Defend Truth


A barren, weak and empty SONA

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Ramaphosa is an old-school socialist who labours under the stubborn belief that the government is able to provide essential goods and services better than the private sector can do. That he is wrong would not even occur to him.

Julius Malema and the Economic Freedom Fighters, who collectively held up the start of President Cyril Ramaphosa’s State of the Nation Address (SONA) by more than an hour and a half, scored a few telling goals.

Neatly distracting from the scandals among their own, they challenged the presence in Parliament of former president and deputy president FW de Klerk and insisted that Ramaphosa fire Public Enterprises Minister Pravin Gordhan over load shedding.

Leaving aside the validity of their points, that they should have been afforded the space for such cynical political grandstanding reflects badly on the Parliamentary rules, which apparently afford no special protection to an occasion such as SONA.

Anyone who raises a point of order which is not a point of order, such as demanding that the president dismiss a Cabinet minister, ought to be ejected from the sitting forthwith. Anyone who raises a point of order on which the speaker has already ruled, such as the presence or otherwise of FW de Klerk, out to be ejected from the sitting forthwith. They should not be indulged for hours while the nation wastes its time waiting for the president to address them.

The EFF’s antics also distracted attention from the president’s speech. I, for example, gave up in exasperation after 90 minutes and saw none of it. And perhaps that’s just as well. I didn’t miss much.

I was never a Ramaphorian. As soon as he was made president and delivered his first SONA in 2018, I wrote a column pointing out that for all his charisma and nice promises, he would not be South Africa’s saviour. On the contrary, he remains committed to the socialist ideology that has always been the ANC’s policy.

Unfortunately, I have not been pleasantly surprised.

Ramaphosa himself summed up the parlous state of South Africa: 

“Our economy has not grown at any meaningful rate for over a decade. Even as jobs are being created, the rate of unemployment is deepening. The recovery of our economy has stalled as persistent energy shortages have disrupted businesses and people’s lives. Several state-owned enterprises (SOEs) are in distress, and our public finances are under severe pressure. It is you, the people of South Africa, who carry this burden, confronted by rising living costs, unemployment, unable to escape poverty, unable to realise your potential.”

Quite. His speechwriters managed to dig up a few marginally positive statistics to suggest that there was a silver lining to all this, but it was like scrounging for crumbs; they all rang pretty hollow.

He talked up “social compacts”, such as “[bringing] labour, business, government and communities together to find solutions to the unemployment crisis”. Apparently, they meet once a month to chat. How nice. Pity all that talking has had a negative return. Unemployment relentlessly kept rising, to levels last seen 17 years ago.

According to Ramaphosa, “Together, over these last two years, we have worked to stabilise our economy and build a foundation for growth.”

You did what now? How is South Africa’s economy stable?

GDP growth has been steadily declining for 10 years and is now firmly anchored at zero. Our GDP per capita has been declining, too, since 2014. We’re getting poorer, not richer. Gross fixed capital formation peaked in 2015, and has been declining since.

Manufacturing output has fallen off a cliff. Private sector activity declined in January 2020 for the ninth month running, domestic demand remains weak and new orders dropped for the 19th month in a row. Business confidence has been stagnant for four years, at levels lower than at any time since the 1994 elections.

Eskom cannot keep the lights on, and electricity production – a leading indicator of economic vitality – has been declining since 2008. South African Airways is on the verge of bankruptcy, and most other state-owned enterprises are dysfunctional, in financial crisis, captured by tenderpreneurs, and overstaffed with overpaid and underqualified management and workers.

Government debt has been rising sharply since 2016, continuing a trend that started in 2009. It is closing in on 60% of GDP, and that does not include government-guaranteed debt owed by state-owned companies teetering on the edge of financial collapse. The country’s 20- and 30-year bond yields are near record highs, which makes the government’s growing debt pile ever-more expensive.

All three major credit ratings agencies have South African debt on negative outlook, and Moody’s looks set to join Standard & Poor’s and Fitch in downgrading South African government debt to junk status. Government revenue has stagnated, but its expenditure is relentlessly growing.

Foreign direct investment is stagnant, and despite previous promises about doubling the size of the tourism industry, so are tourist arrivals. Consumer confidence bounced sharply when Ramaphosa became president, but it’s collapsed right back to the worst levels of the Zuma years.

The household savings rate is pretty much zero and has been negative more often than not during Ramaphosa’s presidency. The value of new building permits, which rose steadily even under Zuma, started declining when Ramaphosa took over.

The only economic measure that has been reliably rising throughout all this is labour costs.

