This week’s medium-term budget policy statement (MTBPS) is the grimmest and most difficult in a generation. There’s the revenue shortfall, anticipated at about R50bn.
The convenient — though perfectly valid — explanation for this huge undershoot is the internal sabotage at the SA Revenue Service by Tom Moyane and his merry men and women.
The less convenient truth, equally compelling, emerges on examination of why more businesses have gone to the wall and more business leaders have simply given up or emigrated. Whichever version fits your prejudice, the likely 6% budget deficit blowout should give pause for thought and recalibration.
Then there is a broken-backed state, which, according to auditor-general Kimi Makwetu had a 20% increase in “irregular expenditure” (a bland term covering a multitude of evils) from a 2017/2018 high of R51bn to a stratospheric R61.3bn for the past financial year. This embraces all national, provincial and state-owned enterprises (SOEs).
Front and centre of the balancing act, finance minister Tito Mboweni has to perform against such a sombre backdrop as the sclerotic growth rate — forecast at a lowly 0.6%, which a leading economist suggests is simultaneously “both optimistic and hopeless”. The optimistic part being that with a population growth rate of about 1.2%, the notional growth rate conceals the negative growth reality behind the numbers.
The rolling blackouts from Eskom have not just plunged the country into darkness, they are a reminder of everything that went wrong, not just with state looting but with the grand idea that the state is best placed in most circumstances to be granted monopoly powers, without any market discipline. To date the only remedy the government can agree on is to bail out the utility, not to improve its efficiency but simply to prevent it from defaulting on its debt.
Perhaps two of the saving graces in our depleted armoury to head off a debt trap, a ratings downgrade and total economic ruination are that for the first time in some years we have an economically literate president and a politically incorrect finance minister.
It is easy to call out President Cyril Ramaphosa’s equivocations and contradictions, and I have been in the band of critics. He represents what his counterpart in the UK, Boris Johnson, calls fatuously the “pro cake and pro eating” strand of politics. We see with the Brexit agonistes how implausibly that approach has worked, or not, in the agonising divorce proceedings between Britain and the EU.
Back home, Ramaphosa offers a similar version of magical thinking. He answered “all of them” to an inquiry on which part of the 77-page National Treasury paper intended to boost growth to 4%-5%. But then he rowed back, almost immediately, on the paper’s suggestion of selling off Eskom power stations and other modest items for the privatisation menu.
“We can’t sell off the crown jewels,” our president opined. Yet these are in any event severely tarnished and possibly unsellable, but at least it would reduce state debt and get us out of the vortex of an enduring debt trap.
The situation is similar with the bloated state payroll, which a recent study reveals accounts for a whopping 63% of all increased state expenditure over the past decade. Once again the intelligent Ramaphosa knows this cannot be sustained if the country is to avoid going cap in hand to the IMF for a bailout. But the political Ramaphosa pledges there will be no retrenchments.
Politics and life are never perfect. Bill Clinton once told a gathering I attended that the only question in life and politics is the question “compared to what?”. And the comparison here is to a past and possible future president with the surname Zuma.
Then there is the man in the arena this week, finance minister Mboweni. He actually has a taste and a track record outside the confines — straitjacket, perhaps — of politics and cabinet. Unlike many others in parliament, he doesn’t need a cabinet post and the perks of office to survive, and he more than survived outside politics.
That is perhaps the key essential for the grasp of reality he displays when he enters the debate. He reminded his budget audience in February that the state borrows R1bn every single day of the year and will, on current projections, keep doing so for the next seven years. He and his Treasury team know how utterly unsustainable this is. And modest though his growth paper might be, it is at least realistic and the minimum required to start digging SA out of the deep ditch into which Zumanomics has plunged this country.
In the run-up to this week’s medium-term budget, Mboweni rounded on the EFF for cooking up a conspiracy theory that the Treasury paper was written by three Harvard academics, Ricardo Hausmann, Robert Lawrence (who, ironically, is South African) and Dani Rodrik. Because this trio are among the finest developmental and trade economists in the world, that in itself would be no bad thing. But a wider group was involved.
The same group was also front and centre of the 2007 AsgiSA policy document produced for then-president Thabo Mbeki. The failure to implement that sound and sensible approach accounts in some measure for our current dire financial straits. But as Mboweni reminded parliament, “time is of the essence … we are not waiting for some future date for implementation”.
It is also worth pointing out — and I have read and heard the Harvard economists speak — that no-one in the EFF sin bin actually believes in a sort of libertarian nightwatchman state. A smarter and more capable state certainly, a government that does its job well and knows its place, and crucially a belief in Amartya Sen’s ideas of “substantive freedoms”.
Hallelujah for that insight. For all the can-kicking and decision-ducking of recent times, in the words of the Bard “the fault dear Brutus is not in our stars, but in ourselves…”
Ramaphosa and Mboweni’s party are at their best litigating the past, and often at their worst in taking responsibility for the past 25 years of their governance and its failures. There is now — late, but at last — a sense of urgency and agency. Or hopefully, in these last weeks before the judgment of Moody’s Investors Service — the last ratings agency to hold our debt at investment level — this will be communicated by action to match the sentiment.
For many others, the good old conspiracy theory is both a handy alibi and an all-purpose explanation for failure and inaction. The EFF, the SA Communist Party, the Zuma faction and other commentators suggest “the world”, “the West”, “the CIA” and now “Harvard” are out to get us — they want our resources, they are “recolonising”. And the all-purpose smear “white monopoly capital” is ever-ready as a catch-all category.
Actually, the core of our problem is the absence of capital of whatever colour, the failure to attract investment and the longest economic downward economic cycle for the past 70 years. Just to add to current miseries, we simply have too few millionaires and far too many unemployed. According to Investec Wealth & Investment economist and Business Day columnist Brian Kantor, “there are only 200,000 SA taxpayers earning more than R1m in taxable annual income”, and there are about 10-million out-of-work South Africans.
Any policy, measures and regulation — more likely deregulation — that can reverse those grim metrics should be applauded, whether it is cooked up by Harvard professors or in Mboweni’s Limpopo kitchen. Little matters at a time of crisis.
My late political colleague, Dene Smuts, once archly said, when urged by a party press officer to issue an evocative statement: “You can make a noise or you can make a difference.” Let’s hope that despite the shrill siren calls of local populism and conspiracy-mongering, Mboweni manages to make a difference this time.
Leon, a former leader of the opposition, now chairs Resolve Communications.
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