A familiar, perilous road - The Witness

Jun 19, 2020
19 June 2020 - Just 24 hours before the Soweto Uprising 44 years ago this week, National Party MP for Ermelo G F Botha warned in the House of Assembly that ‘the fear and pessimism shown by the Opposition can do a great deal of harm to the economy’.

Hermann Pretorius

Just 24 hours before the Soweto Uprising 44 years ago this week, National Party MP for Ermelo G F Botha warned in the House of Assembly that ‘the fear and pessimism shown by the Opposition can do a great deal of harm to the economy’.

Even as the powerful political elite of which Botha was a part pitched South Africa into apartheid’s last bloody decade at devastating cost to the economy and to the lives of millions, it was content to lay the blame for the gathering crisis, and the lasting costs, on the few who had the courage to alert the country and the world to the inescapable realities. 

Mondli Makhanya’s attack on the Institute of Race Relations (IRR) as seeking to ‘sabotage’ South Africa’s prospects of accessing funding from the International Monetary Fund goes down the same perilous road (‘SA-botage’, The Witness, 15 July) .

It is as much an error today as it was then to mistake reasoned analysis advanced to secure better lives for all South Africans as an unpatriotic impulse akin to sabotage.

Makhanya is good enough to acknowledge our ‘solid record of intellectual work and advocacy’ – but fails to recognise that this record of more than 90 years is precisely what guides our current campaign.

The IRR is by no means opposed to IMF funding; we foresaw its inevitability when the COVID-19 pandemic hit. It is quite probable that more will be needed, on top of the concessional COVID-19 relief it is offering.

The case we are making is that these funds must be put to use in a way that assists South Africa’s recovery. This means that we need to understand and respond to the country’s problems as they exist. It would be a grave error to imagine that the problems South Africa faces now are solely – or even predominantly – the consequence of a public health emergency.

The pandemic hit South Africa as ‘a crisis on top of other crises’, to quote economist Dawie Roodt. It shows in the statistics. Since 2008, the highest rate of annual real GDP growth has been 3.3%. Even this was exceptional, and over the past five years, South Africa has not managed 2%. (The National Development Plan aimed at 5.4%.) Real gross fixed capital formation (investment) as a share of GDP declined markedly from a peak of 23,5% in 2008 to 17,9% in 2019 and a near record low of 15,7% in 2020. South Africa’s official unemployment rate stood at 29% at the end of 2019, and was one of the highest in the world. Among young people aged 16 to 24, who all too often lack both skills and experience, it stood at a staggering 56.4%.

Our analysis of why this is the case is based on solid evidence, and is publicly available. Central to South Africa’s malaise is bad policy, which has significantly been driven by ideology, and provided an environment in which venality can flourish. Scandal after scandal has followed the country’s State-Owned Enterprises, even as billions in bailouts have been poured into them. Empowerment policy as it exists has encouraged rent-seeking and corruption, rather than entrepreneurship and productive risk-taking. Threats to property rights have done much to dissuade investment, a point made by President Ramaphosa’s investment envoys. 

Unless the roots of this are addressed, an infusion of dollars from the IMF will merely buy South Africa a little time to drift aimlessly on. In fact, by taking on a new loan, a burden for the future is created. These funds must be repaid. Consider this: South Africa’s the gross debt to GDP ratio was 46.5% in 2014/15; this was projected to rise to 61.6% in 2019/20; and to hit 71.6% in 2022/23. Debt service costs, meanwhile, stood at 3.0% of GDP in 2014/15, and would rise from 4% of GDP in 2019/20 to 4.7% in 2022/23 – by which point it would be chewing up the equivalent of 14.2% of government spending (up from 9.3% in 2014/15 and 11.5% in 2019/20).

These figures, drawn largely from the February Budget Review, reflect the situation before the impact of COVID 19 or an IMF loan was factored in. We are likely to see a much more concerning picture when the revised budget is tabled. Our fiscal situation is dire.

Frankly, South Africa can’t afford to get this wrong. Hence our call to creditor nations to understand the dynamics at play. South Africa’s political leadership has, sadly and unforgivably, chosen to follow a course that undermines rather than encourages the wealth-creation the country needs. Creditors should be in command of the facts, and South Africans to know that these funds are to help rebuild the country, and not finance another round of looting, state capture and policy programmes that stand to cripple South Africa’s future.

We agree with Makhanya when he observes that ‘there are enough wreckers inside the ANC who endanger the nation’s standing and wellbeing through their actions and utterances’. Just so. But who, then, is really sabotaging the country – those who drive it down this path, or those who point to the consequences of such ‘actions and utterances’?

And what is the responsibility of those public intellectuals and influencers – in the media, business, academia and so on – who, like Makhanya himself, recognise that things are very wrong, yet stop short of exposing the links between the country’s problems and the decisions of its leaders?

Makhanya argues that our course is ‘not the way to go’. Yet, as before in our history, the risk lies in pretending that all is well. This is not a pretence the IRR is willing to leave unchallenged.

Looking back at the events of 1976, it is obvious today just how wrong the MP for Ermelo was at that time about the real threats facing South Africa. The consequences are instructive. The 10th anniversary of the uprising found the country in a bleak crisis; in the news on 16 June 1986, South Africans learned of a car bomb in Durban, 22 people killed in violence across the country over the preceding four days, and a mass stay-away. There were draconian emergency regulations, and a complete ban on ‘unrest’ reporting, with every item of news having to be cleared by the Bureau for Information in Pretoria.

Another decade would pass before the ratification of the democratic Constitution.

We are a very different country today, yet, once again, our prospects and welfare as a people are threatened by the bad decisions of politicians, and the IRR makes no apology for calling out the threats, and reminding those with influence that South Africans deserve better.

Hermann Pretorius is Deputy Head of Policy Research at the Institute of Race Relations


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