Fiscal policy and microeconomic reform in South Africa

Abstract

South Africa has embarked on fiscal policy reforms in an attempt to grow its economy and to resolve the structural problems in the country. The macroeconomic reform that was implemented in 1996 with the introduction of the Growth Employment and Redistribution Policy did not yield the intended results. This attests the notion that the macroeconomic reform is a necessary but not sufficient condition for economic growth. Once the macroeconomic policy is refined to provide an enabling environment for economic activity, then the country must reform its microeconomic policy. South Africa like other developing countries followed in the footsteps of the developed countries and implemented the aforementioned steps in their fiscal policy reforms. This research appraises the programmes that support the microeconomic reforms in South Africa, and assesses their value in driving growth. The findings reveal that the microeconomic reforms received substantial support from the fiscus and the policies developed are well aligned to addressing the challenges in the South African situation. Although both the process and fiscal framework are in place, the main challenge is effective implementation of the policy framework.