In a recent interview with McKinsey, former US Treasury Secretary Larry Summers shared his thoughts on what the US government should do to grow the economy. His to-do list included the need to address health and education, increase spending on science and innovation as well as to encourage investment. In particular, the government should take advantage of the current low interest rate environment to build more public sector infrastructure.
If only finance minister Nhlanhla Nene had some cash in his coffers to follow that advice. Come budget day on 25 February, his focus will be on explaining why he is increasing our taxes and cutting spending.
The current economic climate isn’t conducive to private sector investment either. Even if we ignore the economic growth forecasts and the disaster that is Eskom, we are failing dismally at providing investors – the kind who are willing to build mines and factories, and stick around for longer than the next trading session – with regulatory certainty.
We’re recruiting foreign investors the one moment, and threatening their security of tenure the next. We continue to tinker with key pieces of legislation, such as the mineral and petroleum law.
Confidence is the cheapest form of stimulus, Summers says. It’s a pity that, come Wednesday, Nene won’t have even that rabbit in his hat. Send comments to the Editor, Jana Marais – email@example.com.