Presentation to Parliament
Introduction
This IEJ submission by Dr Gilad Isaacs challenges conventional fiscal consolidation strategies in South Africa, arguing instead for a transformative macroeconomic framework centred on employment creation, structural change, and inclusive growth. It critiques narrow debt-target approaches and calls for a broader understanding of fiscal space that supports both demand and domestic productive capacity.
Rethinking fiscal policy and public investment
The document argues that fiscal policy should move beyond stabilisation and austerity toward a coordinated stimulus strategy. Public consumption and investment are positioned as complementary tools that can crowd in private investment, strengthen aggregate demand, and expand long-term productive capacity. A central recommendation is sustained public investment at approximately 10–15% of GDP, with emphasis on improving capital stock quality and investment efficiency.
Sectoral priorities and inclusive growth
A key focus is the strategic allocation of public expenditure toward employment-intensive sectors, industries with high domestic input content, and export-generating activities. The care economy—including education, healthcare, and social services—is highlighted as essential for human capital development and social well-being. The document also stresses the importance of social transfers and automatic stabilisers to reduce inequality and stabilise demand.
A transformative policy package
The paper outlines a comprehensive policy agenda that includes large-scale infrastructure investment, strengthened development finance institutions, expanded public employment programmes, a Just Transition Fund for renewable energy, and enhanced sectoral masterplans. It further calls for increased investment in science, technology, skills development, and state capacity. Fiscal policy is positioned as a tool for both demand stimulation and supply-side transformation, ensuring coherence with industrial strategy.
Conclusion
The document concludes that South Africa’s fiscal strategy must shift from narrow consolidation toward a coordinated, employment-centred macroeconomic framework. By aligning fiscal, industrial, and labour-market policies, and balancing internal and external economic objectives, South Africa can achieve inclusive, sustainable growth rooted in economic justice and long-term structural transformation.