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@RonakGopaldas and other critics of proposed policy of using the SARB to reduce interest payments by our gov & private sector, & fund productive growth, base their criticism on the idea that gov can’t be trusted. In this thread I will respond. https://www.businesslive.co.za/amp/bd/opinion/2020-07-22-magic-money-easy-to-conjure-but-its-spell-could-haunt-us/#click=https://t.co/XSywl8XtH8
Every unnecessary extra 1% in interest charged on SAs over R6 trillion debt (public & private sector) costs SAs gov, households & productive industries R60 billion per year. A drop in 1% interest charged on governments near R4tn debt would save Gov (& taxpayers) R40bn per year.
The argument the state should continue paying 9% on its 10 year bonds, when a household can borrow at prime (7,25%) and a bank at repo (3,75%) makes no sense, especially when the Rands the state borrows are issued by an organ of the state ( @SAReserveBank) & gov debt is safest.
Gov can borrow from the SARB at repo rate (3,75%) using a normal bank loan, and save hundreds of billions per year in interest payments.
The hundreds of billions paid by gov on unnecesary high interest charges are wasteful and inefficient expenditure.
The hundreds of billions paid by gov on unnecesary high interest charges are wasteful and inefficient expenditure.
The argument that SARB should not reduce wasteful, inefficient expenditure by gov by lending directly to gov at lower interest rates because government is prone to spending inefficiently makes no sense.
Rather put in place measures to reduce corruption & wasteful expenditure.
Rather put in place measures to reduce corruption & wasteful expenditure.
The analysis that gov is losing money on wasteful expenditure mainly on its wage bill holds no water.
1) Gov employees do not earn exorbitant wages.
2) Gov only employs around 2 people per 100 citizens. Due to extreme unemployment & poverty the majority depend on gov workers.
1) Gov employees do not earn exorbitant wages.
2) Gov only employs around 2 people per 100 citizens. Due to extreme unemployment & poverty the majority depend on gov workers.
The real leakages in state spending due to corruption etc occur when gov & SOEs procure from the private sector...not just in procuring goods and services but also in borrowing money (gov bond sales). Individuals & companies are making billions on these outsourcing deals.
If analysts like @RonakGopaldas want to reduce wasteful expenditure, they should be calling for more insourcing by gov & SOEs, not just in procurement of goods & services but also insourcing of funding. The state does not need to borrow Rands from any middlemen. It creates Rands.
Neoliberal economists call for smaller state, more outsourcing & privatization, all of which incentivizes corruption & inefficient spending.
Then they point to those inefficiencies & corruption in state spending as reasons to increase outsourcing & privatization.
Then they point to those inefficiencies & corruption in state spending as reasons to increase outsourcing & privatization.
To reduce inefficiency & corruption, gov must insource. When insourcing is impossible, gov must procure & borrow as much as possible from SAns & SAn owed companies that pay a living wage, have low pay gaps and profit share with workers. Here’s why: https://buddywells.wordpress.com/2017/02/06/what-to-do-about-corruption-in-sa/
