Solidarity proposes economic recovery policies based on international examples

10th July 2024

By: Schalk Burger

Creamer Media Senior Deputy Editor


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Trade union Solidarity has submitted an economic recovery plan, which is based on international examples of policies that have led to improved economic development, to the National Treasury.

The policy proposals have five core focus areas, namely infrastructure maintenance and development, lighter and predictable personal and commercial taxation, a stable currency, a well-educated workforce and enforcement of law and order.

“South Africa has an opportunity to head in a direction that we know can work, because it has worked elsewhere. What is needed is the willingness to recognise this and take action,” said Solidarity Research Institute economic researcher Theuns du Buisson.

Policies must be measured on effectiveness in addressing their intended challenges. While many of the policies South Africa implemented over the past 30 years have been well-intentioned, they have contributed to one of the highest unemployment rates in the world.

“Economic growth is not about percentages. It is about people getting jobs, and working to afford cars, houses, families and education, and creating inter-generational wealth,” said Solidarity Research Institute head Connie Mulder.

“South Africa still has significant potential, with a young workforce, and we can grow, if we get people into jobs. The best welfare for people is having a job. We can do this by implementing policies that have been proven to support economic growth.

“We still have some of the best infrastructure in Africa. But other African countries are surpassing South Africa in growth and prosperity. The lack of growth and the results of poor economic policies mean that people in South Africa are getting poorer in real terms,” he added.

Reliable infrastructure and services, such as trains and electricity, are important to support commerce and will bolster the investment case for local and foreign businesses.

Predictable and light taxation will help people to grow their wealth. Personal income tax remains the largest source of revenue for government, but the country needs more people paying this tax, which can only be achieved through economic growth.

Further, the average company tax rate in the world is about 15%, while it is 27% in South Africa. Businesses do not want to give away more than a quarter of their profits for substandard services, Du Buisson pointed out.

“The government will miss the money from lower tax rates, but economic growth that leads to more people having jobs and paying taxes will lead to higher revenues and greater prosperity.

“Welfare, such as social grants in South Africa, must be a safety net for when people lose their jobs. The grant system is undesirable because it keeps people dependent on the State.”

However, because 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 will be changed into a social safety net for when people have lost their jobs, he said.

Additionally, a stable currency is needed to support economic growth, as is a well-educated workforce.

“Rather than fighting for a 5% or 6% wage increase, people should develop their skills to get a higher paying job and thereby secure a much more significant wage increase,” he averred.

The fifth policy proposal of ensuring law and order is needed for people to feel secure and for businesses to be confident that their employees and their investments will be safe if they operate in the country.

“These five focus areas are proven and repeatable steps used in other economies, including in Austria, China and Singapore, to reduce poverty and support development. They have been proven as prerequisites for economic growth in countries around the world,” said Du Buisson.

Economic growth and the subsequent creation of jobs will add to the tax base, rather than only redistribute the revenue that seven-million taxpayers provide, said Du Buisson.

“We have almost 13-million people in the country without work, about 26-million who receive some form of grant and about three in five people under 25 are without work. Some people in their 40s have never had a job,” said Mulder.

This has led to inter-generational poverty, which contributes to a host of issues in the country.

“The policies that have been implemented have not delivered the economic growth that we need to address our challenges, and implementing the same policies again will not deliver the needed growth; hence, our policy proposals for economic recovery,” Mulder said.

Promisingly, the current government of national unity is not a symbolic unity government but is a true power-sharing arrangement.

Coalitions tend to blunt the fringes of the political ideology spectrum, and this at least partially unshackles South Africa from ideologies that have influenced past policies, he said.

“The more people who have jobs, the lower the burden on the State will be and the greater the tax base, which will provide greater revenues for the State.

“Strong economic growth is the basis needed for a strong South Africa in which all communities will come into their own, and we hope that the country will put in place meaningful and proven economic policies that will lead to growth and development,” Mulder said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online




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