South Africa is struggling to grow its economy and alleviate unemployment because it insists with failed policies, an economist said on Wednesday.
“We're dabbling with policies that are known to have failed... and that is why South Africa is struggling,” Chris Hart, chief economist at Investment Solutions, said in Johannesburg.
The country's fiscal policy was not sustainable, he he said at a discussion on the future of the South African economy organised by the South African Institute for Race Relations.
“Trying to construct a developed market welfare state on a developing market tax base is not going to work,” he said.
Ratings agency Standard & Poor's downgrading of South Africa's economic outlook to negative on Wednesday was “something we need to heed... while our fiscal policy is unsustainable”, Hart said.
The child grant, National Health Insurance and other poverty alleviation policies were all sustainable if looked at individually.
“The trouble is, put them all together and you get something that is hideously unsustainable because we don't have a deep enough tax base.”
However, Hart said it irritated him that ratings agencies were concerned about political risk in South Africa.
“Politics is having zero effect on South African markets... unlike in Greece for example.”
He said if one analysed the financial markets last year, you would not be able to determine when elections were held.
“You will not see a ripple.”
Hart said South Africa's political institutions and processes were worthy of a top rating.
“South Africa is doing very well because on the investment side we have yield, we have growth and we are solvent.” - Sapa