If radically transformative economic policy falls in a forest of morons, does anyone tweet?
The answer, apparently, is no.
Perhaps this is why a universe-altering policy tweak, made just days before last Friday’s inevitable Moody’s downgrade, was met without comment from the people who had long demanded its implementation. On 25 March, Lesetja Kganyago, governor of the Reserve Bank, announced that his institution would be buying government securities in order to keep the market for South African debt on a ventilator. (This was shortly after he had lowered interest rates by 100 basis points, another milestone moment for the Reserve Bank.) The technical term for this practice is “quantitative easing”, or QE — a neologism for printing money in the digital age. Nevertheless, the jargon was carefully elided from the SARB’s official statement.
Kganyago’s coyness can be attributed to a deft little piece of politicking: the governor wanted to avoid alerting Ace Magashule and his cohort of looters to the fact that they had, however inadvertently, won from the Reserve Bank the most significant advancement in monetary policy since 1994.
Indeed, the SARB has been under siege since the ANC’s 54th National Conference in 2017, when the RETers used the bank as a cudgel in their leadership tussle with Team Ramaphosa and the financial establishment. The Transformers were at the time led by former President Jacob Zuma; in the ensuing years, the supergroup has (d)evolved to include, among many others, Ace, Lindiwe Sisulu and Julius Malema (EFF leader and wannabe acting president of the ANC). Their most vocal surrogates come and go — howzit Carl Niehaus! — but at the moment they’re represented by Ekurhuleni Executive Mayor Mzwandile Masina, who once swore he’d never serve under President Cyril Ramaphosa, and who now spends his government-purchased data plan punting a “Cuban vaccine” for Covid-19. (Masina is a walking, talking 85-year-old’s WhatsApp group.)
We should take a moment to note that, while ostensibly radical, these people share no coherent ideology. They want the forces of economic power to rebalance in their favour, and they don’t really care how that happens, or who goes hungry in the process.
Back in the good old days, the faction insisted that the SARB should be nationalised — it is one of the few reserve banks in the world to have a private ownership component — and that it expand its Constitutional mandate beyond ensuring price and currency stability “to include [boosting] growth and employment.” This is code for lowering interest rates and flushing more money into the economy, which most economists believe would automatically drive up prices — a no-no for the SARB. In short, the RET faction was selling anti-austerity, developmental state cheap-money boilerplate — the only thing radical about it was that it risked undermining the SARB’s “independence”, a happy fiction that maintains the faux-trust in any country’s economic system. (They also demanded the establishment of a state bank, among a number of other measures that would have nudged the levers of the economy closer to the ruling class in the ANC.)
In 2019, Ace and his cronies went even further. In a press briefing following the National Executive Committee’s mid-year Lekgotla, the Secretary-General announced that, “[We have] directed the ANC Government to consider constituting a task team to explore quantity easing (sic) measures to address intergovernmental debts to make funds available for developmental purposes.”
As is often the case, Ace was roundly mocked for not knowing what the fuck he was talking about — “quantity easing”, hombre? QE, the experts agreed, was impossible in South Africa, laughable, a fantasy barely worth discussing. Nevertheless, Ace’s statement further undermined confidence in Cyril Ramaphosa’s rickety regime, and the ZAR swooned accordingly.
On Facebook, Finance Minister Tito Mboweni posted an exasperated rant entitled, “WHAT IS THIS OBSESSION WITH THE SOUTH AFRICAN RESERVE BANK?” He followed up on Twitter, saying, “Government sets the mandate for the SARB. There is no quantitative easing thing here. The primary mandate of the SA Reserve Bank is to ‘protect the value of the currency in the interest of balanced economic growth and development’.”
Ace’s faction contended that, since the 2008 financial crash, the US Federal Reserve and the European Central Bank had both “quantity eased” with abandon, spurring the recovery and sending stock markets to vertiginous highs. Staggering amounts of wealth were created, which certainly hadn’t passed notice in Luthuli House. “[QE] is a consistent practice by developed countries to save their economies,” lectured Ace, failing to observe that South Africa, which he’d helped rob to the point of destruction, shared zero corollaries with the United States, Europe, Japan or the UK. He also neglected to mention that QE was being blamed for pumping empty calories into equity markets, further fattening the rich on sugar-high stock prices, widening the divide between the haves and the have-nots to levels unseen since the gilded age — an economy so fake that now the QE bailout itself is being bailed out.
With mantic clarity, Nicholas Macpherson, a former permanent secretary to the UK Treasury, once tweeted, “QE [is] like heroin – [you] need ever-increasing fixes to create a high. Meanwhile, negative side effects increase. Time to move on.”
Not in South Africa, the Fanonian post-colony impervious to progression.
Leaving aside Ace’s populist flim-flam (much of which he barely seems to understand), there have long been calls from the left for the Reserve Bank to expand its mandate. Progressives faced off against the early architects of South Africa’s monetary policy, who were hoping to discourage the country from becoming another failed African republic, where after a few decades of financial mismanagement the mint starts churning out cash, the currency plummets, inflation sky-rockets, and the International Monetary Fund walks in with a sjambok and a red pen.
Cheaper money and a devalued currency, the left argued, could help local borrowers and boost local exports — Mzansi could become a nation of makers as opposed to a guild of subsistence shoppers. Instead, imposed on South Africa, right from the very beginning, was a weird blend of neoliberalism and socialism-lite, governed by an austere National Treasury that has been as parsimonious as it has been subservient to foreign finger-wagging.
It hasn’t worked.
