The 2025-26 annual Budget has been subjected to an unprecedented degree of interrogation and deliberation. But two inter-related issues have not been debated with sufficient rigour: the overall economic strategy in the budget, and the proposed increase in Value Added Tax (VAT). The VAT debate has been based largely on conjecture and ideology, rather than on the actual evidence of the impact of VAT, and its role in the country’s larger economic strategy. I address these lacunae in the budget debate in two parts.
A forum for economic policy debate
Econ3x3 promotes analysis and debate on unemployment and employment, income distribution and inclusive growth in South Africa. It publishes accessible research- and expertise-based articles and provides a forum for engagement between research and policy making. We invite contributions from economists and other social science researchers, policy advisors and independent experts.
Editor
Pippa Green
Popular this week
Hannah McGinty, Emma Whitelaw
Latest Articles
Tim Köhler
Education contributes to improving living standards, primarily through the labour market. Using more than 20 years of harmonized microdata, this article shows how the size and nature of the returns to education have evolved in post-apartheid South Africa. Despite a substantial increase in educational attainment, the returns to education have increased. By benefitting lower-wage workers more, this has reduced wage inequality which, nevertheless, remains extremely high.
Hannah McGinty, Emma Whitelaw
How has graduate unemployment evolved since 2008? We situate trends in graduate unemployment in the contexts of improved graduation rates, the shifting composition of graduates, the broader labour market, and public expenditure on higher education.
Andrew Donaldson
In this opinion piece on South Africa’s unemployment crisis, Andrew Donaldson argues that while structural reforms are needed to raise growth and broaden development over the longer term, an employment-orien
Thulani Ningi
Market competition plays a crucial role in ensuring fair pricing and economic efficiency within South Africa’s food industry.
Articles
Popular Topics
Editor's Corner
Andrew Donaldson
In this opinion piece on South Africa’s unemployment crisis, Andrew Donaldson argues that while structural reforms are needed to raise growth and broaden development over the longer term, an employment-oriented economic strategy is the central challenge in present times.
Viewed through an elementary growth accounting lens, South Africa’s frontiers of labour-intensive production should be steadily moving out, bringing unemployed human resources into economically useful occupations. We have abundant physical and mental human capabilities searching for work.
However imperfect the adjustment (“tâtonnement”) process, economic theory implies that there should be progress towards full employment, and higher output should flow from the mobilisation of otherwise unutilised capacity. And if markets don’t generate this result, it is a policy coordination function.
It is not that constructive applications are hard to identify. Houses need to be built, roads repaired, food markets expanded, clothing and furniture supplied, safety and security improved, water sources protected, children cared for.
It is not that we lack the know-how or technological capabilities required: these are activities in which knowledge is readily available and there is clear evidence of under-utilised productive capacity. To put unskilled labour to work, we do not need to overcome technological barriers in artificial intelligence, biosciences or big data processing.
It is not that higher production to meet domestic consumption needs might have unsustainable fiscal or balance of payments effects: in horticulture, timber and related products, light manufacturing, and a wide swathe of commercial and hospitality services there are growth opportunities in tradeable goods and tax revenue will flow from expanded activity.
Of course, there are complementarities in the resource combinations required to expand economic activity: engineering skills accompany artisanal capabilities and physical effort on building sites and floor managers oversee the organisation of work in restaurant kitchens and clothing assembly lines.
But the best available theories of skills development suggest that it is the application of learning by “doing” that is the proximate driver of productivity and skills acquisition.