Investment Solutions’ Solutions to ZA’s Economic Woes

Intrepid globetrotters Glenn Silverman and Chris Hart, both of Investment Solutions, have completed their tour of the five BRICS nations, have written a book about it (Half Way There), and today drew some lessons for South Africa from their observations.

Glenn Silverman kicked off, with a warning that the local economy is far from healthy. We have been a high inflation, low growth country since 1960s “and we seem to be going back to the bad old days.” Based on world rankings, he described SA as a schizophrenic country, with big strengths in the corporate sector and financial services sector, but worrying weaknesses in labour-employee relations and education. He suggested we should set regular goals to improve our position in global rankings, in those areas where we are weak. SA has a slow puncture – a slow deterioration in some vital areas. The way forward is to reduce unemployment, to boost growth, improve education, and protect the rule of law, institutions and property rights, while putting the focus on the private sector and reducing regulation.

Chris Hart suggested that the SA government has very high expenditure plans – with 4 expenditure bombs. These are the public sector wage bill, parastatal funding, the planned nuclear deal, and the intended National Health Insurance scheme.   He said: “The money has to be earned before you spend it, but not in this bizarre world.   Debt is going up and the deficit is rising.”  Looking ahead to the budget, he suggested that “the government doesn’t need more money. It needs more efficiency.   We have fallen down the rankings in terms of being an easy place in which to invest and do business.   In the budge, we should spend where there are results. There was no return on World Cup stadiums. Do we put money into education without fixing education? You should not spend more where you have failure – the budget should be frozen.”   And his budget prescription: “I would like to see taxes being cancelled or cut on capital gains, dividends, taxes on interest earned, dividend taxes… I would rather see a luxury VAT, to eliminate these other taxes, the wrong taxes, which target the rich, and shut down the chance of upside in the economy.” 

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