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SA the biggest welfare state in the world, says economist

South Africa is the biggest welfare state in the world, economist Mike Schussler said on Thursday.

“Look at South Africa’s dependency ratio — it’s three people to one taxpayer and it’s unsustainable,” he told a post-budget speech breakfast hosted by Absa and the South African Institute of Tax Practitioners in Johannesburg.

He said Minister of Finance Pravin Gordhan’s budget was conservative –“and financial markets like conservative budgets”.

Schussler welcomed Gordhan’s stance on not widening the inflation target.

In his budget speech, the minister made it clear he had rejected calls from the left to widen the South African Reserve Bank’s (SARB) inflation target of 3% to 6% and to broaden the SARB’s mandate to include economic growth and unemployment.

“It must be realised that the SARB and interest rates won’t be able to fix everything,” Schussler said.

“Besides, this was the minister’s first speech and it wasn’t time to play around … Gordhan has been very prudent here and it’s good that inflation targeting is going to be debated.”

Moreover, Schussler said it was important for South Africa to show that it did not change policies every time there was a new president.

Turning to the National Health Insurance (NHI) scheme, he said it was clear from Gordhan’s speech that not much would happen for the next three years.

“The left don’t know how to read an income statement. The NHI scheme will be very expensive and would make us the most taxed society in the world,” Schussler said.

He gave Gordhan seven out of 10 for his first budget speech in circumstances where South Africa’s first recession in 17 years drastically reduced revenue.

“His revenue had fallen away but he still has done a very good job.”

According to Schussler, the new finance minister had illustrated that he was more conservative than former minister of finance Trevor Manuel.

Asked if Parliament could change Gordhan’s budget, Schussler confirmed that this could theoretically be done.

“They typically don’t change things — but there are one or two things in expenditure that may not stay the same.

“This would involve about R2-billion an that’s not much when your expenditure amounts to R800-billion.” — Sapa

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