Austerity in the age of globalisation has always been about a race to the bottom: lowering corporate taxes, smashing organised labour, befouling the environment and then, behold! — we are bequeathed the Holy Grail of foreign investment.
Well, we’ve raced to the bottom, and we’ve won. The Holy Grail is empty: South Africans produce almost nothing except raw commodities, and instead mostly work for the state or fill gaps where the state has been rendered incapable — securing, cleaning, teaching, wiping, driving. The corporate sector is its own ring-fenced entity, closed to new entrants, as white as Donald Trump’s dream America. The only sliver of the economy with any energy is the informal sector, and according to most of our financial modelling, it hasn’t really existed until Covid-19 lockdown revealed how indispensable are spaza shops and other under-the-official-radar economic activities.
So what happens next?
Well, if we peer a little closer at what the Reserve Bank is doing, we find that the Ace-istas run into immediate trouble. In fact, the radical measures currently being undertaken are in order for the SARB to maintain its price stability mandate — the extra cash sloshing around the economy should encourage spending, and therefore keep prices from cratering completely.
Next, if Tito Mboweni gets his way, we kick off another round of self-imposed structural adjustment — scaling back the size of the state payroll, shaving down corporate taxes even further, re-introducing fiscal and monetary discipline at the nearest possible convenience. The idea is that this will appease the rating agencies who, when things “return to normal”, will like spurned lovers realise that we really really love them, and restore to us our investment-grade rating.
This is charmingly, if pathetically, naive. For one thing, you can’t appease the monsters in the metropole. Yes, South Africa has been appallingly governed, with corruption and stupidity draining, best guess, R1.5-trillion from the fiscus over the course of Zuma’s second term alone. This is unforgivable. But South Africa’s spectacularly failed economy — 29% official unemployment before the Covid-19 Depression — was not just a result of kleptocratic governance, as so many commentators would have us believe.
It was also a side-effect of inflexible establishment economics.
After all, we stole only from our own larder. Owning South African government securities has paid foreign investors handsomely: in emerging market terms, only Pakistan and Turkey have offered higher rates of return. (As a consolation prize, South Africa’s will be one of the sexiest, best-behaved bonds in the junk grade category.) Nor are South African securities insecure: the last time the country defaulted was during the 1985 “debt standstill”, when PW Botha ran out of forex for the purchase of bondage gear and decent Namibian braai wood. Sixteen years later, a democratic South Africa finally settled that debt, a staggeringly unjust arrangement that, according to the Financial Mail, “[signalled ] improvements to South Africa’s credit outlook by rating agencies like Standard & Poor’s and Moody’s.”
You see who we’re dealing with here?
Let’s not forget that the rating agencies provided the matches for the last global economic conflagration in 2008 — they awarded world-class credit ratings for the mortgage-backed securities that ended up collapsing the financial system. Somehow, these privateering ghouls escaped with their corner offices unmolested; avoiding all meaningful censure, they were sent back into the world to provide neo-colonial oversight on emerging market economies. One by one, they have deemed us unworthy. (I’d argue Zuma’s greatest sin was debasing us before these ethically bankrupt savages.)
In downgrading South Africa on the first day of the lockdown — the equivalent of firing an employee on Christmas Eve — Moody’s reminded us of their malevolence. These are not human beings in the traditional sense of the term. That said, they hate a deficit. As Marianne Merten noted in these pages, “debt service costs are South Africa’s biggest increasing Budget item: R202.2-billion in debt repayments in 2019, up from R147.7-billion debt service costs in 2016.” Much of that is garbage corruption bailout money hosed into state-owned companies that should be triaged in ICU units with the sickest Covid-19 patients, and for which everyone in the ANC should go to jail.
But in the midst of the pandemic pandemonium, obsessing over the balance sheet, and how we’re viewed by the Patrick Batemans in the rating agencies, seems like a waste of precious time. I mean, why even bother fretting when global government debt sat at $70-trillion toward the end of 2019?
According to the IMF, if corporate and personal debt is included, there is more red spilled ink at the present moment than there has been since the dawn of our species.
If debt is the measure, we are screwed beyond all human comprehension.
Tito Mboweni, Team Ramaphosa, the SARB, the financial elite (and probably even Ace Magashule) — all of them just want normality to resume so we can keep screwing ourselves over like good post-colonial patsies.
But even a blue-chip hack like Wolfgang Munchau has noted in his Eurointelligence newsletter that, “It seems extremely implausible to us that life will return to the status-quo-ante, which is the underlying presumption of virtually all the forecasts right now.”
So if normal is now abnormal, then surely structural adjustment — or rather the old school practice thereof — will not get us through this mess. The crisis certainly offers the government the opportunity to punt zombie workers off the government payroll and to change the nature of state employment from patronage to productivity. And it’s a beautiful time to start thinking about how to get money flowing to real South Africans who aren’t in the equity or debt markets.
Indeed, this is the moment for the government and the financial establishment to move on — to head into the Karoo with a Jojo tank full of ayahuasca and to tap into the Universal Consciousness, which will likely not treat them kindly. It’s time to tweak the policies that have made us one of the most divided nations on earth. It’s time to go crazy.
After all, nothing that we’ve done to date has worked.
For years we’ve been well-behaved little austerity monks, undercutting our own policies by corruption and crap implementation. But even if we’d left money in the Treasury for a rainy day, this pandemic would still be a country-changing phenomenon. The final reckoning may reveal a South Africa far more radical in its policies than the radicals could ever have imagined. The bad news for them is there’ll be nothing left to steal. DM