Forget basic income subsidies, fix streets and dysfunctional municipalities instead – Mboweni

Tito Mboweni says that without repairing dysfunctional communes, potholes and reducing dependence on Eskom, South Africa can forget about significant economic growth.

  • Tito Mboweni says SA doesn’t have many of the prerequisites needed for greater economic growth.
  • It can start with correcting “basic factors” such as bad roads and crumbling infrastructure.
  • Instead, the government focuses on expanding social spending with things like basic income subsidies.

Without repairing dysfunctional municipalities, dangerous potholed roads and reducing dependence on Eskom, South Africa can forget about significant economic growth, says the former finance minister. Tito Mboweni.

Speaking at PSG’s annual conference in Sun City on Wednesday, Mboweni said that while SA’s economy has recovered quickly from the Covid-19 setback, it is still at levels last seen in 2017.

“That short-term V-shaped recovery – not much to write about it. It was recovering from a very low base,” he said.

Instead, Mboweni said that 1.2% GDP growth in the fourth quarter of 2021 paints the true picture of SA’s stagnation and shows that the goal of growing the economy by 5% by 2030 is a dream. unachievable.

the problem

There has been no guarantee that the economy will grow. Instead, there are more businesses that, like Clover, are choking on ineffective communes.

READ | Clover closes SA’s largest dairy due to municipal problems in the Northwest

“The municipal roads were bad. Their trucks were constantly having tire blasts. The municipality overloaded them with fares and taxes,” Mboweni said.

She added that Clover was ready to close her business if she couldn’t move to Durban.

Repair roads and infrastructure instead of social spending

Self HEY if he were president, Mboweni said, his priority would be to repair bad roads and infrastructure and clean up the municipalities.

“The importance of managing municipalities properly is paramount,” he said.

Mboweni said there are many other preconditions for greater economic growth that are not present in South Africa.

While there are several structural reforms the country needs – including reconfiguring the country’s energy mix because “Eskom is a major constraint on economic performance” – there are also simple things the government is failing on.

“What are the prerequisites for achieving higher levels of growth? A capable state is very important. [A] state that he will repair the roads and do all these things, it is very important, “said Mboweni.

He said there are many other “underlying factors” that the government needs to refocus its attention on, including investing in infrastructure again rather than just talking about it.

The former finance minister also warned against populist policies, as the ruling ANC may try to appear voter after losing consensus in several meters in last year’s local government elections. Mboweni believes that the increase in social spending must be curbed, especially since the social sector already accounts for around 60% of the consolidated budget.

“As people go around talking about basic income, they have to be careful where we want to take the country. Yes, there is massive poverty and we need to intervene, but I’m not entirely sure … the income subsidy is where should we go, “said Mboweni.

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Mboweni said that given SA’s unemployment time bomb, the country needs to invest in infrastructure, which is a huge creator of construction jobs.

According to The economic indicators of the World Bank, SA’s gross fixed capital formation, which measures investment in infrastructure, has declined dramatically over the past 13 years. In 2018, SA’s gross fixed capital formation stood at 22% of GDP. In 2020 it was 14%.

Where the state is unable to bridge the infrastructure gap, Mboweni believes it should allow the private sector to help.

“The key thing that has happened in the transport sector is that the government has accepted that private operators can operate on the Transnet rail system. It’s a huge, huge development!” Mboweni said.

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