As South Africa braces for the national budget announcement on March 12, economist and Freedom Foundation director Leon Louw paints a sobering picture of the country’s economic outlook. In a candid discussion with BizNews’ Bronwyn Nielsen, Louw delves into the dangers of increasing debt, the impracticality of the National Health Insurance (NHI) plan, and how reckless foreign policy decisions could worsen crime and economic instability.
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The budget: More of the same?
Louw is not optimistic about the upcoming budget. He predicts that the highly controversial 2% VAT increase will likely be scrapped due to its unpopularity among the ANC’s voter base. However, he warns that while tax increases might be avoided, government spending will not decrease. This, he argues, means an ever-growing national debt that South Africa cannot afford.
“We will not see any of the reforms that bring about growth,” Louw laments. “Year after year, budget after budget, State of the Nation Address after State of the Nation Address, we get promised pro-growth policies, deficit cuts, and red tape reduction. Yet, the reality is the opposite: increased spending, increased red tape, and a less investor-friendly economy.”
The NHI: A ‘black hole of meaningless twaddle’
One of Louw’s harshest critiques is directed at the government’s National Health Insurance plan, which he describes as fundamentally flawed and financially unfeasible. He argues that the legislation behind the NHI does not define what healthcare means or what services will be provided, making it one of the most poorly conceived policies in South Africa’s history.
“We were among the first to estimate the NHI would cost at least R1 trillion, and that figure was later supported by others, including medical aid groups,” he explains. “But if you were to provide high-quality healthcare for everyone, the real cost would be closer to R7 trillion – more than the entire South African GDP.”
Louw also highlights the absurdity of excluding traditional and alternative medicines, which many South Africans rely on. “This is a Eurocentric, undemocratic conception of healthcare. If you are truly democratic, you provide healthcare that aligns with what the majority actually use and believe in.”
Foreign policy: Playing with fire
Turning to South Africa’s foreign policy, Louw warns that the government’s antagonistic stance towards the US – particularly in its vocal support of Hamas and condemnation of Israel – could have devastating economic and social consequences. He cites the loss of US healthcare aid and potential exclusion from the African Growth and Opportunity Act (AGOA) as direct results of these policies.
“If South Africa loses AGOA access, we’re looking at a loss of R200 billion in economic benefits,” he cautions. “That’s the equivalent of building 200,000 RDP houses or hiring thousands of new police officers.”
The consequences, he stresses, go beyond economics: “Fewer police mean more violent crime. When you hear about a young girl being raped or someone being murdered, you can trace some of that back to reckless foreign policy decisions that cost us the resources to prevent these crimes.”
The solution: Free markets and radical reform
Louw offers a simple yet bold solution: South Africa should emulate the economic models of high-growth countries such as China, Mauritius, and Singapore by drastically cutting government spending, reducing regulation, and embracing free markets.
“China, despite being run by a Communist Party, has created the freest economies in the world in its special economic zones. That’s where its growth comes from,” he explains. “We need to do the same.”
He argues for the immediate closure or privatization of struggling state-owned enterprises and the abolition of outdated apartheid-era regulations that criminalize informal businesses in townships.
“In Sandton, everything is legal. In Alexandra, nothing is legal. The average person in a township trying to build a home or start a business is treated as a criminal because of bureaucratic red tape. This system needs to be dismantled,” Louw says.
His vision for a new economic path is clear: “Lower taxes, less government, and real freedom for South Africans to improve their lives.”
As the country waits for the March 12 budget announcement, Louw’s words serve as a stark warning: without bold economic reforms, South Africa risks deeper debt, weaker growth, and worsening social conditions.
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