Question

discuss five macro objectives of the government of south africa.

Answer 1

The macroeconomic objectives are:

Economic Growth- On the face of it, after a long slump the South African economy seems to show signs of improving its economic growth trajectory. The south African government has shown its commitment towards re-industrialization.Government should also support small businesses and encourage their growth while supporting the agriculture industry. A complete overhaul of the state owned enterprises in key sectors such as energy, IT, water etc would have to be undertaken. State owned monoploies/ologopolies need to be dismantled to encourage privatization and improve efficient production. Working on policy certainty would go a long way in encouraging new investment and hence, increasing aggregate demand. Recent changes in macro-economic policy has seen an increase in the government expenditure that should be sustained for continuous development and growth. Direct foreign investment should be encouraged, and the government should ensure that the regulatory framework presents no obstacles to new ventures.

Full Employment- The labour force in South Africa is woefully uneducated and low skilled. One of the major policy objectives is educating the workforce and increasing the number of skilled professionals. Public funding in schools needs to be increases so that early childhood development is undertaken seriously. The quality of education is another concern that needs to be addressed. Committing to free higher education for capable students from poor backgrounds is a step forward but more investment is needed in universities and educational institutions. An educated and capable workforce is essential for the growth and development of the economy.

Price Stability- The recent macroeconomic policies have aimed at reigning in the the inflation rate – at 4%. This allows the Reserve Bank to cut interest rates and stimulate investment. South Africa is working towards improving the business confidence of its investors and making south africa an attractive place for investment. Maintaining a stable inflation rate would help the investment climate and ensure price stability.

Income Equality - Some of the new economic policies should highlight inclusive growth in order to lessen the ever-increasing gap between the rich and the poor. Land reallocation in urban areas could reduce inequality left behind by the legacy of apartheid. The government needs to improve access to safe and affordable homes for the poor, public transportation that would improve livelihoods and lower employment/travelling costs. Another avenue could be diverting public funds towards investment in activities benefiting the disadvantaged so that income inequality reduces. This is essential to maintaining social and political stability in south africa.

Balance of Payment equilibrium- South Africa has improved its terms of trade by increasing its value of total exports and slowing the growth of imports. Agricultural exports have showed an increase while South Africa has also diversified its trading partners. Currently, south africa mainly relies on foreign inflows to fund investment so an increase in the domestic saving rate would promote domestic investment and lower reliance on external funding. A trading policy focused on growth of exports and diversifying to new markets would certainly help south africa grow further. Manufacturing exports should be encouraged.