ACTION THREE: Fix the fiscal crisis

The third report in CDE’s AGENDA 2024: Priorities for SA’s new government focuses on fixing the country’s fiscal crisis. The costs of South Africa’s unsustainable fiscal position are high and rising, and the failure to address it causes enormous harm. The speed at which public debt levels have risen in South Africa has had very significant negative effects on SA’s growth prospects. The government must refrain from making any new unaffordable spending commitments. This includes avoiding agreements that escalate public sector remuneration spending faster than the economy’s growth rate. A major challenge is wasteful spending that generates very few benefits or returns. This is especially reflected in the poor performance of our schools, hospitals, police, courts, railways, roads, power stations, etc. Better management practices and dramatically improved accountability systems must be introduced to turn this around, but that will require committed leadership. To stop the massive waste that takes place when 10 per cent of the national budget is transferred to municipalities and metros, the President should appoint a high-level expert task team to relook at the structure and financing of this sphere of government with recommendations for action to be discussed in parliament within six to eight months. Faster economic growth, which is critical to achieving fiscal sustainability, can be achieved through improved governance and a lot less corruption combined with reforms aimed at strengthening the role of competition in the economy.

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