Independent Online

Sunday, December 10, 2023

View 0 recent articles pushed to you.Like us on FacebookFollow us on TwitterView weather by location

Now is the time to fix South Africa’s broken economy

Finance Minister Enoch Godongwana.

Finance Minister Enoch Godongwana.

Published Oct 31, 2023


Nkosikhulule Nyembezi

As Finance Minister Enoch Godongwana prepares to present the medium-term budget policy statement (MTBPS) on Wednesday amid low economic growth, high government debt and insufficient taxes, on one thing, politicians, business, labour and civil society organisations can agree: South Africa is broken.

Not as in the silly, smirking jokes and mocks used by former President Jacob Zuma to make fun of former DA leader Mmusi Maimane’s 2015 State of the Nation address debate speech on “a broken man, presiding over a broken society”, but in the most basic sense.

The newish finance minister is not even pretending this week’s MTBPS measures will meaningfully fix the pressing socio-economic needs of the population and the multilayered institutional problems devastating our economy. Perhaps such candour is to his credit.

What is shaming as we approach the fifth year of this administration that is seeking reelection is that, first, he is not getting the necessary political support to overcome what he calls “corruption leakages” in the form of ghost workers and dysfunctional procurement systems that heap wastefulness on top of fiscal problems, and the severe infiltration of organised criminal networks into construction projects.

Second, he does not try hard enough to rally government departments and social partners to collectively deal with priority areas that could help improve the economy.

Godongwana publicly conceded last month that the Treasury’s growth forecast in the budget presented in February was “a bit optimistic” in hindsight. Getting to the root causes of significant issues and excluding dogma has never been the ANC’s style, even as accusations and counteraccusations of attempts to introduce austerity measures to the economy continue.

It is three years since the start of the first coronavirus lockdown – and, by implication, the third anniversary of the beginning of a nationwide conversation about the high cost of living and unemployment.

As the pandemic confined economically insecure people to their homes, it soon became apparent that many of them were thinking deeply about their disappearing jobs in the formal and informal sectors of the economy, the new normal that determined the unpredictability and irregularity of household income, and the sacrifices individuals are often required to make to protect their livelihoods.

Persistently, there has been a tremendous amount of noise in the media about how people deal with new challenges to find ways to support more family members, take time to consider more fundamental thoughts about disintegrating family support systems, eroding care for the vulnerable ones, evaporating free time for leisure, and the horrors of the daily commute following the sharp rise in fuel prices and the long delays since 2020 in the reinstatement of the passenger train service in places like Cape Town.

And the noise has never died down.

The backdrop of this policy statement demands decisive political leadership, even more so as we enter the election campaign season that is likely to be characterised by spending on pet projects to entice voters ahead of the 2024 national and provincial elections.

Below the spin, even the official forecasts are laden with gloom. The Reserve Bank, in its financial stability review in May, said: “Household finances remain under severe pressure due to rising interest rates, load-shedding, high unemployment, weak real income growth and high inflation.”

Earlier in October, over 100 academics, economists, professionals and civil society organisations signed an open letter to President Cyril Ramaphosa and Godongwana calling for a halt to budget cuts.

“National Treasury’s instruction to government entities to immediately institute severe budget cuts is misguided, dangerous to our economy and wellbeing, and not supported by robust evidence,” the letter says.

“A sense of panic is being created to force through these rushed, chaotic and indiscriminate cuts.”

As we ponder the adverse effects of this broken economy, we must remember that millions of learners travel long distances to school, and many are already writing their examinations.

Because of corruption and maladministration, many lack access to learner transport and other affordable public transport. Many will be hungry as the schools can no longer provide daily meals because of the dysfunctional and corrupted school nutrition programme.

Many schools will have reported more financially struggling parents who have fallen behind with payments and applied for school fee exemption.

Many parents struggle financially and are likely to have impaired credit scores and cannot provide children with daily nutritious meals.

Recently, big banks reported that homeowners who accumulated excess cash and paid down their existing mortgage debt during the Covid-19 lockdown, when interest rates were at historic lows, are now drawing the payments to keep bread on the table and install solar to mitigate electricity blackouts.

The individual and corporate taxpayers are suffering. So, the government’s responsibilities to the nation have multiplied and become equally inescapable as we confront the realities of bad and poorly implemented policies.

One of the key political and socio-economic questions this policy statement is also likely to give clues on as South Africa approaches 30 years of democracy will be simple: who will have time for caring if the government does not continue doing so through prudent economic and fiscal policies?

Millions of people thought about that issue in the depths of lockdown. The fact that the government will likely offer only the cruellest, most narrow ideologically-based answers speaks volumes about how little they understand the future.

For all his clownishness and his relaxed attitude on being called “Mr Austerity”, which he said he does not like but can live with, Godongwana recently raised an urgent issue: South Africa spends eighteen cents in every rand collected on servicing debt.

He warned that R4.3 trillion of public debt is “massive”, decrying the vanishing fiscal space as debt servicing costs rise in an environment of weak growth. He also warned that several large redemptions are looming, and if this ANC-led government does not redeem, the country will “run out of cash by the end of March”. What can South Africans do to fix the problem?

The proposed answers, including tax increases and other government regulatory measures, came out of the ANC jokebook – and are likely to fall flat in an economy shocked by rate rises and financial turbulence.

Different responses, underpinned by environmental sustainability and social justice, have not even been tried at the Union Buildings as the powerships and offshore oil and gas mining companies have one foot inside our house.

But the big question of how to collectively fix the economy hangs over this government and the opposition, even if neither side wants to square up to it.

Nyembezi is a researcher, policy analyst and human rights activist

Cape Times