There is no doubt the R500-billion stimulus package announced by the government last week is necessary and welcome. But any economic stimulus, no matter how big, is only ever temporary. It is designed as a bridge to get families over the churning waters of the crisis that may otherwise sweep away their jobs and livelihoods.
On the other side of the crisis, the bridge is no longer necessary and the economy is supposed to return to normal. But returning to “normal” in South Africa means returning to an economy that was already in recession.
There is a stimulus more powerful and long-lasting than this temporary bridge. A far-reaching programme of fundamental economic reforms would be worth a lot more than any temporary measure. It would orient our economy for growth and unleash South Africa’s world-beating entrepreneurs to invest, innovate and create.
Before the Covid-19 crisis, such reform was urgent. Now it is an existential requirement for the resuscitation and survival of our economy. If we do not take this chance to ditch anti-growth statist policies, we will guarantee a permanently lower standard of living for all, with many millions more living in poverty and unemployment.
With public finances becoming increasingly precarious, the choice is becoming much starker for the government: either introduce reforms on their own terms or those reforms will be imposed on them by international financial institutions like the International Monetary Fund. There really isn’t another option.
There is bitter irony in the ANC left fighting any approach to the IMF on the basis that we should not yield economic sovereignty, while simultaneously making that outcome all but certain by blocking major reform.
The truth is we have already delayed reform for far too long. South Africans have been getting steadily poorer for most of the last decade. Every South African is on aggregate R7,000 poorer per year now than they were in 2014. This is an appalling failure of governance by any measure. In a country where 30 million people live in poverty, it is intolerable.
In 2019, months before anyone had heard of the coronavirus, the World Bank forecast that South Africa would fall out of the top 100 countries in the world ranked by income per capita. We are now 103rd out of 223 countries and island nations ranked.
We should never be comfortable with, or accepting of, a prolonged impoverishment of millions of people. Politics is supposed to be about social progress.
These reforms are important in and of themselves, but they are also necessary to shore up the support of the international funders who will play an important role in our recovery.
To unambiguously set the course, and to win the confidence of global funding markets, Finance Minister Tito Mboweni should table an emergency national Budget as soon as possible. He has confirmed that he intends to do so, but there can be no delay. This Budget must show real commitment to controlling government expenditure and not allowing “ordinary” debt to explode beyond what is already expected.
Again, opponents of reform tie themselves in knots arguing that more debt is fine. In truth, every rand we pay in interest on debt is a transfer from the state directly to the global rich – the holders of South African government bonds. Already this transfer amounts to more than R230-billion a year. Soon it will outstrip direct transfers to the poor through social grants. Hardly redistributive!
Then the government must accept that Eskom’s monopoly on power generation must end and that independent producers must be allowed to compete. Despite repeated promises to get this done, there has been little progress to speak of. Yet, getting this one reform right would probably add more to economic growth than anything else.
The ANC must accept that SAA cannot be saved and should be allowed to fail. The approach to state-owned enterprises must move away from dogmatic state control to actively seeking private investment and privatisation.
Mboweni and President Cyril Ramaphosa must hold a firm line on the decision to cut at least R160-billion from the state wage bill. They can help this cause by supporting the DA’s proposed Fiscal Responsibility Bill, which would introduce a “fiscal anchor” for the first time in South Africa.
Finally, the ANC will have to decisively walk away from a set of policies that are dear to it, but which have stifled our economy and raised eyebrows around the world. All talk of expropriation without compensation, asset prescription, National Health Insurance and nationalisation of the Reserve Bank should be jettisoned immediately.
The reform agenda must be about building the new, not clinging to the old. President Ramaphosa and Mboweni have often and loudly promised just such a bold reform plan. But there has been almost no progress in delivering it thus far; there is no more time for delay. It is time for the whole country to hold the government accountable for this most important stimulus of all. DM
Geordin Hill-Lewis is the DA spokesperson on finance.
