South Africa is on the threshold of an exciting new chapter in the country’s history, and all eyes are on the government of national unity (GNU). Despite the number of failures that can be placed at the door of the previous administration, the hope exists that the local economy will experience a welcome boom. This hope resides in the outlook of better service delivery and effective management.

However, it is important to be realistic, and unfortunately the gears of change can take long to turn, especially in terms of the economy, and actual change can take time. Existing archaic policies must be implemented, and the new intervening ministers must be trained in their respective portfolios. With this, and it is unfortunate, certain politicians will still keep themselves occupied with populism and accompanying empty promises.

As part of a workable solution to South African’s economic problems, close attention should be given to the state of the government finances. The fact remains that public debt continues to increase disproportionately, and all possible options must be considered as matter of urgency to counteract this trend.

One such option will be to reduce the different levels of government in order to make the framework financially more affordable. Such fiscal decentralisation involves the transfer of the fiscal responsibilities and forces from the central government to lower-level entities such as provincial, regional or local government levels. Doing so will improve local autonomy, accountability and efficiency in the establishment and provision of public services. When all is said and done the local governments are better positioned to understand the local needs, to comply with them and manage public spending more efficiently.

A decentralised government does not rely on cadre deployment and cannot be put together of people that are not trained or equipped for the work they have to do. Consequently, increased efficiency will contribute to great fiscal sustainability due too judicious use of resources and reduction of wasteful spending. In this context fiscal policy measures will be included that are aimed at reducing the fiscal shortage and ultimately lower the debt levels. Such measures will directly contribute to the improvement of macro economic stability.

Over the long term, the distribution of fiscal responsibilities and resources between central and local government structures should give rise to optimal management of government finances. With this, stricter budget restraints on local government strucures will also lead to more effective use of government funds. The latter will mean that local governments will be forced to balance their budgets and not rely heavily on additional government aid as in the past.

A good example that can be used as reference here is that of Japan, where a decentralisation process has shrunk the local government structure from 3 000 local authorities to around 1 500. Together with the decentralisation, stronger fiscal monitoring for both income and expense needs to be implemented. Free economic zones also need to be developed because of corresponding performance appraisal mechanisms.

Naturally, the process of fiscal decentralisation is not without challenges. For example, the majority of local authorities do not have the necessary administrative and financial abilities that are needed on their own. The result of this decentralisation can lead to even further inefficiency and mismanagement of resources that will undermine fiscal sustainability. Moreover, without proper coordination and supervision, decentralised fiscal systems can lead to the duplication of spending and inefficiency.

In light of this, it is important that the correct balance be found between central control and local initiatives in order to equip local authorities to provide optimally to the needs of the community. Factors such as the overall level of economic development, the strength of democratic institutions, and the existing fiscal capacity of local governments will thus play a decisive role in undermining the decentralisation of fiscal sustainability.

Mindful of the clutches of state capture, the reach of corruption and the shadow of South Africa’s greylist status, it is important that the GNU makes work of the struggling economy. In this regard, initiatives like the President’s Vulindlela unit are a move in the right direction. The goal of this unit is resolving current structural problems with the help of the private sector.

Ultimately every South African is begging for economic growth, the effective addressing of poverty and unemployment, and the removal of structural obstacles which will stimulate investments and exports accordingly. If this growth is accompanied by the fight against crime, South Africa will be able to enter a future where it can be optimally built and provide for prosperity.