Currently, South Africa sits on 50-percent of Gross Domestic Product (GDP) in sovereign debt. This is also called “debt financing”. It is in fact, a direct result from the era of the British theoretician John Maynard-Keynes’ theory of “debt financing”. It is however, a discredited theory, as there is simply no logic in his thinking.
EU members today have a deficit financing standing at over 80-percent debt to the GDP ratio.
The United States of America sit with over 110-percent of debt to GDP financing. America’s sovereign debt stands at US$17trillion. The US sovereign debt has therefore, created the largest nation of debtors in the history of the world. That exorbitant debt was built within sixteen years from the time Bill Clinton was US president onwards. At a standing GDP of US$15trillion, the debt of US$17trillion, would never be paid off.
The above translates into serious inequalities for the American citizenry and more strife for the world at large in the form of more wars, more economic restraining measures against the rest of the world.
Back to South Africa, where the controversial regulatory banking law, FICA, was tabled to be signed by president Zuma. However, the ANC Youth League appealed to the president, not to sign it.
An independent economist comments under the condition of anonymity, “FICA is constitutional mischief. South Africa is a sovereign state, which has to apply the constitution and live with it. The Treasury’s mischievous attempt to change this around by compiling the damaging FICA bill, claiming, it is necessary to monitor and control money laundering and financing of terrorism, is simply unacceptable. FICA is certainly not necessary in South Africa.”
This country has a constitutional democracy and sovereign state. The state certainly has no mandate to suspend the constitutional rights of its citizens on the basis that the country is a member of the United Nations (UN).
“As far as FICA is concerned, the national Treasury launched an assault on the constitutional rights of South Africa’s citizens through the dishonest application of FICA, claiming to frighten off corruption and even worse, transferring the criminal justice system, vesting it into the hands of the private banking cartel.” “This move can aptly be described as a major step closer to a rough banana republic status”, the above-mentioned senior economist added.
He further asked, “Why would South Africa’s national Treasury invite, furnish all required information and pay foreign UK-US ratings agencies – Standard & Poor, Moody’s and Fitch – to be reliably downgraded? That service does not come for free. South Africa’s Treasury pays for being downgraded. Who is responsible for such illogical and self-destructive buffoonery?”
Meanwhile, president Zuma has to send FICA back to parliament. At the same time, it is national Treasury’s job to re-finance sovereign debt. This is however, not done. Why would Finance Minister Pravin Gordhan renege on following it through?
“Not addressing sovereign debt, South Africa can forget to solve the challenges of the three evils, inequality, unemployment and poverty. It is an unbelievable mess. Like Trevor Manuel and Nhlanhla Nene, Pravin Gordhan seems clueless and incapable to solve that situation,” a former director of the country’s Central Bank complained.
Gordhan’s first point on the agenda should be that of re-financing sovereign debt. He admitted in parliament, “We have to put national interests first.” Please follow your statement. You should know what to do. If not, you are definitely heading the wrong portfolio.
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