Johannesburg - Increasing competition in South Africa solves the unemployment problem and will also help to solve the
inflation problem, according to chief economist from Investment Solutions, Chris Hart.
He was speaking at an economic summit on Thursday arranged prior to the DA publishing its own economic policy, which follows the ANC manifesto released last weekend and ahead of the Budget on February 11.
Hart said that monetary policy was only a part of the solution as market forces needed to set prices.
He feels that an inflation target of 2% rather than 3-6% would be more appropriate in helping to get to growth of 8%.
But he is critical of the SA economy remaining over-concentrated, for example in banking and via Eskom when it comes to electricity.
He says a single entity like Eskom could hold the entire economy to ransom at the moment.
"In banking, if there is one failure, then the whole system can fail, but if there are 14 or 15 banks then the rest can carry on," he said.
He said policies going forward needed to focus on reducing systemic risk and help open up the economy.
"Government must not spend its way into oblivion," he said.
Hart says SA's essential economic problem is unemployment, and hence poverty, and that at the moment the country does not have enough capacity to absorb all of the unemployed.
"The solution is to buy more plant and machinery and infrastructure growth, but the key resource used has to be savings, but savings are at low levels," he said.
He said some solutions were just "magic wand stuff", with the risk of them creating systemic risk from what is currently a cyclical slowdown.
He recommends raising saving via lower taxes on companies and on the interest rate.
He said the opposite applied at the moment where it was actually more beneficial for consumers to go and spend their savings as they have a less in a year's time.
He says, in addition, anti-competition fines should be used to actually grow the competitiveness of the specific sector as at the moment they are not dealing with the symptom of the problem - which is that there is an over-concentration.
And he adds that governments don't allow competition by having their own businesses.
"Governments should not be involved in business, but regulating those businesses," he said.
Hart is also critical of black economic empowerment in its current guise as it is not having the desired outcomes.
Instead he feels there should be only one person per BEE deal ie "widen the net" and that BEE should be "bottom up", meaning there is more benefit for workers than directors. He feels it should also shift to a non-racial, merit based system rather than the current non-merit based system as this would
balance sectors better.
He explains that people with skills will not want to work for a company with a non-merit policy.
- I-Net Bridge