Dawie Roodt on kick-starting South Africa's economy

South Africa's economy is flatlining. How do we kick-start economic activity to ensure higher levels of investment and growth?   

In this episode of the Solutions With David Ansara podcast, I speak to Dawie Roodt, Chief Economist and Director of the Efficient Group, about how to fix South Africa's ailing economy.

Dawie and I analyse the causes of South Africa's recent decline, which has more to do with political factors than economic ones: the outsized influence of the Tripartite Alliance on labour policy; the damaging effects of the Expropriation Without Compensation (EWC) debate on investor sentiment; the risk of National Health Insurance (NHI), which would crowd out private medical savings; and many other harmful policies.

Dawie is critical of the much-vaunted idea of the 'developmental state', which is premised on an efficient and effective civil service that South Africa simply does not have.  The growth in the size and scope of the state has merely facilitated patronage distribution and corruption, Dawie argues.

Government has also attempted to widen South Africa's social security net, particularly during the pandemic, which has resulted in severe problems for the country's fiscal accounts, with government expenditure far exceeding revenue collection. Consequently, public debt is projected to balloon to 80% of GDP.  

There are a few ways that South Africa can get out of its current debt spiral: we can cut our way out (austerity); we can increase taxes; we can grow our way out; or we can inflate our debt away by eroding the value of the currency (watch out for growing political pressure on the Reserve Bank to loosen monetary policy). High inflation will be devastating to savers and the poor in South Africa, he argues.   

What would Dawie do if he were in charge of economic policy, I ask? Simple. He would liberalise the labour market, remove minimum wages, guarantee property rights, abolish BEE and sell off state-owned enterprises.  

Dawie also offers some advice for South Africans looking to protect their income and their assets from state failure, including (legally) minimising your tax exposure, and providing services that the state is no longer able to provide, such as education and infrastructure.  

There are many areas of the global economy that offer significant upside, he says. These include emerging opportunities in the technology sector, offshore investments, and cryptocurrencies.  

TIMESTAMPS 

(00:00) Introduction

(00:30) Dawie Roodt on why the South African economy isn't growing

(01:53) Dawie Roodt on why economic policy is hostile to business

(04:26) Dawie Roodt on the growing dependency on the state

(06:10) Dawie Roodt on the role of the Tripartite Alliance

(09:17) Dawie Roodt on South Africa's new finance minister

(13:51) Dawie Roodt on South Africa's fiscal problems

(17:58) Dawie Roodt on what he would do if he were finance minister

(22:32) Dawie Roodt on what ordinary South Africans can do to protect their wealth

(30:32) Dawie Roodt on  South Africa's shrinking tax base

(35:00) Dawie Roodt on offshore risks and opportunities

(39:10) Dawie Roodt on cryptocurrencies

(41:44) Dawie Roodt on how to navigate uncertainty

(42:49) Conclusion

Watch this  on YouTube