- Tito Mboweni says SA doesn’t have many of the preconditions needed for higher economic growth.
- It can start with fixing the “basic factors” like bad roads and crumbling infrastructure.
- Instead, the government is focused on expanding social expenditure with things like basic income grants.
Without fixing dysfunctional municipalities, dangerous roads full of potholes and reducing reliance on Eskom, South Africa can forget about meaningful economic growth, says former finance minister, Tito Mboweni.
Instead, Mboweni said that the 1.2% GDP growth in the fourth quarter of 2021 paints the true picture of SA’s stagnation and proves that the target of growing the economy by 5% by 2030 is a pipe dream.
While there are several structural reforms the country needs – including reconfiguring the country’s energy mix because “Eskom is a major constraint to economic performance” – there are also simple things government is failing on.
“What will be the preconditions for us to achieve higher growth levels? A capable state is very important. [A] state that is going to fix the roads and do all of those things, it’s very important,” said Mboweni.
The former finance minister also cautioned against populist policies, given that the governing ANC might try to appease voters after losing support in many metros in the local government elections last year. Mboweni thinks that the expanding social expenditure bill needs to be reined in, particularly because the social sector already accounts for about 60% of the consolidated budget.
“As people go around talking about the basic income, they have to be careful about where we want to take the country to. Yes, there is massive poverty and we must make interventions, but I’m not quite sure … a basic income grant is where we should go,” said Mboweni.
According to the World Bank’s economic indicators, SA’s gross fixed capital formation – which measures investment in infrastructure – has fallen dramatically in the past 13 years. In 2018, SA’s gross fixed capital formation stood at 22% of the GDP. By 2020, it was 14%.
“The key thing that has happened in the transport sector is that government has accepted that private operators can operate on the Transnet rail system. That’s a huge development, huge!” said Mboweni.