Glaring contradictions show SA's stark choices - Daily Dispatch

30 June 2020 - In recent days, the deep-seated contradictions in South Africa’s governance thinking has been highlighted by two developments. The first was confirmation that the country would be seeking funding from the International Monetary Fund; the second, that the national Assembly would be reconvening its ad hoc committee on amending Section 25 of the Constitution.

Terence Corrigan

In recent days, the deep-seated contradictions in South Africa’s governance thinking has been highlighted by two developments. The first was confirmation that the country would be seeking funding from the International Monetary Fund; the second, that the national Assembly would be reconvening its ad hoc committee on amending Section 25 of the Constitution.

On the one hand, the imperatives of governance; on the other the lure of ideology.

Long before COVID-19 had been identified – let alone recognised as the destabilising menace that it would become – alarms were sounding about South Africa’s fiscal position. Sooner or later it was going to have to be reckoned with, but the ruling African National Congress (ANC) and the government it leads (with some exceptions) showed little stomach for facing up to it.

The pandemic, and even more so the lockdown, has forced the issue. Thanks to the shutdown of economic activity, the gap between revenue and expenditure has expanded to the point of imminent crisis.

The IMF’s relief programme is a tool to get through this crisis. And whatever aversion many in the country’s political class may feel towards the IMF, the dictates of pragmatism were in this case stronger. (Although the lack of strict conditionalities would have made approaching it somewhat more palatable – South Africa is not, at this point, conceding a dreaded structural adjustment programme.)

And if properly handled, South Africa might join a global recovery.

Meanwhile, since the ANC’s Nasrec conference in 2017, a signature issue for the party has been the abridgement of property rights. This is captured in the phrase expropriation without compensation (EWC).

Nominally, this was about land reform. But the cost of land acquisition has never been shown to have been a major brake on land reform. Indeed, the failings of land reform are attributable to poor planning, an often inept bureaucracy, and poor and inappropriate post-settlement support. Yet these have received very little attention.

A great deal has been made of the historical injustices and imperatives of land reform (which were never really in doubt). And while even President Ramaphosa admitted that the Constitution already made zero-compensation expropriation permissible under certain circumstances, gutting Section 25 – the first time since the adoption of the Constitution that a clause in the Bill of Rights had come up for amendment – became an objective in its own right. And this was despite the clear weight of opinion being opposed to it.

The EWC drive can be understood in ideological terms. It is a drive for greater state power and latitude over something that has both an economic and political meaning – with the latter taking priority over the former.

Meanwhile, it sent a very chilling message to investors. As one of President Ramaphosa’s investment envoys, former finance minister Trevor Manuel, euphemistically put it: ‘Communicating this, I think, is a bigger challenge than what we thought.’

And for the most part, investors and businesspeople have held back, adopting – at best – a wait-and-see posture. Ultimately, most chose to stay away, and South Africa lost the chance to cash in on the so-called ‘New Dawn’.

South Africa now stares disaster in the face. For the past two years, many thought poor growth and economic retardation, and counterproductive policy might be endured, with the assumption that ‘something’ would alter at some point in the future. Numerous commentators have seized on questionable fragments of evidence to argue that this was imminent. This is no longer possible.

The crisis has arrived. South Africa’s GDP will contract by around 7%, according to the South African Reserve Bank, and in excess of 10%, according to some other estimates. The budget deficit could come in at some 13%, according to the IMF. The ranks of the unemployed are swelling and the unemployment rate could reach 50%.

In seeking IMF support along with pursuing EWC, South Africa’s government is attempting to avoid making the choice that can no longer be delayed.

That choice is between gearing itself for growth and expansion, for investment and entrepreneurship (which will require above all abandoning the false promise of EWC), or ploughing on down that road, sticking to damaging ideology and the short-term satisfaction that it may bring for the country’s political class.

It cannot do both, and the ideological option has already wrought great damage.

 Terence Corrigan is a project manager at the Institute of Race Relations

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