From now on, until the end of the 2023/2024 fiscal year in April 2024, I’ve decided to keep only a few facts constantly in mind when I write columns. Obviously, amusing things happen in the country all the time.
For instance, I’ve just been reading about Eastern Cape premier Oscar Mabuyane praising his provincial health MEC, Sindisiwa Gomba, for getting the province through the Covid-19 onslaught in sterling fashion. This is the woman who overspent millions of rands converting motorbikes into contraptions with a sidecar to transport Covid-19 patients to hospital.
Shortly after the praise, Gomba’s messenger was caught with liquor in an official car and arrested. It is not yet known who he was taking the liquor to, but the report reminded me of the time former health minister Manto Tshabalala-Msimang tripped as she descended the stairs from a flight, spilling dozens of mini bottles of spirits on the apron between the stairs and her awaiting car.
But for the moment we are in, with all its attendant rage about widespread corruption around the acquisition of personal protective equipment (PPE), where ANC members themselves, or their friends and relatives, have enriched themselves through fat and easy contracts from almost every department of every municipality and province, I need something to stand still.
Partly that would help me measure the true speed of events and their direction. I know Covid-19 has been awful and the lockdown and its insane bans of alcohol and cigarettes infuriating. And we all know there will be a second wave of Covid-19 infections soon to terrify the government into overreacting all over again. We can only pray it prepares better than it did for the first wave.
But the virus does not determine our trajectory as a nation. That is done by managing the economy in a responsible manner and, given the hole we were in before Covid and the extent to which the virus has made it much worse, I’ve made a short list of things to print out and keep as references for the months and years ahead.
The first is the letter of intent finance minister Tito Mboweni and Reserve Bank governor Lesetja Kganyago handed to the International Monetary Fund (IMF) in July as they sought, successfully, to borrow the equivalent of around R70bn for Covid relief. It is an important document because these two men are really the only people (along with the institutions they lead) standing between us and a financial meltdown.
The promises in the letter are nonbinding. But if we treat it as a dress rehearsal for a full-blown fiscal rescue from the IMF in a few years’ time, then the undertakings in the letter of intent matter a lot. If it turns out we lie to the IMF now, why would it believe us when we’re on our knees in 2025?
The letter promises the introduction of zero-based budgeting (starting each budget, for any arm of the state, afresh each year), cuts in public sector pay and support for only those state-owned entities (SOEs) that meet key performance targets (and these targets will have to be made public if the IMF is to track them). They will ensure that inflation doesn’t rise above 4.5% (in other words, they’ll raise interest rates if prices start rising rapidly).
They’ll also protect the financial system, pulling back some of the regulatory allowances the Bank has made to make it easier for commercial banks to lend. And they promise to get the Reserve Bank the hell out of Dodge as far as buying sovereign bonds in the secondary markets are concerned. The Bank has foreign exchange reserves of about $50bn (about R860bn) painfully built up during the years of democracy. Both men know there’ll come a time when the politicians will want that money. It’s the ditch they will have to die in.
The letter of intent also refers to another document I’m going to print out and keep. It’s that reform paper Mboweni, slightly inaccurately, got credit for. It comes out of the National Treasury’s economics department and it is called Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for SA.
It has become Mboweni’s calling card. When he talks of economic reform to the IMF, this document is his to do list. “SA’s current economic trajectory is unsustainable,” the paper says early on. “Economic growth has stagnated, unemployment is rising, and inequality remains high. The government should urgently implement a series of reforms that can boost SA’s growth in the short term, while also creating the conditions for higher long-term sustainable growth. These growth reforms should promote economic transformation, support labour-intensive growth, and create a globally competitive economy.”
That was a year ago. Despite President Cyril Ramaphosa waxing lyrical about it, nothing had happened by the time Covid hit us. It’ll all be harder now. Let’s see if they stick to their resolve. Or if there is any resolve at all. Here, for instance is the Treasury last November, after ratings agency Moody’s downgraded the outlook on our debt to “negative”, before the final downgrade to junk in March: “Economic reforms have to be implemented without delay,” it said in a statement. “Government has made progress on the measures that the president announced in September 2018: visa regime to support tourism, approval of the revised Integrated Resource Plan providing certainty around government’s preferred energy mix, and release of telecommunications policy directive for spectrum licensing providing a framework to enable the regulator to issue licenses.” Lots of resolve and not much to show for it.
But now everything is delayed and our debt is out of control. So another good document to keep is what the IMF produced after it had lent us the money. It was terribly polite but not all that optimistic about us getting our house in order.
“Once the health crisis subsides, the authorities intend to address long-standing fiscal and structural issues to drive the recovery, boost potential growth, reverse the rising trend in public debt, and foster greater inclusion,” it says.
But, it goes on: “The way forward remains challenging. Covid-19 has already exacerbated economic vulnerabilities built over the last decade, particularly on the real economy and the fiscal position. It has significantly increased the debt level and the service burden.
“Once Covid-19 is behind, there is a pressing need to restore economic fundamentals by consolidating the fiscal position and streamlining SOE operations. These actions could usefully be complemented by introducing an explicit debt target. Increasing the medium-term growth potential requires higher private investment, which in turn necessitates improved governance, lower entry barriers to product markets, and a more flexible labour market to support job creation, and achieve sustainable and inclusive growth.
“Fiscal consolidation and growth-enhancing structural reforms will be crucial to reversing the current upward debt trajectory. Substantial uncertainty remains, and with it significant downside risks as to how and when both global conditions and the SA economy will emerge from the pandemic. Should these risks materialise, the fiscal consolidation and structural reform efforts would have to be larger.”
