Although we may be experiencing fiscal problems, we will not be bankrupt in the next two years, as some have claimed.

This was one of the viewpoints of Prof Stan du Plessis, Dean of the Faculty of Economics and Management Sciences at Stellenbosch University (SU), on Monday (19 October 2015). He delivered the fifth Stellenbosch Forum lecture of 2015.

The Stellenbosch Forum lecture series provides regular opportunities to staff and students at SU, as well as interested people from the public, to learn more about the relevant, world-class research that is being done at SU.

Du Plessis said although we are not in a worst-case scenario yet, the current fiscal difficulties are a cause for concern.

"Even the Minister of Finance is concerned by the evolution of fiscal policy in South Africa over the past few years."

Du Plessis said South Africa suffered fiscal deterioration due to expenditure decisions unrelated to the global financial crisis.

"The recession from 2007-2009 does not explain the changes in fiscal policy over this period. We took decision without there being any revenue basis for it."

Du Plessis pointed out that there was a massive jump in government expenditure in GDP around the time of the global financial crisis.

He said the shape and size of government also increased in this period.

"The government wage bill was raised by 30%."

Du Plessis said the increase in government debt is alarming. He pointed out that government debt increased by 70% from 2007-2014.

He added that the expenditure decisions taken since 2007 will be hard to reverse.

"Thus far the decline in interest rates and a prudent financial policy have shielded South Africa from the impact of rising debt."

However, fiscal sustainability will come under pressure because of rising debt levels, Du Plessis said.

He said there are ways South Africa's fiscal prospect could be improved such as expenditure cuts, higher tax and boosting economic growth.

However, Du Plessis cautioned against over-taxation because it will harm growth.

He said we should also have another look at how state-owned enterprises function. "State-owned enterprises such as Eskom, SAA and the Post Office must be restructured."

"There should also be coherency between different policy documents.  The different documents do not speak to each other."

Du Plessis said if we could have economic growth of up to 5%, fiscal difficulties would be solved and the economy would grow out of the debt problem we currently face.

• Photo: Prof Stan du Plessis speaking at the Stellenbosch Forum.
  
• Photographer: Justin Alberts