Something different coming our way — twin reality checks of Austerity and Privatisation
While many have warned that the government is about to cut back services dramatically, President Cyril Ramaphosa has said that ‘fiscal discipline is not the same as imposing austerity measures’. He’s also claimed that it is ‘clearly not the case’ that parts of Eskom or Transnet are being privatised. While he may be quibbling over words, the government is obviously losing power to the private sector.
On Monday evening, President Cyril Ramaphosa gave a closing address to the ANC’s National Executive Committee (NEC) in which he denied that the government was imposing austerity measures.
This comes after a series of reports, first in Daily Maverick’s DM168 newspaper, that the government was preparing to cut back on services as its tax revenue had decreased.
This is largely because the commodities boom which exploded after the pandemic has now ended and prices for raw materials like coal have declined dramatically.
At the same time, the consequences of other long-term political choices are coming home to roost.
Perhaps most important is the fact that government workers received above-inflation increases for many years before the pandemic. While unions will always focus on how important it is to pay nurses and doctors more, many other public service workers, such as driving licence officials, who are often corrupt, have also received large wage increases over the years.
And despite years of promises that there would be structural reform of the economy, and even a claim of a “Hallelujah Moment” at the start of the pandemic, nothing has happened.
Even SA’s most powerful politician, Ramaphosa, has singularly failed to live up to his promise of a “social pact” to unite government, business and labour.
The confluence of these dire straits resulted in the government being saddled with high levels of debt which must be repaid as quickly as possible (as any homeowner knows, paying interest is essentially giving money to someone for nothing in return).
South Africa’s actual fiscal situation is not entirely clear.
Ramaphosa said in his address that Finance Minister Enoch Godongwana had reassured the NEC meeting that South Africa was “not running out of money”.
On Tuesday, EWN reported that Godongwana said in Parliament, “Our approach has been moderate of combining expenditure cuts, but bump up some borrowing in a sustainable way.”
This suggests that, as always, the National Treasury is looking for the middle path.
Within this comes Ramaphosa’s claim that “fiscal discipline is not the same as imposing austerity measures that will undermine our developmental agenda”.
The one and only option
While dictionaries provide different definitions for the phrases “fiscal discipline” and “austerity measures”, in reality, the government simply has to spend less. There is no other option.
This means that cutbacks in services are inevitable. It doesn’t matter what words are used to describe the situation, cutbacks will happen.
Of course, the issue now is the extent and the mapping of the cutbacks.
Already, many are mobilising against any kind of cuts, arguing that, for example, hospital patients and children should not suffer any more than they already do. However, the government and Ramaphosa will contend that service cuts are not “austerity”.
This is merely semantics — the fact is the government can’t afford to provide the services it has up until now, and services will be curtailed.
No matter how one looks at it, if there are fewer services, or poorer quality services, in a country defined by racialised inequality, this will “undermine our developmental agenda”.
Control and ownership
A similar word game is playing out over privatisation.
Ramaphosa is correct in his statement to the NEC that the state will continue to own Transnet and Eskom. No one is talking about those companies being taken into private ownership.
But that is not necessarily the same as control.
The busiest part of our busiest harbour, Pier Two in Durban, is about to be taken over by the Philippines-based International Container Services Terminal. A private company, and not Transnet, will be running the harbour.
This will weaken the control the government had, through Transnet, on the port’s operation.
There is a similar story at Eskom. It is not being sold — rather, it’s moving from a phase in which it owned and controlled all the means of electricity production, to becoming a purchaser of electricity.
Again, this may not fit the dictionary definition of privatisation, but it is another example of the diminution of government control of an enterprise.
The situation at SAA is different. Considering that once the deal is concluded (should that day ever come to pass), the Takatso Consortium will own 51% of SAA which fits the definition of privatisation. The government will no longer control SAA, an entity it has complete control of at the moment.
What happened to the naysayers?
Considering that privatisation had been opposed by the SACP and the trade unions, and also by the ANC (which at one point promised nationalisation), it is worth repeating how astonishing it is that there is now virtually no opposition to this process.
It’s almost as if the opponents of privatisation have simply vanished.
There are three possible reasons for this:
- They believe Ramaphosa when he says that this is not “privatisation”;
- They have simply been defeated; or
- They accept there is no other option, which is the most likely case. In the medium term, this should be good for our economy.
Already, independent power producers are successfully selling reliable power supplies to Eskom, thus alleviating load shedding.
It is likely that once the Transnet Durban Harbour deal is concluded, Pier Two will operate more efficiently and at a more competitive price.
The same should be true of the bid to allow a private company to run the Transnet railway line from Joburg to Durban.
If these major parts of our infrastructure do then run properly, the impact on our economy will be huge and could lead to economic growth as high as 3% a year (the SA Reserve Bank says load shedding costs around 2% economic growth a year, while the problems at Transnet reportedly cost about 1% per annum).
Of course, this would be good news, but not nearly enough to drive our economy to generate as much revenue as the government needs.
This means that government services, if they are cut, are unlikely to be returned to their current levels for some time to come — no matter what words or communication strategies are used. DM