Answer to Question #172256 in Economics of Enterprise for Mthobisi

Question

Critically assess the efficiency of the government in the south African economy 

Answer 1

The South African National Treasury in the local government realm has been to secure sound and sustainable management of the financial affairs of local government. This has required the development of a coherent approach to improve the delivery of services to local communities. The National Treasury has implemented a strategy of financial and technical support for local government based around the MFMA, including conditional grants, subsidies, technical guidelines, policy advice and the placement of international advisors with various municipalities. This strategy took into account the vastly different levels of capacity of the different municipalities for implementing the reforms. It also prescribed requirements for institutional strengthening, municipal capacity building and improving municipal consultation, reporting, transparency and accountability. The MFMA aims to modernise budget, accounting and financial management practices by placing local government finances on a sustainable footing in order to maximise the capacity of municipalities to deliver services to the local communities.

The South African Government owned and managed almost 40 percent of all wealth-producing assets, including iron and steel works, weapons manufacturing facilities, and energy-producing resources. Government-owned corporations and parastatals were also vital to the services sector.

South Africa recently introduced a national minimum wage, and labor force participation was up in 2019. In 2020, despite years of poor performance, the government pledged to continue subsidizing the state-owned Eskom electricity utility for a total amount of nearly 5 percent of GDP over the next 10 years.