By what measure does Ramaphosa think our economy is anywhere near stable and on a good foundation for growth?

To address the multiple crises in which South Africa finds itself, Ramaphosa did what Ramaphosa does. He made a lot of vague, pleasant-sounding promises, most of which involve “engaging” and “working with” various government departments to do what has been promised so often before, like reducing wastage, containing the public wage bill, reducing government spending, and investing in infrastructure. All of which would already have been done if Ramaphosa had a record of making good on his promises. Sadly, he doesn’t, as Ferial Haffajee pointed out recently.

“The National Treasury and the SARB are working together to ease pressure on business and consumers,” he said, without any further explanation. What does that mean? Are they going to reduce VAT? Abolish exchange controls? Relax labour laws? Reduce the high burden of government regulation?

I will bet they do none of the above.

“This year, we are moving from the stabilisation of SOEs to repurposing these strategic companies to support growth and development,” he said.

Wait a second. Let’s not get ahead of ourselves here. What about first actually stabilising them? Then perhaps reconsider which SOEs are actually “strategic”.

He cited SAA as the perfect example of State Capture, corruption and mismanagement, and says it should not be dependent on further government funding. The best way to achieve that would be to sell it off and let private investors take any future losses. Even if it is closed down entirely, domestic and foreign competitors will fill an SAA-shaped hole in the aviation market in a heartbeat.

Why is a diamond mine (Alexkor) strategic? Does the state need a discount line on luxury jewellery?

Why is the South African Forestry Company strategic? Private companies exist to manage forests, including on state-owned land. Why can’t they manage all forests?

Why is Denel strategic? Why is the Passenger Rail Agency of South Africa strategic? Why is Sentech strategic? Why does government own shares in Telkom and Vodacom?

For that matter, why is most of Eskom strategic? It’s not like it’s fulfilling its mandate to provide abundant, reliable, inexpensive energy to fuel South Africa’s economy. Let private companies compete to offer consumers the most reliable, cleanest and least expensive electricity. At least the private sector has a record of success.

As I’ve been saying all along, Ramaphosa is an old-school socialist who labours under the stubborn belief that the government is able to provide essential goods and services better than the private sector can do, because the government does it “for the good of the people”, whereas private companies only do it to make money. That he is wrong would not even occur to him.

He continued to blather on about planning to fix this, develop that, improve such, and address so. None of his promises came with any substantial, concrete details. All of his promises we’ve heard before, not only from him, but from his predecessors.

Inebriated with the exuberance of his own verbosity, Ramaphosa’s imagination then takes flight. The government will establish a sovereign wealth fund, he says. And put what in it? Perhaps he hasn’t been told that this country has no wealth. It only has debt, and no obvious way to pay it off.

Perhaps he plans to take private pension money and put it in his sovereign wealth fund. That would be totally in character for the ANC. Besides, he’ll need it for the nationalisation of the health industry, which he’s hell-bent on achieving.

He wants to establish a state bank, because state-owned institutions have a glorious record of success, and aren’t at all prone to fraud, looting and corruption. Perhaps he is sad that VBS Bank collapsed.

“We said that every 10-year-old needs to be able to read for meaning,” he said. Instead of progress, he reports only that “[o]ur early reading programmes are gathering momentum.”

But while Grade 4 children still can’t read properly, he wants to “introduce coding and robotics in Grades R to 3 in 200 schools, with a plan to implement it fully by 2022”.

Great, but perhaps teach the kids to count and write first.

No Ramaphosa SONA would be complete without dreaming of smart cities. Perhaps he can start by getting traffic lights – when they work at all – to change automatically, instead of requiring a manual attendant to flip a switch. And perhaps someone ought to tell him that smart cities cannot exist without an uninterrupted supply of electricity. Let’s learn to walk before trying to run, shall we, Mr President?

For all Ramaphosa’s lofty promises, the speech was barren of detail and lacked substantial indications of past success. It was weak and ultimately empty.

As a clever rhetorical flourish, he ended with an exhortation: “We will not surrender our future… to those who are permanently negative to the work that is being done to improve the lives of our people.”

He will not listen to anyone who questions whether this government – or any government, for that matter – is capable of making good on any of his promises. He will dismiss anyone who questions whether government even ought to embark on grandiose central plans for state-led growth, instead of freeing the market to respond to the needs and wants of the people.

No, we’re just being “negative” if we don’t believe that St Cyril will make everything all right.

“This year, we fix the fundamentals,” he said. I’ll believe it when I see it. Imagine, a capable and prosperous socialist state. Now that would be a thing of wonder, indeed. DM


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