‘Myopic Cyril can’t, or won’t, make the tough calls to prevent SA’s collapse

‘Myopic Cyril can’t, or won’t, make the tough calls to prevent SA’s collapse

There is the famous story of the British admiral, Lord Nelson, who, when his commander-in-chief tried to signal him to retreat during the Battle of Copenhagen in 1801, placed his telescope into his blind eye.

Something very similar is going on right now at our moment of national economic peril and our president’s wilful blindness in reading the signals and the warning shots and changing course, or retreating from the field littered with failed policies and ruinous ideology.

Of course, Nelson’s ignoring of the signal allowed Britain to destroy the Danish-Norwegian fleet – but then it had superior firepower to do so, even if Nelson’s commander was himself blinded by the smoke of battle and so could not accurately read the unfolding battle, or at any rate not as clearly as the one-eyed Nelson.

SA’s road to economic perdition is, alas, in plain sight. But our commander-in-chief, Cyril Ramaphosa’s myopia is also ever present. And with our battered currency heading into the red-zone of R15 to the US dollar, our sovereign firepower is very limited.

There is something rather Shakespearean about our national condition and the trigger warning we have received these past few days. The Bard reminds us in Hamlet: “When sorrows come, they come not single spies, but in battalions.” Bad happenings, in other words, occur simultaneously and contribute collectively to national tragedy.

Last week we received the latest grim and growing unemployment metric: the jobless queue is now a mountainous 38.5% (on its expanded definition), the highest it has been in 16 years. No sign of the 275,000 new jobs Ramaphosa airily promised in the first flush of his “new dawn” presidency in 2018.

The president’s own initiative, which usually consists of PR stunts like conferences, summits and rhetoric, has even on this sandcastles-in-the-sky approach failed or stalled. Hot on the heels of the new spike in unemployment came word that the outcomes of the October 2018 jobs summit had not been implemented or had been delayed. The Business Unity letter this week authored by its plain-speaking president Sipho Pityana confirms what the market already knows and has priced in: “It’s crunch time. And to get out of the current crisis, instead of just talking about creating jobs, we need to talk about how to build an economy that creates jobs and take urgent steps to implement clear options.”

But, as Pityana expressly and by implication suggests, the government response had been, in the immortal phrase of legendary sports coach Yogi Berra, “When you come to the fork in the road, take it”.

The debt mountain? One of the reasons for the Fitch downgrade from stable to negative last week and the warning from Moody’s of the likely downgrade of our remaining positive sovereign credit rating, is precisely because the government will not act on the clear and present dangers on our fiscal path.

Instead of reducing expenditure and cutting the public-sector wage bill (which now consumes 47% of the current budget) the president’s one-eyed response is straight from the populist playbook: no retrenchments, no wage cuts and no reconsideration of the panoply of bad decision-making and planning, from BEE (it will be “intensified”) to cadre redeployment (the good picks from the private sector exit, like Mark Barnes from the Post Office, just as beleaguered Eskom can’t or won’t appoint a CEO with proven independent and world-class business skills).

Even the announcements in February – modest as they were – such as the restructuring and splitting of Eskom, disappear or stall while the government pumps ever more billions into the cash-guzzling entity without addressing its fundamental problems, from massive overstaffing to diluting its monopolistic risk to the entire economy and our energy future.

But on the dreams and schemes side, the state and the president ramp up the rhetoric: National Health Insurance (“It’s coming whether you like it or not”, says Ramaphosa who curiously has a reputation for negotiating outcomes).

Expropriation without compensation (ditto) and then the assault on the SA Reserve Bank and now a plan for a state-owned bank and the roll call on the road to ruin is long and depressing.

One of the first commentators, two years back, who predicted SA was financially unsustainable, was RW Johnson. Last week, two sources both confirmed this truth. First up were the numbers: on the back of the cash injection into failing and flailing Eskom of R23bn earlier this year and the R59bn bailout over the next two years, a debt blow-out was announced: Fitch ratings agency predicts our budget deficit will breach the 6% mark this year, almost one-third higher than the treasury forecast, and within two years we will find that our debt-to-GDP ratio will breach the 68% level within three years.

The voice of reason is crying in the wilderness of an implacable government which will neither read the signs, nor act on them and change course. Consider the alarm bell pressed by national treasury director-general Dondo Mogojane, who is no alarmist, sounded very alarming when he commented: “A measure equivalent to cutting the salaries of all government employees by 10% is what is needed to fund the bailout of failed state-owned enterprises.” This, he noted, was not realistic and so ineluctably comes the second option: “There are no holy cows, and we have to make some tough decisions. We need to avoid a situation where everything collapses.”

When the most senior civil servant in the nation’s most important department advises that we are on the verge of “where everything collapses” a prudent government takes note, and reverses course, or advises what steps are now to be implemented to change the trajectory. But as Business Day columnist Carol Paton trenchantly notes, to date Ramaphosa has not led, he “has wimped out”.

Back to RW Johnson, the original canary in the coalmine. Last week, amidst all the doom and gloom in the numbers and the human misery behind them, he sketched the future in an article on Politicsweb: “The government is quite certain to run out of money, at which point it will be unable to pay the interest on its debt and default … effectively what all this means is that all roads lead to the IMF (for a strict and conditional bailout).”

Perhaps if you are a conspiracy-monger, this is the Ramaphosa plan or so-called “long game”. Afraid or unable to make the tough calls required of him; hemmed in by his circling opponents in his fractured party; unable to chart a clear course in a world endangered by a trade and now a currency war between the US and China, he surrenders our national sovereignty to the Washington-based IMF.

Whatever the plan – if there is one – and the motivations for the current malaise and inaction, the past 18 months of wishful thinking and bland optimism is not going to cut it. Time for Ramaphosa to remove the telescope from his blind eye.

Leon, a former leader of the opposition, now chairs Resolve Communications.
@TonyLeonSA.

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