The fiscal system and objectives of GEAR in South Africa: Consistent or conflicting?

Abstract

This paper critically examines the attainability of the targets set out in the South African Growth, Employment and Redistribution strategy (GEAR). The GEAR document envisaged an economic growth rate of 4.2% per annum, on average, with a rapid expansion of employment over the five-year period ending in 2000. However, actual performance thus far falls short of GEAR projections, except for definite progress towards a reduction of the budget deficit. The current macroeconomic conditions, an over-regulated labour market, prohibitive taxation, low savings and high crime rates make it difficult to stimulate entrepreneurship and attract sufficient investment, especially of a labour absorbing nature, to meet the GEAR projections. The GEAR targets evidently need to be scaled down.