It is difficult to talk about economics in South Africa without talking about race. The persistent legacy of apartheid means that economic realities were baked into the racial composition of our country and racial inequity is baked into our country’s economic structure. This pattern largely persists, like yeast that permeates a lump of dough.
So, while it is necessary to talk of economics in economic and numerical terms, such as GDP growth rates, fiscal deficits and sovereign debt levels, it is inevitable in our context to arrive at conclusions about their socioeconomic outcomes for particular race groups.
ANC’s fiscal cliff and empty bag of tricks
Prior to the Covid-19 pandemic, South Africa was already headed for a fiscal cliff due to our massively inflated and growing public debt. Economic growth had already stalled under President Jacob Zuma, government spending had ballooned and our persistent deficits were expanding our debt levels year after year. This was true in SOEs and at national and municipal level.
Successive finance ministers, including Nhlanhla Nene, Pravin Gordhan and now Tito Mboweni, bravely spoke of cutting back public spending and stimulating growth, but these were mere platitudes and promises rather than pragmatic interventions. At the heart of this spending was the public sector wage bill and the expanding burden of social grants.
A prime example is the new-look, old-disease SAA that has been grounded but continues to consume public value without creating any.
The fundamental economic problem which South Africa is facing has still not been addressed – even amid Covid-19. We are not expanding our capacity to produce value, goods, services or anything useful to the world.
We do have existing competencies to do interesting things as a country and export some impressive quantities of coal, food, wine, automobiles and the like. But these industries pre-date the democratic dispensation led by the ANC and are all losing ground in some way.
What we have done instead of enhancing our capacity – what the ANC has sought to do and succeeded in doing – is to tinker with the race-face of our industries through BB-BEE instead of growing them. They have succeeded in turning apartheid’s white monopoly capital into a new elitist form of a multiracial monopoly capital, while at the same time debilitating the state monopolies in energy, transport and logistics, as in forestry.
This was done while complicating the lives of small business owners and entrepreneurs through red tape and decimating business confidence through policy uncertainty, now reaching the lowest point in the history of South Africa.
ANC insiders will argue that South Africa is structurally stagnant and in a middle-income debt trap, but they are wrong. We are in a self-imposed debt trap.
A statist utopia
The minds of those in charge politically are preoccupied with an outdated bag of tricks. They have no confidence in the people of South Africa or in the people’s ability to be commercially minded and rely instead only on politicians and government to save the day.
By driving an agenda with state intervention at its core, the ANC is saying to South Africans: “Unless we lift you up through paternalism, you will remain useless, poor and unemployed.”
Consequently, South Africa is suffering from a shocking dearth of imagination and enterprise.
The ANC’s bag of tricks is empty.
They are now scraping the bottom of the barrel and plan to monetise our debt and shift the burden to the black middle class. They have an ideological blind spot in the shape of an industrial free trade zone.
Tried and tested economic euthanasia
In the coming months, as the ANC tries to spend itself out of our self-inflicted economic malaise, it will seek to shift the burden of its failures on to the black middle class, literally at the cost of its children.
This will be done by using the law to force private citizens such as municipal workers, mineworkers and the like, to invest their savings into government-controlled and crony manipulated projects.
Let me be clear, in a perfect world I would support a state-led effort to stimulate our economy by using all domestic savings at our disposal. Financially speaking, we have few other options. But in the world of the ANC’s making, where it has proven its capacity for corruption and proven its incapacity for accountability, this is madness.
Public sector pensions and SARB monopoly money
What the ANC is going to do is to turn the Public Investment Corporation (PIC) into a cookie jar, while printing money at the South African Reserve Bank to fund deficit spending and expanding social grants into a universal basic income.
The ANC will argue that the US Federal Reserve and the European Central bank are also buying up bonds and equities through quantitative easing measures during Covid-19 to provide liquidity to their embattled economies – so why can’t we do the same?
The answer is simple, we do not have the domestic consumption or the global reserve currency – the dollar – underlying our economy as does the US, nor do we have the high levels of asset accumulation and economic sophistication underlying European economies.
What we have behind our currency is a stagnant mining and industrial cluster, a financial sector looking elsewhere for returns and an over-indebted consumer class.
What we have underlying our economy is a deeply unequal society with a tiny upper- and middle-income group who already carry the revenue burden of an ever-expanding socialist state.
It is our denial of our economic adequacy that has put us in this fiscal position in the first place.
It is the delusion that we can fund ourselves out of poverty through borrowing and consumption, instead of investment and development, that pushed us into junk status.
It is our comparative risk profile as a middle-income country that forces us to pay homage to economic principles that favour real-world economic development over monetary policy aimed at expansionary financialisation.
It is this reality that demands we walk a tightrope in relation to basic economic rights versus wholesale economic transformation.
Market forces versus political ground forces
Simply put, our political elite has not come to terms with the meaning and usefulness of market forces. They mistake the role of political ground forces, rallied to create consensus about power-sharing and policy, with market forces, rallied to create competitiveness and value addition.
They confuse the capacity of the market to hoard for the rich with the capacity of the market to distribute value as well as incomes to working people.
Our political elite has been so preoccupied with who among them gets to stick their hand in the apartheid era cookie jar, that they have not paid attention to how empty the jar has become.
A child would understand that unless we come up with a new recipe for how to bake our own unique cookies now, and how to sell them to the world, we will eventually begin fighting over the crumbs.
All that is now left are the pension funds: thereafter, the future incomes of the shrinking black middle class. Sadly, if we misuse those resources, we will devalue our currency in the process and quadruple the cost that our children will bear in future.
What new businesses?
If you love this country, force the politicians to answer this question: what new businesses are we creating, and what is the distinctiveness of these businesses that will sustain them in the face of competition from the outside world? What is the government doing to help us answer that question?
The alternative is to use protectionism and subsidies to prop up fledgling enterprises while continuing to trade away our commodities to hungry emerging superpowers.
This path is a temporary mirage behind which hides an ongoing racket whereby the elite pretend they are innovative while extracting what is left of our natural economic endowments.
The high road, where we offer the world something in exchange for our economic emancipation, will require more imagination and a less myopic approach to governance.
It will require an approach that understands government departments do not develop nations – nations develop themselves when their potential is unleashed, including the energies of those among them who are inclined and able to build enterprises and employ others. DM