SONA BY (DEPRESSING) NUMBERS
What the hard data reveals about the true state of the nation (spoiler alert: not good at all)
Small lakes of ink have been used in writing about the political challenges that face President Cyril Ramaphosa at his sixth State of the Nation Address (Sona) on Thursday. But what is his factual position? What does the data show? What are the numerical challenges that he faces? Here are some of the key numbers.
Theories about the direction in which South Africa should go or will go or have gone are as plentiful as Eskom’s load shedding. But what are the facts?
Fortunately, they are at hand because some of the most well-known figures in development economics, led by Ricardo Hausmann, have just published a paper on the South African economy over the past decade through the United Nations University World Institute for Development Economics Research.
We all know the general picture is bad, but prepare to be really depressed. The research is aimed at discovering the reasons why SA grew barely at all for a decade and it poses three possibilities:
- An external story — the end of the country’s growth and the fiscal consequences of the end of the commodity supercycle.
- A macro story — SA’s debt build-up and macroeconomic failures.
- A microeconomic story — the persistent loss in productivity in the economy and the investment slowdown triggered by microeconomic policies.
But let’s leave that for another day and focus on what actually happened, in detail, in data.
The big picture is clearly bad, but it’s worth noting that even before the financial crisis, South Africa was underperforming on the average global developing country growth rate. After the financial crisis, the country’s position declined, and the gap between SA and the developing world universe got larger.
Superficially, the problem was not exports, which were flat in volume and value over the period. But this view is deceptive because relative to the rest of the world, SA was falling behind.
Investment held steady for the first few years after the financial crisis, but then steadily declined.
The real shocker was what happened to the unemployment rate and its converse, the employment rate. In its slightly laconic way, the report says: “[South Africa’s] labour market indicators have deteriorated notably in the last decade and are amongst the worst in the world.”
And here is one of the big culprits: the government just continued to spend more and more. But what is worse, even though it was spending more, the investment portion of that expenditure got smaller and smaller. If you want to know why SA’s roads are full of potholes and the traffic lights don’t work, this is where you see it.
And what happens when you spend more than you take in? Your debt increases. And so it turned out in South Africa: the country’s government debt burden rose from just 27% of GDP in 2008 to 62% in 2019, an increase of 35 percentage points in 11 years. It’s now sitting at around R4.2-trillion, and South Africa is spending about R303-billion annually just to service the debt, a little below R1-billion per day — and this, as the research points out, is despite the Treasury frantically pushing the debt out to reduce immediate payments.
How was this money spent? This graph shows how the spending patterns changed over time, with payments for government employees and grants increasing, squeezing out investment spending.
The result is particularly weird — government salaries in all but the lowest and highest categories gradually outpacing private sector salaries, to the extent that now state employees in the 50th percentile get paid 110% more than their private-sector counterparts.
In addition, the total number of employees jumps too, with the result that the total salary bill shoots up by 70%. And who are these new employees? Not teachers and not so much health workers and police — the sectors that really need them — but people employed in the social work, transport, central government administration.
Tax rates stay more or less the same, other than a big increase in VAT in 2018 and personal tax in 2017. But it’s interesting to note that the corporate take, what SARS managed to bring in, slides from 2011. Which sector? All of them.
Why did this all happen? One reason is the consistent overestimation of growth and of inflation. This graph is complicated but it shows what the expectations were compared with how things turned out. Every year growth was expected to rise, but instead, it fell.
All of this happened during a period when the quality of governance declined. Remember all those promises of a “capable state”? Turns out they were porky pies.
And as night follows day, the public perceptions of governance declined too, but what is remarkable about this graph is by how much. From 2005, the perception that the government was doing “very badly” was confined to just 12% of the population. It is now 40% of the population.
So where does this leave us all on the eve of Ramaphosa’s Sona? Ever since US President Ronald Reagan introduced the phrase “The State of the Union is strong,” in his State of the Union speech, US presidents have repeated it every year. If Ramaphosa were to be honest, he would start by saying, “The state of the union is weak.” The numbers show it. DM/BM
- Article corrected to reflect that the speech on Thursday is President Ramaphosa’s sixth, not fifth, SONA.
[hearken id=”daily-maverick/9072″]
Become an Insider
Well, we all know how the governing party has failed us over the last 20 odd years. How the economy have collapse since the election of Jacob Zuma as dictator president in 2009. How virtually all citizens suffered in terms of job opportunities, regardless of socio-economic status, the poor (especially), but also the better off, average people. But this article, so well supported by statistics, graphs, and the like, describe how bad the true state of the nation really is. Thank you Tim! And tonight we, or those that bother, will watch the much better off politicians parading in their designer outfits, awaiting the arrival of the incumbent President to come down the red carpet, cheered along by those that have created this disaster. “My fellow South African’s…..! Of course he will be interrupted by a force of some 25-odd people dressed in red! And by the end we will hear the cheers of “Unity”. And viewers like me will watch, and wonder, what did this man actually say? How many promises did he made this time? Can we ever believe him?
