Leading South Africa after what we can all agree was a wasted decade of the presidency of Jacob Zuma was never going to be an easy task. Certainly, it would never amount to a popularity contest giving the amount of reforms needed for the clean-up campaign. In fact, given the ferociousness of internal contests and factionalism in the governing ANC, it was always going to be a job that if done well would in all likelihood risk being a one-term presidency. But that was a risk that had to be taken to avoid the country falling off the cliff.
So when President Cyril Ramaphosa’s administration began its first term after the years of maladministration by his predecessor and the collapse of governance across many state institutions, we understood that if his promised clean up job was to work, it would certainly make him unpopular in certain quarters of his party. That was the nature of his job, to govern in the interests of the more than 55-million South Africans rather than just in the interests of his party.
A turnaround job was needed, much in the same vein that you’d be tasked to do in an underperforming corporation or any government department. It’s no popularity contest in any form. There are some difficult and hard choices that are always going to set you on a collision course with established interests who’ve built an intricate web of economic systems that benefit them. Appeasing these interests for the sake of unity or to not ruffle any feathers would undermine the turnaround job and weaken confidence levels.
For a country suffering low growth and whose credit ratings were headed for junk status, we were initially encouraged by the energy that the sixth administration brought to the job of turning the ship around. A slimmed down Cabinet, while not nearly enough, was a welcome sign and evidence of a preparedness to take the difficult road. Commitments to some of the difficult but necessary structural reforms in sectors such as energy were also welcomed. Boards of important state-owned enterprises such as Eskom, which were at the centre of the state capture project, were also changed and a greater adherence to governance was followed. SAA was allowed to go into business rescue at the end of last year, a signal, we thought, that the era of blank cheques had passed.
In March this year Finance Minister Tito Mboweni, in his last salvo at avoiding a slip into full-blown junk status, announced that the rate of growth in public sector wages would be curtailed. Jobs would not be slashed, but the rate of wage growth – that has been far higher than in the private sector – would at least be slowed. Credit rating agencies had long warned about this expenditure line. For any chance of success, the minister and his boss, President Ramaphosa, had to be aligned and ready for a tough renegotiation with labour federation Cosatu, an important political ally.
Unfortunately, with the medium-term budget policy statement just two months away, it seems these conversations haven’t progressed much. Now I can understand that the Covid-19 pandemic and its health and economic response may have focused energies elsewhere. But we have a ballooning fiscal deficit that will in any case limit the country’s ability to better respond to the economic crisis unleashed by the pandemic.
Tough and unpopular talks around reining in public sector wages are unavoidable if we are to emerge from junk status and see confidence in the South African story rebound. Leadership has to take responsibility and, in this case, support Treasury in dealing with the country’s fiscal deficit. It comes with a political cost, no one can deny that, but faced with the prospect of low growth over the next two years, is there any other choice?
The state has a difficult task ahead to reclaim credibility in the eyes of its citizens, let alone global markets. This was most telling in the feedback that came after receiving the loan of about R70bn from the International Monetary Fund for Covid-19 relief programmes. International and local markets expressed a hope that the funds would not be stolen or misspent by the state. An example, if ever one was needed, of a crisis of confidence in the governance of the South African state.
One can only hope that President Ramaphosa and his administration took some time for introspection when all the noise around the loan played out in the court of public opinion. The energies that we saw when the “new dawn” began more than a year ago need to be sustained. We can ill-afford to pander to the divisions within the governing party at the expense of the country. Some of the structural reforms will come with short-term pain, but they can’t be avoided in favour of a popularity contest if South Africa is to prove a successful turnaround story.
This column was first published in Business Report.
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