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Rising Public Debt in South Africa

 

eNCA: Fridays with Tim Modise

Friday, 5 April 2019

Interview about South Africa’s rising public debt and what has been driving the increased debt. The discussion reviews the impact of the rising public debt and what the debt has been used to finance. The interview also reviews alternative sources of finance such as foreign direct investment, the significance and impact of foreign investment, and possible solutions to the challenges facing the South African government.

Siya Biniza

Role: Executive Director
Contact: siya@politicaleconomy.org.za
Siya is a Political Economist specialising in Development Finance, Industrial Development, and Regional Integration...

1 comment

  • There are a couple of interesting facts about “money” that people today should take into account. First, “money” today, in virtually every nation on this planet, has become an essential tool for survival.
    Fact # two, it is totally realistic that any given society needs an acceptable and guaranteed medium of exchange, which, in reality, is the only real purpose for having a “money” system.
    Fact # three, it would be a major nightmare for everyone in a given society if they had to contend with multiple different forms of money for their daily living. Fact # four, a nation’s Government is the only logical entity in the position to declare what shall be the nation’s legal tender, and the only practical entity with the power and authority to back up a guarantee that the legal tender is not false and counterfeit.
    Fact # five, if “money” has become an essential tool of survival for everyone living in a given nation, it should be the Government’s duty and responsibility to ensure that everyone is adequately provided with access to that essential tool.
    Obviously, there is no use providing people with “money tickets” is there is nothing to exchange them for. Hence,
    Fact # six, it is a Government’s duty and responsibility to ensure there is an adequate productive capacity with the ability to provide for the needs and wants of the people. To date, history has shown that individual initiative and entreprenurialship lies in abundance when the opportunities occur. A good Government can encourage this and support such productivity through providing an educated and healthy population along with an honest judicial system to ensure the producers provide safe and healthy products in an honest and ethical manner. A Government is far better placed to plan and provide a nation’s infrastructure that will benefit both the people and the productive sector, rather than leave it up to the producers to prioritise their needs.
    When the Government is the sole creator of the nation’s money supply – a system that has proven to be the most efficient, convenient and practical system for providing a universally acceptable and guaranteed medium of exchange, the Government is in the position to monitor the supply in a way to make sure the money available bot production is in relative balance to the amount of money needed for consumption of that production and in keeping with the nation’s population levels.
    Fact # seven – it is obvious that the population levels play a major part in determining the needs and wants of the people, and just as importantly, a rising population must always lead to an increase in the money supply.
    Fact # eight – rather than burdening the people in a perpetually increasing web of debt, the Government should use the current banking system to do the job it actually does quite well. The banks form the vehicle for distributing the money supply to the private sector, but unfortunately, they do this by distributing the “money” as interest bearing debt. That “bank money” is not supplied by the Government and is largely outside of the Government’s control as how it is distributed and the purposes for which it is used.
    Fact # nine – As the Government really does have the only legal authority to declare what shall be the nation’s legal tender, then the Government is also in the position to declare what shall be designated as “credit”. Thus, the Government is in a position to SELL credit access to the private banks for passing on to the bank’s customers. The private banks would be required to carry out a legitimate due diligent analysis of a customer’s application for funds, and if rational collateral is deemed acceptable, the bank could then apply for the allocation of “credit” from the Government. The bank would then pass this on along with an administration fee applicable to the period of the loan. That fee would include the purchase cost of the “credit” paid to the Government but the banks would not be allowed to charge any interest on the loan, and certainly not compound the administration fees in any way.
    Fact # ten. It is obvious from the current amount of “money” distributed as “digital money” by the private banks that the Government, by selling credit access at a very low cost, the Government could achieve all the revenue they need without imposing any other form of taxation on the whole of the economy. Of course, this would mean that the Government would lose much of the control they currently have over the people through their enforcement of tax laws and the threat of penalties.
    I guess the choice is really up to the people. Do the people want shed the shackles on ongoing debt and the imposition of taxation that blights their lives?
    A good question.
    If people are happy with the way the system currently works, then it their choice.
    Let the status quo remain.

Siya Biniza

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