My former parliamentary colleague, Errol “EK” Moorcroft, once offered sage advice on the perils of overpromising and underdelivering: “Least said, soonest mended” was his stance. President Cyril Ramaphosa and his government have a different approach. “Cyril loves big numbers” is the inside view of a National Treasury mandarin.

Indeed, a scroll back to Ramaphosa’s “new deal for SA” speech, delivered in Soweto in November 2017, just before his election as ANC president, is revealing of both his approach and Moorcroft’s caution. That address, with its expansive rhetoric and dazzling numbers, became the template for each of the half-dozen state of the nation speeches he has delivered since his presidency commenced in 2018. In his speech Ramaphosa pledged GDP growth of 3% in 2018; the actual GDP achieved was 0.8%. He also offered GDP growth of 5% by 2023; this year National Treasury projects just 1.9% by that year.

The “new deal” speech also showcased his youth employment scheme to provide 1-million paid internships by 2020. As DA MP Geordin Hill-Lewis pointed out, the actual number delivered by 2019 was just 32,248, meaning at that rate (the high water year of the scheme) it would take 88 years to reach its target. It is not much mentioned these days. Back in 2017 Ramaphosa also pledged that an infrastructure fund totalling R1.5-trillion by 2022 would be operational. This year it was scaled back to a more modest R340bn, but much of this was “in the pipeline”, whatever that means.

In fact, on Ramaphosa’s watch debt service costs and public service wage bill now gobble up 79c of every tax rand, suggesting each and every other pledge of his administration is fanciful, to put it mildly. Yet, unchecked by any of these missed targets, failed schemes and forgotten pledges, president and government press on regardless.

‘Positive disruptor’

Recently the National Treasury advised parliament that plans are well advanced for the introduction of a state bank, with Mboweni enthusing that it is “a potential positive disrupter” to our financial system. In this he did not exaggerate; given state borrowing costs of R2bn a day the only way this will be financed without reducing us to complete beggary will be to tap into the trillions in the private banking and pension sectors, just as the SA Communist Party suggested was the way to finance the “national democratic revolution”.

The latest entrant to the government school of fantasy economics is that old stalwart trade & industry minister Ebrahim Patel, bouncing back from the political purdah after his bizarre lockdown capers. Remember no cooked chickens, the ban on slip-slops and T-shirts, and other delights plucked from the command and control model?

In his budget speech last week Patel promised to outdo Donald Trump and revive the apartheid playbook of siege economics. He has identified, doubtless with the same precision as his lockdown rules suggested, 42 products for “localisation” — or banning their import. Appropriately given his political colours, Patel sounds like the Red Queen in Alice in Wonderland, who believed in “five impossible things before breakfast”. Our Red Minister believes in 42, and the list will grow.

The impossibility here is the simultaneous pledge to “increase exports through trade with the rest of the world”. Yeah, right. The SA economy, a peashooter in size, is going to go against the bazookas of world trade by banning their products and expecting ours to be welcomed by the countries to which we have given the middle finger.

I have “lived experience”, as the lingo puts it, with living in a protectionist country, namely Argentina, at the height of its protectionist frenzy under the economically ruinous presidency of Cristina Fernandez de Kirchner. I attended her second inauguration, where in language of which Patel would be proud, she proclaimed: “We must not import a single nail!”

A few days after, a friend in London sent me a new Kindle reader. But when I tried to retrieve it from customs I was advised it would take $200 to “nationalise” it, triple the price of the item. Argentina indeed had “factories” that “localised” imported products such as BlackBerrys and iPads, but these were in reality simply packaging points. It had, like us, neither the market nor the technologies to produce from scratch. Prices went through the stratosphere: these items were 400% more expensive than in Hong Kong, for example.

Argentina’s import restrictions, which like Patel’s commenced with a modest list that grew exponentially as an army of rentiers, grifters and politically connected individuals spied the chance to make easy pesos, had by October 2011 “imposed more trade restrictions than any other country bar Russia” (Global Trade Alert, September 2011).

National misery

Consultancy Intellidex estimates the Patel list is likely to cost consumers an average price hike of  20% on “localised” items, but that is just the beginning of the national misery likely to follow if Argentina is any guide. Kirchner — now enthroned again as vice-president — promoted inefficient local industries at fearsome cost: price hikes fuelled runaway inflation (about 40%) and resulted in a lack of quality goods.

To tamp down popular outrage Argentina duly introduced price controls (just as Patel did here under the guise of the lockdown). But that in turn led to a manufacturing strike and exporters downing tools, as they refused to sell goods locally at government-decreed, artificial prices. For consumers it was hell; black markets flourished, the currency cratered. Some jobs were saved but many more were lost. Some of the very sectors targeted for import protection collapsed because low domestic demand due to spiralling inflation and the response of the rest of the world, principally its traditional trading partners.

The price of Argentine protectionism was not just a local matter. As Michael Hasenstab of Templeton Global Macro wrote in December 2016 in the New York Times: “[Argentine] import restrictions started small-scale trade wars, and by 2015 trade conflicts erupted with more than 40 different countries. This left the domestic agricultural and manufacturing sectors in disarray.”

SA’s motor manufacturing industry — protected by a wall of tariffs, hence the high cost of cars here — is only viable because of our preferential access to US markets under the Africa Growth & Opportunity Act (Agoa). One can only hope that when Patel talks of “judicious” targets for localisation he will exclude any significant US-sourced imports, otherwise goodbye Agoa and our car manufacturers. This is the crux of the problem when government ministers start picking winners and losers in the economy — especially a government with the ANC’s 27-year track record.

Ramaphosa’s 2017 new deal speech referenced approvingly pan-Africanist intellectual Amilcar Cabral: “Tell no lies, mask no difficulty, mistakes, failures.” Excellent advice — he and his government should take it.

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

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