SA awaits it’s own Greek tragedy

No one can be sure how the result of the Greek referendum will affect the South African economy. Yet South Africa is unlikely to be immune. The European Union remains South Africa’s biggest trading partner. So we could be vulnerable to eurozone wobbles.

South Africa differs from Greece in that our foreign debt is well under control, while the Greeks owe more than R4 trillion to the International Monetary Fund and the European Central Bank.

Yet the underlying basis for the Greek crisis is financial imprudence, which we have in abundance. The public sector wage bill and our welfare system gobble up 60% of our national budget. That is unsustainable.

One of the Achilles heels in the Greek economy has been the national pastime of tax dodging. With this in mind, the referendum outcome should not have been a surprise.

A nation which is not in the habit of paying its way was always unlikely to vote “yes” to an austerity package which cuts down on freeloading.

South Africa’s laudable tax collection system is losing credibility after a series of top-level scandals. Yet the tax problem here is different from that of Greece. A relatively small number of individual income taxpayers carr y a heavy burden. Corporate tax collection is less than it could be as companies hold back because the climate is unfriendly to investors. The “investment strike” is a reality.

Political leaders are openly hostile to “monopoly capital” and “corporate capture”, as if business is the enemy. Yet it is business which can help lead the way out of poverty by providing jobs.

If, like the Greeks, we continue to flout simple economic principles we, too, shall end up broke. Some analysts think we are well on the way.