He pointed to a widening fiscal deficit in the coming years, threatening its plans to stabilise its substantial debt burden.<\/p>\n\n\n\n
Finance Minister Enoch Godongwana stated in his 2025 Budget speech that government debt is expected to stabilise at 76.2% of GDP in 2025\/26.<\/p>\n\n\n\n
However, this optimistic view does not tell the whole story. Roodt said the official debt-to-GDP number does not include debt from state-owned enterprises and municipalities.<\/p>\n\n\n\n
When their debt is added to the national government\u2019s, South Africa\u2019s debt-to-GDP ratio is closer to 95%. This is entirely unsustainable.<\/p>\n\n\n\n
\u201cSouth Africa is in deep trouble, and unless the government makes important changes, it is heading towards even deeper trouble,\u201d he said.<\/p>\n\n\n\n
\u201cThe sooner we start making these changes, the less painful it will be. Unless it is done quickly, the day will come when these changes are rapidly forced on us.\u201d<\/p>\n\n\n\n
He warned that if South Africa continues on its current path, the country will face a financial crisis.<\/p>\n\n\n\n
Roodt said the government should significantly reduce state spending and avoid further tax increases, which hurt the economy.<\/p>\n\n\n\n
Part of cutting spending involves reducing the number of government employees and improving the state\u2019s efficiency.<\/p>\n\n\n\n
He said government employees are overpaid and underworked, which requires a large amount of tax revenue to sustain.<\/p>\n\n\n\n
\u201cThere are 1.2 million national government employees. It goes up to 2 million if you include local authorities,\u201d he said. \u201cSouth Africa\u2019s economy can no longer carry this huge burden.\u201d<\/p>\n\n\n\n
\u201cThis is why the finance minister wants to increase VAT. He wants to take more money out of the system to fund the state machinery.\u201d<\/p>\n\n\n\n
However, these plans are now on the rocks after Godongwana was forced to hit reverse on the VAT hike.<\/p>\n\n\n\n
Instead, the country will now face a R75 billion hole in the budget over the medium term, with few options to plug it.<\/p>\n\n\n\n
Increased borrowing may be the only option, which is really bad news for South Africa’s finances.<\/p>\n\n\n\n
The government should not focus on job creation<\/h2>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2023\/08\/Dawie-Roodt-1024x576.jpg\")
<\/a>Economist Dawie Roodt<\/figcaption><\/figure>\n\n\n\nRoodt said that to fix South Africa\u2019s unemployment crisis, the focus should not be on job creation. Instead, the government should focus on economic growth.<\/p>\n\n\n\n
\u201cThe politicians do not understand this. They think if you keep somebody busy, like waving a flag next to a road, you have created a job,\u201d he said.<\/p>\n\n\n\n
\u201cThat is not how jobs are created. Employment is created when the economy grows. People will then automatically get jobs.\u201d<\/p>\n\n\n\n
South Africa\u2019s problem is that it has the wrong macroeconomic policies, like the Expropriation Bill and Black Economic Empowerment (BEE).<\/p>\n\n\n\n
These policies make South Africa an unattractive investment destination for local and international investors.<\/p>\n\n\n\n
\u201cOur politicians are pre-conditioned to make bad decisions, which harm South Africa\u2019s economic growth.\u201d<\/p>\n\n\n\n
Roodt said government spending, which has reached 33% of GDP, is one of the biggest problems. This money is taken out of the economy in the form of taxes.<\/p>\n\n\n\n
The government is inefficient at spending this money, which means it is a net drain on the economy. The money would have been far more valuable in the hands of the private sector.<\/p>\n\n\n\n
Political economist Moeletsi Mbeki also stated that South Africa\u2019s civil service is the highest paid globally as a percentage of GDP and should be drastically reduced.<\/p>\n\n\n\n
Mbeki said South Africa needs to reduce civil service pay to a level comparable to that of similar countries and invest the saved money in productive assets.<\/p>\n\n\n\n
<\/a>Roodt said that to fix South Africa\u2019s unemployment crisis, the focus should not be on job creation. Instead, the government should focus on economic growth.<\/p>\n\n\n\n
\u201cThe politicians do not understand this. They think if you keep somebody busy, like waving a flag next to a road, you have created a job,\u201d he said.<\/p>\n\n\n\n
\u201cThat is not how jobs are created. Employment is created when the economy grows. People will then automatically get jobs.\u201d<\/p>\n\n\n\n
South Africa\u2019s problem is that it has the wrong macroeconomic policies, like the Expropriation Bill and Black Economic Empowerment (BEE).<\/p>\n\n\n\n
These policies make South Africa an unattractive investment destination for local and international investors.<\/p>\n\n\n\n
\u201cOur politicians are pre-conditioned to make bad decisions, which harm South Africa\u2019s economic growth.\u201d<\/p>\n\n\n\n
Roodt said government spending, which has reached 33% of GDP, is one of the biggest problems. This money is taken out of the economy in the form of taxes.<\/p>\n\n\n\n
The government is inefficient at spending this money, which means it is a net drain on the economy. The money would have been far more valuable in the hands of the private sector.<\/p>\n\n\n\n
Political economist Moeletsi Mbeki also stated that South Africa\u2019s civil service is the highest paid globally as a percentage of GDP and should be drastically reduced.<\/p>\n\n\n\n
Mbeki said South Africa needs to reduce civil service pay to a level comparable to that of similar countries and invest the saved money in productive assets.<\/p>\n\n\n\n