Well. Mboweni has given them (and us) an explicit debt target – 87% of GDP by the end of fiscal 2023/2024. Not a lot of people believe that is possible. And “higher private investment”, “lower entry barriers to product markets” and “a more flexible labour market”? Where will they come from?
I’ve said it before and I am more convinced than ever that Ramaphosa’s “friends” are a bigger danger to him than his enemies. As Mboweni plots a liberal reform of the economy, his colleagues are going the other way – for centralism, a bigger role for the state.
Trade, industry & competition minister Ebrahim Patel is creating master plans for key industries in the hope of creating jobs in the sugar industry, poultry, cars, and now steel and fabrication. He has totally banned the export of scrap metal from SA for two months while he settles in his mind the merits of an argument between scrap merchants and steel producers, who say the merchants export all the good stuff because prices in Asia are higher and leave the rubbish for domestic smelting.
Patel, a trade unionist forever in his heart, never gives up. Neither does Pravin Gordhan, who has plugged away through the lockdown (he has left his modest home in Pretoria four times since the lockdown started, I understand) at saving SAA in some form.
Neither Patel nor Gordhan fits into the Mboweni reform plan sold to the IMF. Yet Ramaphosa needs them around him for political support. That support you can almost see draining into the sand as the most recent corruption allegations reach deep into his own office.
I have never seen him so indecisive or so dispirited. Based on what we have seen these past two weeks and the little we have heard from the president himself, you can almost feel a second term slipping away, even if he manages to survive the first one. (If he loses the party vote in December 2022 he will be quickly removed from office by the ANC national executive committee, which did the same to Thabo Mbeki and Jacob Zuma.)
How, in the middle of the gravest health crisis anyone alive today will ever see again, amid the rigours of the world’s harshest lockdown, have the political elites around Ramaphosa been able to merrily loot away at the state he is in charge of?
The Oppenheimers and the Ruperts and the Motsepes must rue the day they donated so generously to the anti-Covid effort that Ramaphosa’s government has so badly handled. What of the Solidarity Fund? Solidarity with what?
Politically, Ramaphosa has stalled at almost every turn. He has done what he can to strengthen institutions, but even there his appointments can often flatter to deceive. His appointees at the National Prosecuting Authority (NPA) are a case in point. It is great to have Reuel Khoza chair the Public Investment Corp (PIC), but how does the chairperson explain why, after all the evidence given, Independent Media is still in the hands of Iqbal Survé? I listened to the entirely upstanding leader of the Hawks, Gen Godfrey Lebeya, on Karima Brown’s TV show, The Fix, on Sunday in disbelief at his inability to stand up for himself or to express himself.
On Monday Eskom and the Special Investigating Unit finally produced some excitement, declaring they were going to try to recover R3.8bn from Brian Molefe, his accountant and a host of other Eskom scoundrels, including Mosebenzi Zwane, the former minerals minister and Gupta acolyte. I hope that “try to recover” comes with the understanding that, bar a few Ferraris, the money is gone and that prosecutions are the right way to go. But, for the moment, this is a civil claim.
The difficulty of the moment is that it is almost impossible to see a way out. Or, if not an actual escape, then at least some knowledge of how this ends. I mean, there’s no way Mboweni gets to cut public sector pay, surely? Or starve ministers of funds? At least not in any significant way. And not in time.
And he should not expect much help from Ramaphosa while the latter still hopes for re-election as ANC leader at the end of 2022. The unions and the Left, well funded and with fantastic media access, would have Ramaphosa for breakfast if he tried the reforms Mboweni promised Washington.
I understand Ramaphosa is constantly in a political corner, but he’s been in office for 2½ years almost and it is, largely, time wasted. Perhaps there’s something to be grateful for in inaction, in nothing overtly awful happening. But as we slip towards bankruptcy and 40% unemployment, the benefits are harder to trace.
It’s true that we could have had Nkosazana Dlamini Zuma as president and, truly, I cannot think of anything worse. But with Ramaphosa there’s always been that little hope the country could improve.
But it hasn’t. To quote John Cleese: “It’s not the despair, Laura. I can take the despair. It’s the hope I can’t stand.” So with the country sick and the government moribund and possibly even slightly deranged, I have two more pieces of work to print out and save.
RW Johnson is one of my favourite writers on SA. He’s a catastrophist but the writing is brilliant and his perseverance is admirable. Johnson has been predicting that we would fall into a sovereign debt crisis for years now and the events of the past year have strengthened that view. He cannot see this party sorting out its political differences and making sensible policy in time.
What is it about the ANC? It cannot focus, for one. Ramaphosa has just gazetted 55 infrastructure projects that are supposed to become the backbone of an economic boom after Covid. But why so many? Why not, say, five? Or three? Build a new city, even though people laughed when he once wondered it aloud in parliament. It also can’t choose. Every election it comes out with a list of top 10 priorities and it never does anything about any of them.
Johnson knows this and recently wrote a two-part series on how and why he is more convinced than ever now that a return to the IMF is inevitable and, perhaps, even desirable. Running out of money, once everything else is stolen, might be a sobering experience for the ANC.
I’ve no doubt Johnson enjoyed writing these, and the logic of his case is depressingly solid. He writes regularly for Politicsweb. Here’s Part 1 and here’s Part 2.
I can’t vouch for Johnson, but enough people I know and respect believe that an SA sovereign debt crisis is now almost unavoidable – that it is “when” and not “if”. Just too much money gets stolen and not enough politicians or officials are held to account for it. The price may turn out to be our sovereignty. At least it’ll also be the end of the ANC as we know it.
That’s the thing about running a country. It’s actually quite difficult. You have to focus.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.