DA's Plan for Growth and Jobs - Democratic Alliance

Presidency and VIP security have increased well above the rate of inflation, while thenumber of Cabinet posts has ballooned. The DA would eliminate wastefulexpenditure, streamline the cabinet by cutting some departments and mergingothers, and place tighter restrictions on state employees doing business with thegovernment.Shift from consumption to productive investment: For three of the last five yearsthe state wage bill has increased at twice the rate of inflation. This has been one ofthe drivers behind dramatic shifting of expenditure away from productive investmentand towards consumption. It reflects the ANC alliance partner’s strong bargainingposition, but is entirely disconnected from the value for money South African citizensreceive from the public service. A DA government would rebalance governmentspending away from non-productive spending towards productive investment.Increase infrastructure investment: Between 1994 and 2004 public sectorinvestment as a percentage of GDP dropped well below the key target level of 10%of GDP. This has left South Africa with a maintenance and infrastructuredevelopment backlog estimated to be R1.5 trillion. A DA government would tackle theskills shortages in the public service that hamper effective infrastructuredevelopment; cut the red tape that delays projects; and increase infrastructureinvestment by mobilising private funds.Monetary policyThe DA supports the inflation-targeting framework implemented by a strong, independentReserve Bank. We believe that inflation hurts the poorest most, and that both high andvariable inflation are detrimental to the economy’s ability to generate wealth for all.In considering the official task of the Reserve Bank, we believe that it should be responsiblefor maintaining macroeconomic stability, with the primary objective being price stability.Employment levels fall outside the ambit of monetary policy and should be the responsibilityof fiscal policy.While the Reserve Bank should make use of a variety of tools to achieve price stability,interest rates should be considered its most important mechanism. The bank should act in aflexible exchange rate regime, with active participation in currency markets only to build thecountry’s foreign exchange reserves, with no objective of influencing exchange rates.A DA government would fully dismantle South Africa’s out-dated exchange control regimeand the many restrictions and administrative burdens it imposes. These ultimately limit theproductivity and allocative efficiency of capital flows and add unnecessary transaction costs,further undermining our competitiveness as an investment destination.While recognising that export industries would benefit both from greater currency stabilityand from a slightly devalued Rand, we need to accept that the South African economy is toosmall to take on global foreign exchange markets, and that in considering the needs of theeconomy as a whole, artificial depreciation is not attractive.We believe that greater stability of the Rand can be achieved through continued transparentand predictable Reserve Bank policy and action, which in turn will provide necessaryplanning certainty for export industries.37 | P a g e