Upward income distribution in favour of a few, limits the demand for mass goods and services, says deputy finance minister David Masondo.
Speaking in the State of the Nation debate in parliament this week, Masondo said that the government needs to do more to promote growth and redistribution of wealth as a united concept, and not as two separate metrics.
“Concentration of income increases conspicuous consumption of luxury goods – such as Ferraris, Lamborghinis and other expensive tastes – in the midst of appalling levels of poverty. These luxuries, produced in very small quantities, do not significantly contribute to the economy and more jobs.
“If we are to avoid more unrests as we have witnessed during the 2021 July events, we have to take seriously economic growth with the distribution of income and productive assets in favour of the poor, in addition to strengthening the security cluster.”
Masondo added that inclusive economic growth can only be realised if both growth and redistribution take place simultaneously, not sequentially.
“Growth and redistribution are not polar opposites, as some who believe in trickle-down economics would like us to believe. Distribution of income places money in the hands of the poor, which generates demand for mass goods and services, thus setting market conditions for economic growth and development.”
Reforms to bolster the economy
Masondo also touched on a number of reforms in the coming years that are expected to benefit the economy:
- In a few years’ time, energy reforms will mean that there is competition in electricity generation, with adequate supply to meet demand. This will also end load shedding. The independent grid operator will buy electricity at the lowest price from Eskom and private generators.
- In a few years to come, a “world-class” freight logistics system would have been established. This will mean more jobs in export industries, lower costs for all of the goods that we buy, and less congestion on our highways.
- The release of spectrum will reduce data costs, increase broadband speed and quality and expand network reach across the country, including in deep rural areas.
- Stronger institutions in the water sector will mean better maintenance of our water infrastructure, fewer disruptions to water supply, and long-term water security in the face of climate change.
- The reforms to the visa system will ensure that we can access the skills and resources that the economy needs while protecting and increasing the employment of South Africans, especially in low-skilled and semi-skilled work.
“The only way that we will achieve a fundamental shift in our growth trajectory is by transforming the structure of the economy,” he said.
“Operation Vulindlela was established as a joint initiative of the Presidency and National Treasury in October 2020 in pursuit of this imperative. Its aim is to support departments and entities to accelerate the implementation of reforms that will unlock growth and create jobs.”