African politicians star daily in their own glitzy performances of a revised, ‘Much ado about nothing’. Tonight will be no exception, and sadly many of those in attendance should actually by now be wearing orange, not Gucci or red overalls. Sad to sit in our own sea of self-made detritus, and watch our neighbour go the same way.
Never mind – Alles sal Rectum
All issues and ‘challenges’ that cr faces for the SONA and otherwise are of his own doing. He has done very little to get rid of the rubbish in his cabinet, because he still believes in cadre deployment and putting the anc before the nation. In short – he is a pathological liar.
Will anyone follow the SONA apart from journalists who are paid to. Personally I dont take any notice as its all waffle and totally meaningless. Especially from THE NOWHERE MAN. (remember the Beatles) Sitting in has NOWHERE LAND. Making all his NOWHERE Plans for Nobody. Doesn’t have a point of view..Knows not where he’s going to…. my apologies to The Beatles’
You’ve got it in one! And yet he is such an intelligent man! Why is he so afraid to act decisively?
Exactly. I’m expecting something like “we’re screwed, I’m resigning and I’m outta here.”
Excellent and succinct article. An issue which is rarely emphasised but has been present all the way from 1994 is that the ANC government’s economic model is fundamentally flawed and could never have worked.
With ANC, Cosatu and SACP with hands on the levers it is no surprise SA finds itself in the same position as Venezuela and Cuba(without even the better elements of the latter).
Fact is that the tripartite alliance detests business and especially white business. Sadly SA big business acquiesced and bought into the commendable ideals of transformation and equity without strongly challenging the negative consequences of government policies.
Apart from Tim’s crisp analysis here-we have a formal economy running at 1/2 speed and employing fewer than in 2010 and 30% reduction in the number of companies on the JSE.
Add cadre deployment, chronic overmanning, general incompetence and systematic corruption and we are where we are.
But don’t worry-the SONA organisational team have “had their shoulder to the wheel” to bring us yet another fatuous waste of everyone’s time-in a relocated venue-the original having been rendered unusable by fire-not to mention at least 3 hospitals and an airforce base partially damaged!
This confirms that really, for individuals who can manage it, the only way is out! How sad………. There are no words, just tears
Dali Mpofu is a ‘nincompoop and scoundrel’ and not fit to be on the JSC.
As for his friend, Malema, he is a criminal.
Not relevant here.
One has seen a similar scenario develop post-independence in Zambia and Zimbabwe, Namibia, among other countries in Sub-Saharan Africa. In short, government spending what it doesn’t have, a bloated, overpaid and unproductive civil service, and corruption from the top trickling down to the very bottom to the extent nothing gets done unless there is a backhander. As for South Africa at the dawn of democracy. There was high expectations of the ANC, but the party that spawned iconic struggle heroes, has imploded. So sadly back to the start for South Africa, but this time with politicians at the helm who understand the concept of servant leadership..
How will Squirrel try to gild the turd this time? No doubt more lies and talk of economic renewal…
There really is no escape from this depressing scenario except lies & obfuscation, which, no doubt, will be the spine – the only one in Government – of Ramaphosa’s address. I’ll be rehearsing with the Sunny Skies while it goes down, and hopefully miss the entire disgraceful charade.
This detailed analysis as well as Ferial’s lengthy take are perfect examples of what Greta Thunberg will call “blah, blah, blah” ! CR … as in Zapiro’s cartoon, can save us a lot of time and energy (thanks Eiskom) be summed up in one word … CAPTURED ! As an afterthought … he could add the phrase …. ‘and I don’t have a clue of what to do about it.’. Because the scoundrels who did it, are inside MY party … and walking about freely, as if nothing happened. In fact they are giving me the ‘up yours’ signal !
Bottom line, the foundational bedrock of the situation is simply as follows: The desperately needed decisive corrective action required by the ANC (CR by extension) against the ANC, will result in the ANC fracturing along factional lines. CR doesn’t have the balls to pull the trigger and for this to be his legacy, a legacy that will echo down the halls of history – the man who broke the ANC apart. Despite the dire need for this, he will rather watch the country be ripped apart and keep the ANC intact. Every call on him from every corner of society should simply be “Country before Party”. You are delusional if you think both can co-exist sustainably.