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Cyril's 2-week action plan won't fix 10 years of pillaging: ...


Cyril's 2-week action plan won't fix 10 years of pillaging: economists

SA economists weigh in on Ramaphosa's challenge to come up with a plan to help consumers cope with rising costs


A mixed bag of wishes – that is what South African economists are offering President Cyril Ramaphosa after his challenge to ministers to come up with a plan to help consumers cope with rising costs.
The usual suspects are there – get rid of costly parastatals, rethink land expropriation without compensation.
And economist Dawie Roodt even threw in some tough love: “People have to accept the reality that South Africa is getting poorer and start cutting back on their living standards.”
But independent economist Ntombana Mbele reckons old-fashioned networking and talking to one another might prove an excellent start.
Ministers in the economic cluster were given two weeks to come up with a plan to deal with the ever-rising cost of living for South Africans, particularly the staggering petrol hikes.“The economic cluster should engage retailers and food suppliers/producers to halt increasing their prices in exchange for an agreed decrease in the corporate taxes that they pay to the state,” Mbele suggested.
“This will give government more time to come up with sustainable remedies to these issues whilst safeguarding consumers from these price hikes.”
South Africans are finding themselves increasingly cash-strapped. Earlier this month petrol rose by 26c a litre for 93 octane, with 95 octane fuel going up by 23c, while diesel (0.05% sulphur) was hiked 26c per litre.This was followed by a petrol hike in June and this week the Automobile Association warned motorists to expect yet another fuel increase in August. This year also saw VAT increased from 14% to 15%. Water, electricity and sewerage increases were announced across the country’s municipalities.
Mbele said with VAT and fuel price hikes being the main challenges facing households, the cluster could look at accelerating the new oil relationship that Ramaphosa has forged with Ghana. This could lead to having an alternative oil supplier with a lower exchange rate risk, and help mitigate further fuel price hikes.
Other economists approached by Times Select agree the deadline set by the president is a steep climb.South African Institute of Race Relations chief economist Ian Cruickshanks said coming up with a plan to deal with rising cost of living is not something that can be done in two weeks.
“The economy has been pillaged for at least the last 10 years, so an action plan to fix that in two weeks is asking a lot. It’s a massive task, but not impossible, if Cyril Ramaphosa can get the electorate to go with him with a promise of a better future.”
He said the situation is made worse because “we haven’t just fallen to the ground floor, we’ve fallen to the economic basement”.
Economist Dr Azar Jammine warned that short-term attempts had “very little chances of success”. 
They also agreed that the first step in dealing with the rising cost of living was to build up confidence in the economy.Cruickshanks said this would result in more capital entering the country, which meant more people could potentially be hired. This would ultimately increase spending power and promote corporate revenue.
“We have to start building up confidence in the economy. Land expropriation without compensation is damaging confidence. Talk of the introduction of the NHI – we don’t know who will foot the bill and the same can be said for the mining charter,” said Jammine.
For economist Dawie Roodt, the first task in improving the economy is to get the economy to grow faster. This means reducing the size of the “inflated” state. 
“You have to fire a lot of civil servants; there are too many and they get paid too much. You have to reduce the tax burden, but politically that is going to be a very difficult thing to do. You need to nationalise Eskom and other state-owned entities to reduce the tax burden,” Roodt said.
Cruickshanks added that SAA should be closed down because it was “drowning in debt”.
“There’s an election next year so they can’t do anything to upset the labour sector. It’s balancing the political risk against the potential for commercial reward.”Jammine said not increasing the petrol rise is not an option, as it would come to back to bite consumers eventually.
Mbele suggested that other essential goods, such as sanitary towels, be exempted from VAT.
“Looking at goods that are commonly bought by households will also assist the cluster in knowing which goods to include in the basket. This will ease the burden for consumers in a significant way.”
She said foreign direct investment should be the cluster’s long-term plan and should include forging strong relationships with potential investors as part of the $100-billion goal that the Ramaphosa administration has set itself up for.  
Roodt also sounded this warning: “The tough times will continue. If you have a job, keep it and stay productive.”

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