South Africa has ‘prioritised current expenditure and marginalised investments in the economy’: Rhandzo Mukansi – Futuregrowth Asset Management.
SIMON BROWN: I’m chatting now with Rhandzo Mukansi. He is head interest rate [analyst] and portfolio manager at Futuregrowth. Rhandzo, I appreciate the early morning time. Financial repression policy is something which, I have to be honest, I hadn’t heard of. I saw your recent article and went reading up on it.
RHANDZO MUKANSI: I think ideally perhaps what’s being positioned is an economy where government expenditure is beneficent. I think the domestic experience, when you think back to perhaps the trough of government debt to GDP in the early 2000s at around 30%-odd, gross government debt to GDP at the moment is, as you said, careering towards 80%. If you add provisions and contingent liabilities of the state to that, that number fairly quickly goes towards 100%.
SIMON BROWN: I take your point. Government has been sort of focusing on consumption, rather than capital expenditure, fixed capital investment, which would work better. The stark truth here is that really we need our government to make some tough fiscal policy decisions and implement them rather than perhaps trying to manage the process away. Just make those tough decisions.
And that’s really the nub of the issue here: how do we stimulate real growth and meaningfully grow the economy, as opposed to perhaps looking to financial repression-type policies which grow at nominal growth rates and perhaps help inflate away your debt-to-GDP issues but won’t solve the real issues, which are high unemployment, a poorly skilled labour force. I think those types of broader macro issues won’t be solved by the suggested financial repression routes that have been suggested.
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