Business Maverick


After the Bell: You may prefer to sit out Sona 2024. Don’t

After the Bell: You may prefer to sit out Sona 2024. Don’t
President Cyril Ramaphosa during the 2023 response to the State of the Nation Address debate at Cape Town City Hall on 16 February 2023. (Photo: Gallo Images / Jeffrey Abrahams)

The ANC is in a corner here, and when politicians feel they are cornered, they instinctively reach for the cookie jar.

My guess is that President Cyril Ramaphosa, amid a long-view defence of ANC performance, will make two important announcements and two important promises in his State of the Nation Address (Sona) on Thursday, 8 February. 

The two important announcements will be the new CEO of Transnet and the 2024 elections date. The two important promises will be the continuation of the Covid-era unemployment grant, currently scheduled to end in March 2025, and the implementation of the National Health Insurance (NHI) system.

This guess is not a huge punt from left field; I think it is pretty widely speculated that these will be some of the focus issues. It also stands to reason: the ANC is in a corner here, and when politicians feel they are cornered, they instinctively reach for the cookie jar. 

That the party is in a corner is also pretty obvious, but perhaps the underlying reasons are misunderstood. Because of its huge support base, the ANC’s proportion of the vote is very highly correlated with voter turnout. Total voting-age population turnout in the past three general elections has declined from about 60% in 2009 to 58% in 2014 and to just below 50% in 2019. This is slightly different from formal turnout, which is the proportion of registered voters who cast a ballot; that was 66% in 2019. 

Either way, with each decline, the ANC’s share of votes has declined in very close relative proportion. Consequently, it’s not as though the ANC is losing support in the way that the opposition parties would like to believe (or have us believe); it’s more that the ANC is losing popular enthusiasm. To combat that, the ANC is not proposing to change its policies; why should it? It sees its existing policies as having been successful. 

What it’s trying to do is regain popular enthusiasm by doubling down on its existing strategy. The aim is not so much to win new voters but to convince existing voters to vote for precisely the things they voted for previously. More or less.

The ANC, then, is in a corner because this “get out and vote” idea is not landing very effectively. Analysts think the turnout this time will be between 55 and 60% of eligible voters, and while that’s pretty bad news for the ANC, it’s by no means fatal. Loosely speaking, this would bring the ANC’s proportion of the vote to below 50%, but not so much that it would be unable to cobble together a new government with a few smaller parties.

But for South Africa, this process of trying to spur voters into voting by promising a basic income grant and NHI is ominous. The basic income grant will cost about R40-billion a year and go to about eight million recipients, putting a level of stress on the budget, but is arguably doable. 

Whether poverty support should take this form is, of course, another debate. Personally, I like the fact that it is a cash grant rather than a work-benefit system like the Expanded Public Works Programme because the simplicity of a cash transfer is something of a corruption mitigator. But the amount spent on booze is worrying. 

The NHI is a different matter. We have no clue whatsoever how much this is going to cost, but between R200-billion and R500-billion a year seems likely. If it were implemented tomorrow, the deficit (the difference between what the government brings in tax and what it spends) probably rises from the unsustainable 6% it is now to the totally ridiculous level of around 10% a year.  

It makes you wonder why the ANC is not seeing the problem here. The positions of Eskom, Transnet, the SA Post Office, Sanral, the Land Bank and a host of other ailing government institutions are all linked. Losing control of the budget means vital investment is delayed to pay immediate expenses, which over time reduces the quality of services, which means that customers find alternatives, which increases the stress on the organisation, which means good staff leave, which all contribute precipitously to the downward spiral. And so on.

I suspect the average ANC MP has no idea what the difference is between a 3% deficit and a 10% deficit; it seems so small. Allow me to elucidate: 3% is handleable, 10% is death, not just of the government but of the whole country. A 3% deficit means borrowing around R178-million a day; a 10% deficit means borrowing R600-million per day. Every day. Including Sundays.

That means less capital for all other potential borrowers, which means growth slows, which means the deficit rises. Foreign investor holdings in SA’s bond market are already at a record low. And if the ANC does not recognise this now, trust me, it will later. As Margaret Thatcher once famously said: eventually, socialists run out of other people’s money. DM


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