FINANCE Minister Enoch Godongwana announced two seismic considerations in his Budget speech as regards South Africa’s gold and foreign exchange reserves account (GFECRA) and the two-pot pension policy ‒ the worst policy missteps a country can ever make.
Firstly, unleashing of GFECRA to the tune of R150 billion to ease the deficit and boost public expenditure.
Secondly, the two-pot retirement reform allows pre-retirement access to a third of employees’ retirement assets in times of personal stress to relieve household debt and expenditure pressures.
The Fiscal and Financial Commission (FFC) have expressed severe misgivings about using GFECRA to reduce the country's debt. while the Parliament Office of Budget has argued favourably for the step thus taken of availing the R150bn to relieve debt and ensure that the austerity blow is lessened.
What the protagonists are missing out on is that we are operating under a defective macro-economic system which is bound to continually find itself entangled in these missteps.
None of the four institutions ‒ SA Reserve Bank, National Treasury, the Fiscal and Financial Commission and the Parliamentary Office of Budget ‒ actually understand the dimensions of the forest as they argue loudly about the tree species in the forest.
On the eve of 1994, the then civil servants of the Republic of Venda were allowed to withdraw their pensions from the impending consolidation of the Transkei, Bophuthatswana, Ciskei, the Self-Governing Territories and South Africa under one umbrella of the new South Africa.
The civil servants of Venda were not certain about how secure their hard-earned income would be under the new South Africa. This created a nearly chaotic civil servants run on on pensions.
Fortunately, the rest of the country held on and averted serious bankruptcy and a future that would have looked bleak for South Africa.
This early withdrawal of pensions in Venda has had a devastating effect on the retirement cushion of civil servants of Venda.
The second blow that visited Venda as a region was the pillaging of the Venda Mutual Bank reserves that emerged from its Venda Burial Society.
The earlier blow was self-inflicted by civil service personnel who doubted the future, and for the then government of Venda to have allowed it was quite irresponsible. The second was inflicted with complicity by government and municipal officials, with heavy consequences especially for enterprising Venda women.
On February 32, the Budget speech by Godongwana reminded me of what befell Venda on both counts. A run on pensions and reserves invoke a sense of déjà vu for Venda.
But first, a detour into the architecture of economic governance under apartheid would help us to understand what could be the pitfalls of our current economic governance and lays the lens on the Venda financial tragedy.
The apartheid development model created state-owned enterprises (SOEs) as an instrument and an economic agent not only of policy orientation, but critically of economic intervention and interface with the private sector.
These institutions also carried a serious responsibility for training. Almost all of them had a training centre that was directly and organically connected with the National Technical Certificate (NTC) system.
The manpower development system was pervasive and derisked the private sector from the human resources they received from the NTC system and the SOEs.
Through this, the private sector had access to a skilled pipeline of people that emerged out of this interlinked and seamless technical training and skills acquisition system. It certainly worked.
Post-1994, this system was replaced by a system, the consequences of which destroyed the organic presence of technical training institutions that provided a platform for skill requirements within the SOEs that met an industry-wide thirst and demand for such skills, and the NTC system, which interfaced with attachments, internships and apprenticeship to industry.
The teacher training, agricultural colleges and nursing schools that provided much-needed practical skills in education, food production and health were universalised.
As a consequence, nurses started speaking big English to the wounds, as well as to the dust on the hospital floors.
In specific environments -‒such as the Coloured community where the skills of motor mechanics and welding were predominant ‒ the competencies disappeared. So severe has been the impact of shortage of skills that builders, welders, motor mechanics, plumbers and electricians generally come from Mozambique or Zimbabwe.
What is the relevance of this rant on skills to the raid on reserves and on pensions? Apartheid South Africa adopted a system that connected pensions and reserves as part of the fiscus that would support the state intervention in its long-term planning.
Hendrik van der Bijl borrowed R 16 million almost a century ago to build Eskom. Bijl was able to pay this money back to General Jan Smuts’s fiscus in less than six years.
The apartheid architecture used surpluses from the SOEs to direct and intervene in development. The entire SOE infrastructure interfaced with the private sector and the white minority through these surpluses as agents of economic development.
But now Godongwana has released the surpluses into consumption.
South Africa once had a budget surplus and many opportunities of surpluses that would protect and augment surpluses. But the aim is to strip the SOEs of their developmental mandate, which should primarily focus on skill development.
Instead, this has created a focus into financial profit centres, thus turning the SOEs into developmental eunuchs and financial milk cows ready for the picking by the private sector.
The dishing out of the R 150bn and a third of the pensions for today’s consumption loudly says South Africa is not a developmental state and is not desirous of being one. A National Development Plan has no pillow to place its head on in this country.
Many opportunities to deploy pension and surpluses into development have been lost because of the macro-economic framework that defines the state as an adjudicator and facilitator between economic agents and not as an active intervener.
We have not learnt from the dire consequences of the Venda pension saga, nor have we related to the raid of Venda Mutual Bank. The consequences of the finance minister on these two counts will reminisce those of Venda.
It was a grave mistake and South Africa will pay a heavy price for it, which in its already weakened state it can’t afford.
DR PALI Lehohla is a Professor of Practice at the University of Johannesburg, a Research Associate at Oxford University, a board member of Institute for Economic Justice at Wits and a distinguished Alumnus of the University of Ghana. He is the former Statistician-General of South Africa.
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