External shocks, internal failures: ‘Parasitic state’ will use war as excuse

South Africa, along with the world, now confronts a vastly reshaped and malign economic outlook, untethered to previous assumptions etched as recently as the benign Budget speech in Parliament just three weeks back.

Whether we navigate such uncertainty or get washed away in the undertow of the US-Israel-Iran war and its economic effects, you can generously bank on this latest crisis providing forward cover for the government for its failure to prepare or maintain internal buffers to absorb the shocks.

Senator J William Fulbright, who died in 1995, bequeathed to posterity a trenchant rebuke to the reason offered by Presidents Kennedy, Johnson and Nixon for America’s futile military offensive in the 1960s and 1970s in Southeast Asia. This was the so-called “domino effect” the “loss” of Vietnam to Communism would see the rest of the region fall to Soviet control.

Fulbright wrote in 1974:

“The Soviet Union has indeed been our greatest menace – not so much for what it has done, but because of the excuse it has provided us for our own failures.”

This fifty-year-old warning has a decidedly contemporary and local echo, even though the current war against Iran in the hands of President Donald Trump is a series of tactical strikes apparently unmoored to any cohering strategy.

Just how radioactive the consequences right now are contrasted by the rosy assumptions underpinning the pre-war February budget and the conflict realities of today.

Finance Minister Enoch Godongwana told Parliament on 25 February:

“For the first time in 17 years, debt will stabilise and continue to fall in the coming years. The budget deficit has narrowed significantly, and debt-service costs are also falling. The world has taken notice…”

He did tip his homburg hat at an “unprecedented global trade environment characterised by persistent geopolitical tensions” and committed to unspecified measures to “reduce vulnerability to external shocks”.

But he could not, indeed, along with his peers, imagine the effects of the current war, especially Iran’s throttling the Strait of Hormuz and with it, upending energy and oil supply, and potentially strangling the world economy.

It is hazardous to offer certainty amid a metastasising conflict, but you can confidently predict that Godongwana’s forecast of global growth of 3.3% will not be met, and even less likely is his assumption that “emerging markets will continue to anchor global momentum”.

On the contrary, the very same global investors whose hot-money punts have powered the surge in both our currency and local shares and bonds, flee risk in wartime and move funds to safe havens if they can find one.

Locally – and here the length of the conflict is crucial – all the assumptions in the Budget on growth, debt rate, inflation, interest rate cuts and employment can be “thrown out of the window”. The longer the war and the choking of supply and energy chains continue, the grimmer the outlook.

That was the analysis of economist Dawie Roodt, who is hardly alone in his view. Though he offers a blunt assessment less heard from polite economists: “South Africa could be much more insulated against external shocks if it got its own house in order…we have a massive state that is supposed to look after citizens interests. But [instead], we have a parasitic state.”

The same state, for example, that neglected our water and reticulation challenges despite an expert warning of the future costs in terms of reticulation back in 2008.

The expert, Anthony Turton, warned then that SA was facing a critical water crisis characterised by what he termed “a growing ingenuity gap”, i.e. the demand for complexity of technological solutions outstripped the country’s capacity to develop them.

Instead of acting on this caution, his employer, the state-run Council for Scientific and Industrial Research (CSIR), suspended him for “insubordination and bringing the CSIR into disrepute”. Today, he lives in Australia.

Discarded expert advice and warnings also prefaced the collapse of our electricity supply and transmission during the dark years of load shedding. While indeed commendable repair work has been done recently to reset supply through private provision, the origins of this crisis were all of a piece with the current collapse in water supply.

In 1998, the energy white paper warned starkly that by 2007, the country’s surplus generation capacity would be exhausted; new power stations (taking 10 years to plan and build) and provision of private participation in generation were a priority. The government delayed, dithered and drifted until it was too late. By 2007, precisely as predicted, the first load shedding commenced.

Before the current war caused a price surge for farmers sourcing fertiliser, the agricultural sector was already battling the worst foot-and-mouth disease (FMD) crisis in a generation.

Once again, the state, starting 25 years back, disabled its own buffers and pulled away its best defence mechanism to mitigate the disaster.

On 23 February, News24 provided an analysis headlined “Inside the institutional collapse that killed SA’s foot-and-mouth-defence”.

It noted, “the crisis was not sudden – it had been years in the making”. Repeated advice from experts were ignored and warnings on institutional collapse, poor decision making and inadequate enforcement would “culminate in a major disaster”.

Chief culprit listed in the unheeded warnings was the steady collapse of state-owned entities at Onderstepoort and its Agricultural Research Facility (ARC), with its vaccine production capacity.

In the timeline appended to the article, each minister of agriculture is listed in terms of the capacity and status of the facility. The last ministers to achieve “operational vaccine production capacity” were the NP’s Kraai van Niekerk and ANC’s Derek Hanekom. The road to ruin commenced under Thoko Didiza (now a contender for president) from 1999 onward, and it’s been downhill until very recently.

In the early 2000s, Van Niekerk joined the Democratic Alliance and was gravely concerned about the incapacitation of Onderstepoort, the ARC and its stripped-out expertise. He urged me to write to then-president Thabo Mbeki requesting intervention at the highest level. I did so, received a polite presidential reply, and no action was taken. Though Van Niekerk’s warning to me then echoes now. He said, “Behou jou kundigheid.” (Keep your expertise). These wise words were ignored until 2024, and only with the entry into the portfolio of a non-ANC member (John Steenhuisen).

The immediate price pain to be felt from events far away in the Persian Gulf will soon be at the petrol pumps.

And lo, none other than Mineral and Petroleum Resources Minister Gwede Mantashe this week called for an “unlocking of full potential of our petroleum sector”. He also found a handy target to blame for delays on this front – environmental activists.

Unmentioned in his remarks are the actions (and inactions) by his ministry. In recent times, it sold off 10 million barrels from the strategic reserve fund for around $40 in 2016 in dubious circumstances. There was the closure of local refineries in Durban and Cape Town that could refine 700 000 barrels a day of crude. Among reasons citied by owners for the closure was “an unclear regulatory future”. This too is the current hallmark of Mantashe’s empire.

Still on Senator Fulbright’s view of matters, the current war in Iran and its aftershocks will provide, along with apartheid, Covid-19, “the lost decade”, and now environmental activists, a further excuse for economic stagnation and worse. The “parasitic state” and its failures and its purge of expertise will not get a mention.

Historian Bernard Lewis wrote in 2002, around the time the government here was ignoring experts on looming crises to come, that there were two basic ways in which nations respond to the challenge of adversity.

The first is to ask: “Who did this to us?” The second is: “What did we do wrong?”

The first leads to blaming others, the second to self-help or correction.

Past and current form strongly suggest this government will only ask the first question and not address the second.