Recession: Economy needs freeing from the dead-weight of a failing state

South Africa’s slide into economic recession following a 2019 4th quarter 1.4% GDP contraction, is largely a consequence of the government’s failure to give South Africans their freedom from Eskom, continued bailouts to zombie SOEs and unsustainable levels of debt growth.

‘Economic tinkering’ is not a reform strategy. What South Africa urgently needs is bold structural reforms that will drive competition and investment in the energy sector, do away with the outdated model of monopolistic SOEs and reduce reliance on debt to fund consumption.

While the DA welcomed the President’s call to allow municipalities to buy electricity directly from IPPs, this crucial reform cannot wait a moment longer. The economy must be freed from the dead-weight of the failing state. This is especially the case in energy. It is important that specific and urgent timelines are provided for private energy generation and procurement. Government cannot afford to continue dragging its feet on energy sector reform when it is evidently clear that the Eskom crisis is slowly but surely killing the economy.

To free South Africans from Eskom, the DA proposed a 3-year Emergency Solar Rebate (ESR) that would offer tax rebates for solar systems installed at residential properties. This would remove 480 MW from the grid, offering a much needed energy lifeline to small businesses.

The R160 billion cut to the state wage bill, over three years, announced by Minister Mboweni, is a good starting point to slash government spending but more needs to be done to rein in government debt. The ANC should also help support the DA’s proposed Fiscal responsibility Bill, which holds the key to reducing national debt and debt service costs.

Freeing the economy from the dead-weight of a failing state will provide South Africa’s struggling economy with the antidote needed to arrest the terminal decline and put the country on a sustainable path of economic growth.