Busi Mavuso | Selfish economic sabotage by politicians will not help the poor
POSTED ON: January 20, 2022 IN by Admin
Economists are warning us to expect a series of interest rate hikes this year, Eskom has requested a 20.5% tariff increase this year following the 15% hike it was granted last year, with other administered prices set to rise as well. With global inflation also high, it’s going to be another tough year in South Africa particularly for low-income earners and the masses of unemployed people.
What’s disturbing is that under such dire economic conditions, more and more political figures are effectively advocating what are little more than slash and burn tactics. Based on the spurious claim that because the economy has been faltering so badly since 2009 the constitutional order itself must be at fault, they attack the very foundations of our democracy – our judiciary, our Reserve Bank and other important organs of state. And they attack our constitution.
The people launching these attacks are trying to blame those institutions and the constitution for the country’s woes. It’s a vacuous argument but purposefully so, with the nefarious intention of deflecting from the real causes.
Were there any substance to the claims, the economy would not have expanded every year from 1994 to 2009 at a rate that today seems mouth-watering. The best years were from 2005 to 2008 when the economy expanded by more than 5% each year, an incredible performance in today’s times. Similarly, unemployment had been consistently below 30% from 1994 until it spiked to 33.3% in 2002 before plunging to 22,4% in 2008. So much for the “jobless growth” narrative so frequently peddled at the time.
Then, in 2009, South Africa was inflicted with both the global financial crisis and Jacob Zuma’s ascendancy to the presidency, the latter proving to be far more damaging.
Corruption has been ever-present in South Africa since long before democracy began but Zuma institutionalised it, opening the door for the Gupta family and others to loot state institutions on a grand scale. We will probably never know the true amounts stolen by the Gupta family alone but investigator Paul Holden, who tracked invoices and bank statements, found R50bn that had directly flowed to Gupta entities, the bulk via Transnet, Eskom and the Free State provincial government. In 2017, Pravin Gordhan estimated “the cost of state capture” at R250bn.
Those are staggering amounts but the damage that is proving far more difficult to overcome is that wrought on state institutions, particularly state-owned enterprises, which were gutted of competent personnel in senior positions and racked up massive debts because of the looting and general misgovernance. Each state-owned enterprise is now being rebuilt with the ultimate aim of ensuring they are financially self-sustainable, a goal that is proving elusive with a string of SOEs still knocking at National Treasury’s door asking for a government bailout. This is all in addition to the extreme damage done to the image of South Africa as an investment destination , business and consumer confidence, as well as the faith of millions of South Africans in the political class.
The misgovernance was also flourishing at national level and our debt was allowed to soar from 27.8% of GDP in 2008 to 56.6% of GDP in 2018 when Zuma’s term ended. It will keep climbing – Finance Minister Enoch Godongwana’s medium-term budget in October last year projects that it will peak at 88.9% in 2025/2026 before it starts coming down – and that will only happen if government displays strong discipline in keeping its expenditure under control but should any of those espousing reckless policies have their way, that debt will quickly soar past 100% and become uncontrollable. This is likely lead to a complete economic and social collapse, not only in terms of crippling debt service costs (now at about 20% of total government revenue) but also because investors will be exiting the country en masse. The next step will be that dreaded phone call to the IMF, begging bowl in hand, our sovereignty under threat – and yet more misery for the poorest South Africans.
In South Africa’s climate of mass poverty, empty promises of a better life (but with no explanation of how that will come about) may prove seductive. Those excluded from the mainstream economy may or may not believe that such radical actions will improve their lives but they do know that the existing system isn’t working for them.
That’s where we need to focus: on sustainable and real ways to improve the system for the poor. There are many areas where “the system” appears designed particularly to exclude the poor and those need to be identified and addressed but the only way we as a country can possibly overcome our burdens of poverty and inequality is through improved education, government efficiencies and strong, sustained economic growth, which will drive down unemployment.
The GDP growth of the Mandela and Mbeki eras happened based on a constitution that is considered among the most progressive in the world and is a model for law and constitutional experts. Our constitution is just fine, thank you, as is our judiciary, which stood firm during the darkest days of the state capture era and now through Judge Raymond Zondo’s commission has documented the most egregious acts of that time.
Only sustainably higher levels of economic expansion can improve the lives of the poor, not economic sabotage for selfish political ends.
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