President Cyril Ramaphosa has no plan to rescue South Africa from economic collapse. Nor does he have the political courage to cut public-sector spending.
If he does not introduce tough austerity measures soon, the International Monetary Fund (IMF) will impose them. Rising levels of debt and unemployment are unsustainable. We are heading for a crunch, which SA can’t survive without IMF help.
“Voting for Cyril” was not a good idea. Three months after the elections, Ramaphosa has not issued any policy statement or done anything which could help avoid the crash. There was nothing in the ANC manifesto, or the party’s 2017 national conference resolutions, that would be good for the economy. What did we expect?
As US Senator Elizabeth Warren said of one of her Democratic Party rivals last week, “I don’t understand why anybody goes to all the trouble of running for president” if they have no vision. Why did Ramaphosa campaign for the job if he is not going to lead?
He is hemmed in by union demands, by foes within the ANC, and by his own timidity.
The figures are stacking up. Unemployment on the narrow definition is at a record 29%. Fitch Ratings predict SA’s debt-to-GDP reaching an alarming 68% in 2021-22, with the budget deficit at 6.3% next year.
Ramaphosa’s response on unemployment is weak. He will a study a report on last year’s presidential jobs summit. Doh.
And he is ineffectual in dealing with the public sector wage bill. At R550 billion and climbing, this is a third of government’s expenditure. It must be trimmed.
Instead, Ramaphosa has promised there will be no public sector retrenchments. And jobs are safe at overstaffed, loss-making Eskom.
And he supports the unaffordable national health insurance scheme. Ramaphosa’s multibillion-dollar investment drive is stuttering.
The dominant “radical economic transformation” faction of the ANC offers even worse prospects for recovery. Preaching hasty nationalisation of the Reserve Bank, and robust expropriation without compensation, this lot frightens job-creating investors.
Our slide hurts the poorest. But the unemployed, and those who survive on social grants, are not the only ones buffeted by rising inflation and low economic growth. We’re all affected.
IMF-imposed austerity is increasingly likely. China, which previously looked like an alternative source for a bailout, is not impressed by the impecunious practices and mismanagement laid bare over the last few years at Eskom and elsewhere in SA.
Terms and conditions apply when the IMF issues loans. Many poorer countries despise the IMF’s “structural adjustment programmes”, which often entail tough policy changes. The IMF has required some state-owned-enterprises to be privatised. It has insisted on economic deregulation and labour market reforms.
Such demands would be anathema to the ANC, which is addicted to credit-negative policies. There has been some relaxation of IMF conditions over the past decade. Perhaps Ramaphosa and Finance Minister Tito Mboweni will be able to negotiate a soft-landing but there can be no doubt SA will have to change its ways.