1. The new Keynesian world and the MTBPS A presentation by Dawie Roodt

2. 2 STEP 1: RE-FOCUS? Dawie Roodt 1/13/2016

3. What went wrong? The excuses: +Insufficient regulation +Greed +Speculators The truth: +Loose monetary policy +Political interference Dawie Roodt3 1/13/2016

4. Its all about your approach Dawie Roodt4 1/13/2016 Monetary ↑M3 → ↑Inflation → ↑Currency Price stability Keynesian Demand driven Gov intervention Currency stability Classical Let it be! Prices adj. to demand & supply

5. Fed Printing money Dawie Roodt5 1/13/2016 US Economy US Fed Buying Bonds / TB’s Fund $ Some economic activity Resource prices ↑ Emerging Markets

6. The driving forces 1.Euro under threat: ↓ Euro 2.Dollar under threat: ↓ $ 3.↑Renminbi 4.↑ Commodity Prices 5.Strong Rand (for now) Dawie Roodt6 1/13/2016

7. 7 THE “NEW” ECONOMIC GROWTH PLAN Dawie Roodt 1/13/2016

8. The plans: Dawie Roodt8 1/13/2016 +HOP - 1994 +GEAR - 1996 +Asgisa - 2006 +The new Growth Plan - 2010 ↓Poverty & ↓Unemployment = ↑ Economic Growth “ Apartheid ” Macro economic stability Harvard group

9. New growth plan targets Dawie Roodt9 1/13/2016 +Stringent Fiscal policy focused on savings +Smaller Current Account deficit +Lower interest rates +Competitive currency +Lower unemployment

10. Creating jobs according to NGP & MTBPS Dawie Roodt10 1/13/2016 +Labour market strengthening & skills development +Further help from development finance institutions for infrastructure development +IPAP2 +Improve competitiveness +Improve public service delivery & management

11. Will companies expand sufficiently? Dawie Roodt11 1/13/2016

12. Some limitations: Dawie Roodt12 1/13/2016 Barriers to entry Red tape FICA, FAIS, RICA, NCR etc. Tax registration Licences Labour Law Zim. example Access to capital High tax Forex control regulations Political uncertainty - Property rights Companies

13. Dawie Roodt13 WHAT ABOUT OUR CURRENCY? 1/13/2016

14. The Rand since 1977 Dawie Roodt14 1/13/2016 9/11 Financial crisis of ‘08 Source: I-net Bridge & Efficient Group forecast

15. The Rand & Relative PPP Dawie Roodt15 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

16. The Rand & Relative PPP Dawie Roodt16 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

17. The Rand & Relative PPP Dawie Roodt17 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

18. The Rand & Relative PPP Dawie Roodt18 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

19. The Rand & Absolute PPP Dawie Roodt19 1/13/2016 Source: I-net Bridge & Efficient Group forecast using World bank PPP

20. The Rand & Absolute PPP Dawie Roodt20 1/13/2016 R7.13 R5.03 Source: I-net Bridge & Efficient Group forecast using World bank PPP

21. The Rand & Absolute PPP Dawie Roodt21 1/13/2016 Source: I-net Bridge & Efficient Group forecast

22. The Rand & Portfolio inflows since 1985 Dawie Roodt22 1/13/2016 Large outflows → Weakening of the Rand Source: SARB

23. So…what can be done? Dawie Roodt23 1/13/2016 ↑ReservesEXPENSIVE!!

24. SA’s solution Dawie Roodt24 1/13/2016 SA Economy SARB Buying $$$ Rands TB’s & Debentures

25. So…what can be done? Dawie Roodt25 1/13/2016 ↑ReservesEXPENSIVE!! ↓ Interest rates What about inflation? Tobin Tax Shrug off investors Forex control regulations ↑ % possible

26. Another solution Dawie Roodt26 1/13/2016 SA Economy SARB Buying $$$ Rands Excess revenue & cash deposits Treasury SARB owes R135bn!!

27. 27 STEP 2: RE-EVALUATE? Dawie Roodt 1/13/2016

28. Is the PIT burden shifting? YES! Dawie Roodt28 1/13/2016 Source: Tax statistics 2008/09, National Treasury & Efficient Group est. for 2010

29. Income distribution Dawie Roodt29 1/13/2016 SA’s Gini = 57.8 Cumulative share of income Cumulative share of population Source: SA Survey, Employment & income 2009 & Efficient Group graph, World HDI report 2009.

30. Income distribution Dawie Roodt30 1/13/2016 Source: World HDI report 2009.

31. Income distribution reloaded Dawie Roodt31 1/13/2016 Source: Efficient Reseach

32. Who pays and who receives? Dawie Roodt32 1/13/2016 Source: SA Survey 2008/09, Employment and Income & Efficient Group est.

33. How do we spend? Dawie Roodt33 1/13/2016 Social services = 44.2% Source: www.budget.gov & Feb. 2010 National Budgetwww.budget.gov

34. How do we compare? Dawie Roodt34 1/13/2016 Well done SA!

35. Is our state saving? Dawie Roodt35 1/13/2016 NO! Source: Feb. 2010 National Budget – Consolidated budget data, Efficient Research calculation

36. How do we spend on capital? Dawie Roodt36 1/13/2016 FIFA PREP Source: SARB

37. 37 STEP 3: RE-THINK? Dawie Roodt 1/13/2016

38. The main numbers… Dawie Roodt38 1/13/2016 Source: Feb. 2010 Budget & Efficient Research

39. MTBPS summary Dawie Roodt39 1/13/2016 +Synergy between growth plan & budget +Better economic growth outlook +Better revenue & expenditure than budgeted +Reinforcing infrastructure & investment growth – R811bn over MTEF +Forex control reforms +Regulatory reforms +NHI

40. Will the NHI really work ? Dawie Roodt40 1/13/2016 Source: World Bank development indicators 2009

41. Will the NHI really work ? Dawie Roodt41 1/13/2016 Source: World Bank development indicators 2009 * Efficient Group estimates $164 p/c = R52Bn p/y

42. Is this really necessary? Dawie Roodt42 1/13/2016 Source: Efficient Research

43. Our problems… Dawie Roodt43 1/13/2016 +Unemployment +Poverty +Collusion +Greed +“Do more” +Too many cars

44. The solution Dawie Roodt44 1/13/2016 Economic growth Employment Poverty alleviation Better income redistribution Creating wealth

45. 45 QUESTIONS? Dawie Roodt 1/13/2016

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