BNC#8: Dawie Roodt warns SA’s “parasitic state” is choking growth and bankrupting taxpayers

At BizNews Conference BNC#8 in Hermanus, Efficient Group chief economist Dawie Roodt delivers a blunt assessment of South Africa’s economy - warning that a bloated state, runaway debt, and failing institutions like Eskom are suffocating growth. While financial markets briefly showed optimism after policy shifts such as a lower inflation target, Roodt argues structural problems remain severe. With civil servant wages consuming a huge share of the economy and government debt racing toward 80% of GDP, he says South Africa risks deeper stagnation unless the state is radically reformed..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the keynote address .Thank you very much. It’s very nice. To be here in this beautiful Hermanus. I went for a jog this morning, and it is really a very nice place. It is really beautiful. I’ve listened to some of the speakers, and I’ve got a bit of a dilemma. I listened to some of the speakers; some of them I totally disagree with. So maybe later on when we get the opportunity to talk, maybe we can discuss some of that. Let me start by saying to you, two days ago, I was invited to talk to a farmers' organisation, a bunch of maize farmers. I did an economic talk, but before that, I listened to what they had to say, and they showed me all sorts of things. There were speakers talking about hybrid seeds and genetics and stuff that I don’t understand. Other speakers talked about fertilisers and how to fertilise, precision farming, drone technology, and so on. They also showed me graphs on all the yields on a hectare. How that increased over time. These guys are seriously clever; they know everything about farming. They know everything about maize farming and can compare the South African yields to the Americans and all of it. They had some international speakers as well. These guys are really on top of their game.August last year, we climbed Kilimanjaro. It took me five days to get to the top. It’s really something special. And then I cycled down from the top on a mountain bike. Five days up, one hour and 22 minutes to get down. It was amazing. From there, we cycled all the way through Tanzania and Kenya to a town just south of Mombasa. We went through the rural areas and came across many subsistence farmers on pieces of land smaller than this stage.I spoke to them and asked, "Is this your land?" They said yes, more or less; they weren't sure which part. I asked about their practices; they work the land literally by hand. I asked about fertilisers, and they said they don’t believe in fertilisers because their forefathers never used them. I asked where they get the seeds, and they said they buy them in pharmacies. I looked at what they produce, and most of the lands were simply dry. They could produce very little.I thought to myself: What is it that we want in South Africa? Do we want these subsistence farmers, or do we want modern corporate farmers? Is it possible for subsistence farmers to ever compete with the farmers we have in South Africa who feed most of sub-Saharan Africa? The answer is there is absolutely no way they can compete.Why do we have policies in South Africa that want to create all these so-called small businesses or subsistence farmers? Why does the ANC government not want us to become a modern economy that works in the corporate world with skilled people using the most recent technology? I can think of four reasons: Ideological: They want a romanticised idea of controlling people on small farms. Big corporate farmers do their own thing and cannot be controlled. Wrong Policies: Ideology leads to poor policies like expropriation. Cadre Deployment: Employing people based on party loyalty rather than skill, which is another word for incompetence. Corruption: High levels of corruption lead to what we see today. Local authorities have been run into the ground financially and operationally. They are supposed to provide water, electricity, and pavements, but they don't. Without those, you cannot grow an economy. The same goes for State-Owned Enterprises like Eskom, Transnet, and the Post Office, which is just disappearing.Last year, some economists, including myself, saw signs that the economy was getting a little better. Two things stood out: We were taken off the so-called grey list, making it easier to move money and open bank accounts abroad. The decision to reduce the inflation target from a range of 3–6% to a fixed 3%. Historically, the Minister of Finance set the target at 3–6%. Eventually, the Reserve Bank Governor, Lesetja Kganyago, started targeting 4.5% (the midpoint). He kept interest rates relatively high to force inflation lower, for which we paid a price in lost growth. When the Governor announced a move to a 3% target, the Minister of Finance was initially against it because politicians like high inflation. High inflation erodes the value of money, but it also erodes the value of state debt.By reducing the target to 3%, financial markets reacted positively, leading to a huge inflow of capital into our equities and bonds, and the rand appreciated. However, obstacles like failing local authorities and expropriation policies prevent this from fully spilling over into the real economy.On the revenue side, South Africa has an exceptionally narrow tax base. Very few individuals pay almost all the taxes. VAT contributes approximately 30% of revenue and is the only tax that could potentially be increased. Personal income and corporate taxes are already over the Laffer curve; if you increase them, you get less because people will organise their tax affairs aggressively or emigrate. Approximately 1,000 companies pay 80% of company taxes. On the expenditure side:Education is the biggest item. Social expenditure and Interest on state debt compete for second place. Civil Service: There are 1.2 million civil servants (excluding SOEs). The average civil servant is paid more than R50,000 per month. Their salaries account for a third of total state expenditure and roughly 13% of the total economy. Meanwhile, 27.5 million people out of a population of 65 million receive a state grant. The old age grant is about R2,400, and child support is around R600. These grants increased by 3.8%, while civil servant increases are set at 4.4% over three years.Eskom, gas, and water contracted by 4.3% last year. Eskom prices will increase by 9% to 12% while the inflation target is 3%. We have a "board" and a "CEO" in name only. The CEO of Eskom is paid R13 million per year, and the head of Transnet R8 million. These are civil servants working for the people, yet the state is being run into the ground.Economic growth for 2025 was only 1.1%, meaning our per capita GDP is back where it was 20 years ago. We have lost two decades. The debt-to-GDP ratio is likely to exceed 80% this financial year.The state has become a parasitic state. We need a political leader to stand up and say they will create a civil service that actually serves the people of South Africa.Thank you.

BNC#8: Dawie Roodt warns SA’s “parasitic state” is choking growth and bankrupting taxpayers

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