Trade union Solidarity has urged the government to prioritise infrastructure investment, soften the tax burden, stabilise the rand, ramp up skills development and strengthen the rule of law in a bid to ignite economic growth in South Africa.
The Solidarity Research Institute (SRI) yesterday launched an economic recovery plan, which argued that growth was essential for the state to first get its finances in order without putting further pressure on citizens in the form of taxation.
Theuns du Buisson, an economic researcher at the SRI, said though the South African economy was in serious trouble according to almost all criteria, major intervention can begin to make a difference.
“It is indeed possible to change course, even now. Solidarity believes strong economic growth forms the basis for a strong South Africa in which all communities will come into their own,” Du Buisson said.
“This report proposes a clear plan in terms of which such strong, sustained growth will be achieved,” he said.
The report argues that concrete action must be taken to knock road and rail transport into shape, and liberalise the electricity market to allow more private service providers.
It also proposes reforms in the tax system beginning with corporate taxes, saying that South Africa must move closer to the Organisation for Economic Co-operation and Development’s (OECD) target of 15% company tax.
The SRI report said all fixed-capital investments should be fully tax deductible to encourage continued growth, while social grants should be reconsidered by replacing smaller grants and VAT exemptions with one universal basic income grant.
It said the independence of the SA Reserve Bank must be reaffirmed, with the state confirming its commitment to growth and a free business environment to protect the value of the rand.
The SRI said emphasis must be placed on the quality of school education, and steps should be taken to ensure people with scarce skills were trained locally as far as possible.
In South Africa, there are currently more than 8 million unemployed people and more than 3 million discouraged job-seekers.
However, the report said BEE laws and employment equity regulations were obstacles to employment and excessive bureaucracy in the workplace, and thus must be removed.
It also said law and order must be maintained, and particular attention paid to violent crime and corruption, which created the perception that it was not safe to do business in South Africa or to visit the country.
Du Buisson said a copy of this plan was also handed to the National Treasury and the hope was expressed that it would be possible to put their trust in meaningful economic policies.
He said Solidarity hoped that in the weeks following the elections, attention would be given to proposals that can benefit the economy immediately as well as in the long term.
“We hope that the new administration, now that its strong ideological handcuffs are slightly loosened will be able to start making better decisions regarding the economy. Only then can attention be given to challenges such as poverty and inequality,” he said.
“This is an opportunity to head in a direction that we know can work, as it has worked elsewhere. What is needed, however, is the willingness to recognise this and to then take action.”
Du Buisson said some of the proposals in the SRI’s economic recovery plan, such as those on a universal basic income were not as instrumental for growth as he would prefer it to be, but they were nevertheless still the only way out of the current circumstances.
“Of course, the grant system remains undesirable, because it keeps people state-dependent. Since so many people are already dependent, the best solution for the time being is to make it more streamlined with a clear outline of when and under which circumstances it would finally be terminated,” he said.
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