Government could bolster the local economy by more than R36 billion a year if it didn't buy imported vehicles, a study by a University of Witwatersrand student found.
Government bought some 17,943 new vehicles (bakkies, buses, cars and trucks) last year - a quarter of which were shipped from other countries, a survey by Lourens Weyer, a postgraduate student at the Wits School of Economics and Business Sciences, confirmed.
According to the study, local, provincial and national branches of government spent billions on buying luxury cars for high-ranking officials which included:
Government is buying fewer locally-made vehicles, according to the Wits study - from 19,089 in 2015 to 13,427 last year.
Only two locally-produced luxury models were acquired for the government fleet.
In all, government spent R2.6 billion on imported vehicles last year. According to Weyer's calculations, that money could have bolstered the economy by close to R37 billion due to what's called the multiplier effect.
Coined by acclaimed economist, John Maynard Keynes – the multiplier effect refers to a chain reaction of activities that stimulate the economy. In the end, a cash injection can result in a much larger economic boost than the initial amount.
Explaining the multiplier effect, Weyer uses the example of R100 being paid in wages to a worker, who then spends it at the local Fruit & Veg – which in turn, uses the R100 to restock from farms, which then pay their labourers.
Just like the R100, the R2.6 billion could be kept circulating within the SA economy - instead of leaving the country to pay for imported cars.
Sticking to only locally produced vehicles could bolster the economy by more than a percent, increase employment and shrink the budget deficit by more than 9%, his study found.
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