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Chris Hart: Incentives often a sign of bad policy

Cape Town - Government incentives are often there to make up for bad policy, according to economist Chris Hart.

"Government policies can be enabling or disenabling. Rather take impediments out of the way," he said during a presentation at the Smart Procurement World Conference in Cape Town on Tuesday.

"Water flows downhill I always say. A higher hurdle rate leads to a lower growth rate, while a lower hurdle rate leads to a higher growth rate."

Earlier during the conference Minister of Trade and Industry Rob Davies announced a new cost sharing grant relating to procurement and supply. The aim would be to enhance manufacturing supply capacity.

Hart said since the 1980s countries like China, Mauritius and Chile have overtaken SA. Mauritius - which has not much more than good beaches going for it in his view - started in 1980 with a gross domestic product (GDP) per capita of less than half of that of SA. Now Mauritius is regarded as the 5th most economically free country in the world.

READ: DTI sweetens procurement transformation pill - Davies

"SA increasingly has a self-induced disabling environment, yet, the country has a high potential," said Hart.

In his view, the antidote for SA's three main challenges of poverty, inequality and unemployment should be policies which remove over-regulation of labour, remove over-taxing and address the deficits of both government and households.

"Taxes are a burden. If the government is taxing a tax base which is already in deficit, it is creating problems for those it should be serving," said Hart.

His criticism of Budget 2017 is that capital formation is being taxed.

"Government is trying to alleviate poverty, but it is not reducing poverty as it is merely shifting resources," said Hart.

"SA needs to be competitive not comparative. We must look at SA and Africa in a global context to see how the country can be competitive. Nobody is going to invest in SA if we are essentially against investors."  

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