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Poor handling of riots dealt investor confidence a severe blow

The ANC government and its law-enforcement agencies' clumsy handling of the situation of unrest in KwaZulu-Natal and Gauteng this past week dealt investor confidence in South Africa a severe blow.

Various companies, including Toyota, which suffered great losses after infrastructure was burnt down, stock was stolen and highways were blocked, hindering the transport of goods, are currently reconsidering further investment in KwaZulu Natal a well as the rest of the country.

The room for growth that was created by the upward growth of commodities will be consumed by providing aid to companies and counteracting the loss of job opportunities.

The government will most probably re-institute the special Covid-19 relief grant of R350 per month at an annual cost of approximately R30 billion for 6,9 million adults.

If the government were to institute a basic income subsidy / grant to alleviate poverty it may improve political stability in the short run, but in the medium and long term, it will be detrimental to the economy because a minimum amount of R585 per month paid to 22,5 million unemployed adults will double the government's welfare bill at an annual cost of R160 billion.

In that case, the government will turn into a mere tax-transfer office that will, amid the lack of economic growth, only be able to sustain the grants by frequently increasing taxes.

The ANC government must abandon its poor economic policy direction in order to ensure economic growth as that is the only sustainable measure to alleviate poverty.

 

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