The Reserve Bank governor’s justification for reducing the inflation target to 3% is largely false analysis (“Kganyago sees 3% inflation target as key to cutting SA’s risk premium,” August 13).
Country risk is determined by many factors, not just macroeconomic factors. There is perception that SA is no longer politically stable, partly due to socioeconomic factors. Political stability cannot be achieved when a country has high unemployment, high income inequality and extreme poverty.
There is perception that SA has become lawless; that crime is out of control. Law enforcement agencies are under-resourced and cannot enforce or maintain law and order.
There is perception that SA does not protect or respect property rights. Assets can be expropriated by the state without compensation.
What SA should be doing is addressing all of these matters. Once they are adequately addressed, a conducive environment for reviewing SA’s macroeconomics will be created. At that point the Treasury will be able to lower tax rates because of the increase in the number of taxpayers resulting from the eradication of unemployment.
John Maleka
Via BusinessLIVE
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