South Africa is in very deep trouble – Economist

“We are in very, very deep trouble”. This is the view of Dawie Roodt, chief economist at the Efficient Group, who was discussing the state of South Africa’s economy on the Big Daddy Liberty show.

Roodt said the state is by far the biggest role-player in the South African economy, accounting for around a third of the total economy.

“The government takes a lot of money out of our pockets in the form of various taxes and they spend even more than what they take,” he said.

The difference in what the government spends and what they get in is quite significant, which means they have to borrow a lot of money to keep going every year.

“The rate at which the government is borrowing money is increasing much faster than what the economy is growing,” Roodt said.

He said South Africa has already reached a point where it is extremely difficult to turn the situation around.

What the government should do

Roodt said there are a few ways in which the government can prevent facing severe economic problems.

First, sell assets to pay off state debt. This is essentially the privatisation of assets – but in reality, there are not many assets which can be privatised.

Another option is to increase taxes. This has been done in the past, however, and South Africa is also running out of taxpayers.

An option which will see good results is for the government to cut back on state spending.

This is the only realistic way to turn the situation around, but that will mean anger from civil servants and trade unions.

“That is where we are, unfortunately. It will be extremely difficult to turn this around,” said Roodt.

Interview with Dawie Roodt

The full interview with Dawie Roodt is available in the video below.

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South Africa is in very deep trouble – Economist