intervene on the pending retrenchments as they would hinder the state’s plans to create jobs.

Chairperson of parliament’s select committee on Trade and Industry, Mandla Rayi, said that it was ‘not ideal’ to begin 2020 year by laying off workers with no alternative sources of income.

“It is not ideal to have the government interfere in business, but the severity of the pending retrenchments necessitates that there must be a collaboration of minds.

“Losing over 1,000 job opportunities will be catastrophic not only for job creation but also for the families of those who will be affected,” he said.


Read: Telkom says retrenchments are aimed at ‘safeguarding its sustainability’

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South Africa is taking a painkiller to cure a broken leg: economist