Dear President Ramaphosa, we have read with great interest and appreciation the broad comments by deputy minister of finance Dr David Masondo in an interview with Business Day on Thursday July 4.
While some may feel that parts of his comments are controversial — such as those on monetary policy — we nevertheless welcome the frank views on politically sensitive issues indicating that there is still scope for discussing difficult choices without being labelled as dogmatists. It was refreshing to have a contribution that got to the substance of the policy matters at hand from someone who clearly possesses a serious intellect. We should continue in this vein, insisting on separating the substantive policy debate from politicking and alarmism.
We do not wish to get entangled in the debate on the SA Reserve Bank except to say that a recognition of the independence of the Bank does not preclude proper consultation with the Treasury. Fiscal and monetary policy must work in tandem.
We particularly welcome Dr Masondo’s comments on the need for a developmental state. We are reminded daily that SA is a developing country with huge numbers living in desperate conditions. These conditions are not being improved significantly by welfare payments and it may be that over the years we have lost some focus on development in favour of welfare spending. While welfare is necessary, we need a primary focus on development spending. It is abundantly clear that poverty and unemployment can only be overcome by deliberate interventions by the state to draw people into economic activity. Investment itself, however, will not lead to redistribution. We have to develop redistributive fiscal mechanisms which ensure that not only the wealthy benefit from such investment and here social policy can play a role.
We also agree that a priority is to encourage investment to boost demand for employment to grow. This applies to both the state and the private sector. The primacy of investment is now common cause by all commentators on the economy. The challenge, however, is to identify by what means this is to be achieved and where such investment should be directed so that it serves the majority of our people. There is ample room for debate on this now.
We need to consider providing meaningful stimulus to grow the economy using all available instruments at hand to do so in the spirit of the developmental state. This can be done responsibly and within the bounds of our fiscal position along with other market realities and in this effort, monetary policy too has a role as Dr Masondo has alluded to, albeit not in isolation from other policy interventions and structural reforms.
There are some prospects that government, business, labour and civil society can find common ground here and we, the undersigned, offer our support.
Professor Ben Turok and 16 other university professors and economic researches
By e-mail
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