Why South Africa – much like Zimbabwe - can’t print money to pay for Covid-19
109 days ago
Quantitative easing (“printing money” amongst impolite company) is inappropriate for a broke South Africa struggling to finance the fight against Covid-19, argues Nazmeera Moola (Head of SA Investments at Ninety One).
Read: Why quantitative easing isn’t appropriate for South Africa – Daily Maverick
Instead, she argues, we need structural reforms to boost economic growth and, therefore, tax revenue.
The government must, she says, cut expenditure.
This year, about 60% of all tax revenue will go towards paying government employees’ salaries.
In 2019, it was 47%.
If the government cuts total public sector wages by only 7%, it would free up enough money to pay a R350 per month Basic Income Grant to every person without a job between the ages of 19 and 59, says Moola.
“We would be cutting the wages of 2.5% of the population by 7% to pay a Basic Income Grant to 16% of the population,” says Moola.
Arabile Gumede (in for The Money Show’s Bruce Whitfield) asked Moola to explain why she believes quantitative easing isn’t appropriate for South Africa and why Argentina, Venezuela and Zimbabwe may offer a warning to us.
We have a multi-year funding gap. We have expenditure that is unsustainable… and growth that perpetually disappoints…Nazmeera Moola, Head of SA Investments - Ninety One
... Argentina, Venezuela and Zimbabwe are examples…Nazmeera Moola, Head of SA Investments - Ninety One
Our expenditure is too high, and growth is too low. We must do the hard stuff, unfortunately…Nazmeera Moola, Head of SA Investments - Ninety One
When you realise where the debt-to-GDP ratio is going… it starts to look pretty scary!Nazmeera Moola, Head of SA Investments - Ninety One
Listen to the interview in the audio below.
This article first appeared on CapeTalk : Why South Africa – much like Zimbabwe - can’t print money to pay for Covid-19