THE dramatic events this week which saw the removal of finance minister Nene and his replacement by former reserve bank governor Tito Mboweni arrived not a moment too soon.
With the ruling ANC on the ropes after state capture revelations at the Zondo Commission. Nene’s departure signals the demise of Zumanomics and hopefully the re-introduction of the pragmatic, consensus-based policies which gave rise to the boom period under Mandela and Mbeki.
Anyone appreciating the opportunities in the bond market as many analyst did, may find it painful to digest other facts surrounding the South African economy, currently in its longest slump since 1945 .
Economic stimulus plans announced by President Ramaphosa will come to naught unless there are serious policy reforms.
Reforms which can only happen if the entire economic paradigm and political economy of the country is shifted, from big government for the sake of big government, to household responsibility and individual freedom.
The country recorded a surplus last quarter, a factor of the currency, which also has an effect on consumer prices.
Getting South Africans to work, requires entrepreneurs and individuals ready to create jobs, thus the politics of the Zondo commission is revealing in what it shows of the opposite trajectory under Zuma. Ergo the clandestine leftism of the former President’s associates, all squaring state capture and the Gupta’s with a ‘dictatorship of the proletariat’ and other Marxist mantras, best understood by dashiki-wearing economics students sipping chai lattes while quoting Fanon and Frere.
The business environment in the country is said to be hostile, a result of ‘ideology getting the better of pragmatism’. A series of blunders involving populist rhetoric on land reform and property rights, and inability to deal with parastatals, in other words, State-owned Bureaucracy, has hobbled Ramaphosa’s government.
Under the last administration, cabinet posts almost doubled, as bureaucracy took its toll on productivity and individual freedom.
Ramaphosa has yet to pronounce on any constructive changes to policy in this regard.
South Africa’s unions must take some of the blame in driving a one-sided narrative, a wedge between the state and business, that has shifted the party from workers rights to political intrigues that saw the Guptas rise to power amidst BRICS neo-colonial ambitions.
EXACTLY how is the country to going pay for free education? This is the question foremost on people’s minds, as the country sobers up to the events of the past weeks, which saw the unprecedented storming of parliament and storming of the Union Buildings.
Surprisingly, South Africa, ( as previously alluded to in part 2), already has a ‘sovereign wealth fund’ with a massive R1.5 trillion rand invested, and certainly the youth need to be tackling finance minister Nhlanhla Nene and education minister, Blade Nzimande on why they are suffering in the face of so much wealth.
Instead of a Public Investment Corporation (PIC), benefiting one privileged generation who just happened to be in power during the 90s, let’s make the public investment more inclusive of all citizens, and all generations, and let’s call the PIC what it deserves, by the term Publica, since the ruling party appears to have lost the distinction between what is public and what is private — funding Nkandla, and government pensions for party insiders. Publica should rather be redirected to funding a social wage for all citizens, one which includes education, health insurance and childcare grants. Instead of a party wage, we could have a social wage reducing the worst affects of poverty and mitigating the coercion inherent to the job market, even one that is Internet-enabled, while providing free education.
Publica, unfortunately, like so many self-aggrandising programmes run by the ANC, appears to have evolved and deformed into a strange facet resembling one of the pillars of the previous regime, the apartheid equivalent of cadre deployment.
The Independent Development Corporation (IDC), cooked up by apartheid cronies Anton Rupert, Chris Stals, Nico Diederichs and Owen Horward, was really nothing more than an efficient scheme to create bantustans. Escaping international sanctions by moving state capital into Swiss offshore bank accounts for the exclusive benefit of the politically-connected. In reality, a state-within-a-state, a fund that was part-and-parcel of the covert government which created apartheid and the oligarchs, technocrats and apparatchiks, that existed, hand-in-glove with the state’s volkscapitalisme.
The missing apartheid millions are all documented by news journalist Sylvia Vollenhoven, but her documentary ‘The Spear’ was banned by the SABC, as no doubt any similar investigation of the fiscus under Zuma would also be.
An investigation of the corporation we may now call Publica, i.e the massive state corporation created out of public funds drawn from the public purse over the past two decades, would undoubtedly uncover a lot more than the Nkandla millions. These funds need to be returned to the people.
The youth of today, deserve free education, and they deserve connectivity, to be online. But in saying this, we want a youth who are able to grasp the many opportunities that exist, at the same time as they are cushioned from the worst forms of economic exploitation, inequality and poverty. This can only come about through a social wage that includes free education.
IN 1994, the ruling party charted an economic course born out of the Interim Constitution and the Codesa negotiation process. Essentially, it involved embracing a ‘mixed economy’ approach, in which a market economy would exist side-by-side with a “dirigiste” economy, that had, as its antecedent, the ‘volkscapitalisme’ of the former National Party.
Thus the country’s industrial base was given new life, with local conglomerates such as South African Breweries emerging into global entities. The once fiercely nationalistic beer cartel, is now a thriving international business called SAB-Miller, which, as it turns out, is in the process of merging with another beer giant, AB inBev. A testimony to South African can-do attitude and the country’s ability to embrace internationalism.*
State industries such as SASOL and ISCOR were privatised, while others like Telkom, Eskom, and Transnet remained in government hands.
SASOL went on to repeat the success of SAB, while ISCOR under Mittel, faired a lot differently.
The ruling party thus presided over a long boom, which lasted approximately 15 years, coming to an abrupt end in 2009. The economy has been running in fits and starts ever since, and it is not simply because the global party of low-interest rates and easy finance has come to an end.
Arguably, more South Africans were pulled out of poverty under the administrations of Mandela and Mbeki, than under several decades of National Party rule, but under Jacob Zuma, the economy has been on the skids.
Now with talk about another credit ratings downgrade, jitters over the Rand, and looming threat of junk status for the nation’s debt, the question needs to be asked: What exactly went wrong?
For starters, the “dirigiste” economy took on a tragic life of its own.
Not only did we witness a massive expansion in state enterprises, but with the exception of Transnet, state enterprises today, operate under the illusion that annual bail-outs from central government are sustainable, that a de facto command economy, is the norm.
The effect on the nation’s fiscus has been dramatic. The public service wage bill under Zuma, (R61Bn and counting), has swelled by 80% and shows no signs of abating. Coupled with a massive bureaucracy that has produced the largest cabinet and government ministry in the world (64 ministers and 64 deputy ministers), the country has began looking a lot like its former self, under the National Party.
As the slowing down of GDP and growth to 1.4% (2015)**, has shown, growth in the private sector is not enough to accommodate a bulging public sector. Areas of the economy which could have provided benefits, face massive obstacles from central government.
Red-tape and statute inflation (too many laws) has dramatically affected tourism, impacting small-and-medium businesses. The recent opening of the economy to Independent Power Producers, and likewise, the entry of wireless companies into the home fibre and cable market, has come a decade too late, for meaningful economic growth to benefit the class of 2015.
- * The SAB part of the equation however, is ironically on the decline, a result of the much diminished Rand.
- ** With a bit of luck could increase to 2.4% in 2016, projected by Deloitte.