Macroeconomic aspects

What makes the rand so volatile: global or home-made factors?

Nasha Mavee, International Monetary Fund on 30 March 2017
Reads 1,837

Exchange-rate volatility can complicate decisions concerning trade and investment and constrain a country’s economic growth. Understanding what contributes to a currency’s volatility is an important first step in assessing whether economic policy can reduce this volatility. For South Africa, changes in global commodity prices and financial-market risk perceptions drive most of the rand’s volatility. However, local political uncertainty also emerges as a significant source of volatility. More policy and political predictability could help to smooth the rand’s volatility.

Have real wages fallen behind or increased out of line with productivity? A macroeconomic perspective

Philippe Burger, University of the Free State on 20 January 2016
Reads 3,458

Macroeconomic data on wages and productivity suggest that there has not been any constant tendency for real wages either to fall behind or increase out of line with increases in productivity. Upward shifts have affected real wages sporadically, but have subsequently been offset by downward shifts, leaving a one-to-one long-run relationship between real wages and productivity. This is contrary to the conventional wisdom in both the labour union and business worlds.

How effective is VAT zero rating as a pro-poor policy?

Ada Jansen, Stellenbosch University on 20 July 2015
Reads 5,417

In most countries with VAT, certain goods and services are zero rated to alleviate the tax burden on the poor. However, this may not be the most cost-effective way of helping the poor. We investigate the appropriateness of the products currently zero rated and the impact of this on the poor, the implications for tax revenue were it to be removed, and the contribution to poverty relief of zero rating compared to targeted social transfers.

The Budget’s fiscal stance: The non-cyclical element may be a cause for concern

Wynnona Steyn, South African Revenue Service on 16 April 2013
Reads 13,636

It is estimated that less than half of the present main budget deficit of 5.7% is explained by cyclical factors. The remainder reflects a non-cyclical, structural component of the deficit. The increase in the structural budget deficit since 2008 may constrain the ability of government to sustain its present revenue and expenditure policies. An in-depth understanding of the structural component of the fiscal position as opposed to its cyclical element is important for sustainable long-term government financing and planning.

The Budget: both the fiscal stance and ‘structural stance’ are sound

Kuben Naidoo, National Treasury on 25 March 2013
Reads 5,296

Many economists have argued that the government’s fiscal stance in the recent budget is verging on the risky. This article argues that the fiscal stance is both correct and prudent. In addition, the article puts the budget in a broader developmental context, highlighting its contribution to long-term growth and development and to tackling poverty and inequality.

The National Development Plan and exports as a catalyst to generate employment growth: Can it work?

Philippe Burger, University of the Free State on 20 November 2012
Reads 7,266

Small and medium-sized firms hold the potential to absorb most of the unemployed in South Africa. In this the NDP may be correct. However, the NDP may not be correct in arguing that exports can be the main catalyst of the growth the country needs to address poverty and employment. Several factors hinder such a strategy. A more domestically-focused policy aimed at production (and services) for local consumption might bear more fruit.

The unemployment debate is too fragmented to address the problem

Frederick C.v.N Fourie, University of the Free State on 18 November 2012
Reads 8,736

The debate on unemployment is fragmented into at least three sub-discourses, i.e. those of macroeconomists, labour economists and poverty analysts. This results in inconclusive analyses and narrow, flawed proposals to address the problem. This fragmentation feeds into the policy field. Sustainable and consistent remedies for unemployment and poverty will require an integrated analysis that covers the formal sector, the informal economy and survivalist activities – and especially linkages and barriers between these segments.