Fanie Brink, Independent Agricultural Economist
"The R180 billion revenue windfall that resulted from the high global commodity prices has led to an increase in the corporate income tax of mining companies, according to the budget by the Minister of Finance, Enoch Godongwana, which he presented to Parliament today, says Fanie Brink, an independent agricultural economist.
The government accepts and understands this very well because the country is struggling with serious fiscal problems such as the widening gap between the revenue and expenditure of the government, budget deficits and rising public debt that cannot address the very serious social problems in the country.
Unfortunately, the government does not fully understand what the revenue windfall really means for the economy and the country because it does not understand how economic growth is created.
The revenue windfall increased in the first place the profitability of the mining industry which means that the industry could in the second place succeei to increase its contribution to economic growth for 2021 which is the only way the industry could achieve it.
This means that if the government wants to succeed in increasing the country's economic growth rate it will very urgently have to do everything possible to increase the profitability of all the industries on the supply side of the economy by deregulating its unilateral socio-economic intervention in the economy that further destroys the economy to give all the industries the possibility to make greater contributions to economic growth.
The government can very clearly not understand that economic growth is created by the supply and demand sides of the economy as proven every quarter by Statistics SA which is driven by the profit motive.
It is, however, very incomprehensible that the government, Reserve Bank, many economists and virtually all the asset managers in the country accept the growth figures of Statistics SA and use it to make economic projections without apparently still not understanding how economic growth is created.
The growth figures of Statistics SA prove very clearly every quarter how economic growth is created by an equal contribution to growth by all the industries on the supply side and consumption expenditure, capital formation and net exports on the demand side of the economy.
The demand side of the economy should, therefore, also receive just as much attention through more jobs that must be created by the private sector if its profitability can be increased, a lower tax burden on consumers to support private consumption expenditure, as well as improving the economic conditions that could promote capital formation and exports.
Why would the private sector create more jobs if it could not make more profits?
Despite this, the Reserve Bank and most economists still cling to the Bank's interest rate policy, which can only have a negligibly small effect on economic growth, the inflation rate as well as the value of the currency which are purely determined by the market forces of supply and demand in the economy! Precisely the same delusion as the Federal Reserve in the US, the European Central Bank and the central banks in other countries in the world!
President Cyril Ramaphosa's statement during his State of the Nation Address that the "private sector should create more jobs" was completely off course because it is the government's responsibility in the first place to create a political and economic environment conducive to the private sector to generate more profits and create higher economic growth.
“Profits are the sole creator of economic growth!”
There is no other way to create growth as very clearly been proven worldwide for decades, but the government's socialist ideology has the exact opposite effect.
"The government has absolutely no idea how economic growth is created and this will mean the total destruction of the economy within the next 3 to 4 years. The final countdown has already begun!" according to Brink.
