Why no money? - Polity

28 January 2021 - ‘We do not have the money, that’s the simple truth that has to be put out there, we are constrained from a financing point of view.’ So said President Ramaphosa in a recent interview with eNCA, answering questions about relief to firms in distress as a result of the Covid-19 pandemic and the lockdown response to it. It was hardly a revelation, coming on top of the nightmare that was 2020, yet for the president to utter these words has a particular symbolism.

Terence Corrigan

‘We do not have the money, that’s the simple truth that has to be put out there, we are constrained from a financing point of view.’ So said President Ramaphosa in a recent interview with eNCA, answering questions about relief to firms in distress as a result of the Covid-19 pandemic and the lockdown response to it. It was hardly a revelation, coming on top of the nightmare that was 2020, yet for the president to utter these words has a particular symbolism.

‘We do not have the money.’

This is a statement that reverberates through South Africa, way beyond the state coffers. So do its implications. It describes not only a country in which the government does not have funds to support businesses facing ruin, but one in which millions of people have been thrown out of work, have lost their incomes or have simply been ruined. This is a matter not simply of state budgets, but of an economy in crisis.

It also describes a country whose future is in grave peril. Not only does South Africa face a highly restrictive fiscal environment – with all manner of consequences for governance – but one in which the hopes and aspirations of its people have been dealt violent blows. It obstructs prospects for prosperity and mobility, even if this is as modest as finding a job.

It also raises disturbing questions as to the sustainability of South Africa’s social welfare system. Much has been written about the happenings at the social security agency offices in Bellville last week, where police turned water cannons on grant applicants who were not observing required social distancing. Those assembled at the offices had been waiting for hours on end to renew grants that had been cancelled. Imagine the scene where people have to be told that there are no funds to pay their grants. ‘We do not have the money’.

President Ramaphosa returned to this theme in his weekly newsletter: ‘Public finances are under extreme strain, now even more so because of the cost of our health response to Covid-19 and the social and economic relief measures we put in place to assist businesses and poor households. The contraction of the economy also meant that tax revenue has declined significantly. There are some parts of the economy that will take longer to recover due to lower global demand generally and restrictions on international travel.’

Yet the president is speaking, here, in partial truths. South Africa entered the pandemic in poor shape, after a decade of anaemic economic growth and an even longer period of institutional decay. While the country enjoyed an encouraging period of economic take-off in the latter part of President Mbeki’s tenure – in no small part due to the commodities boom – it was hit hard by the global financial crisis and never properly rejoined other emerging markets in the recovery.

In 2018, GDP growth edged along at a dismal 0.8%, and in 2019, at 0.2%. Final numbers for 2020 are not available, but in setting out the Supplementary Budget last June, finance minister Tito Mboweni talked of a contraction of 7.2% for the year. This may prove to have been optimistic.

‘We do not have the money’.

The sad fact is that South Africa’s government and ruling party have made choices, too many of them consciously. The growth and developmental push that Africa needs was never to be found in vacuous and voluminous policy documents or declaring our sclerotic institutions a ‘developmental state’. This would only arise in an environment attractive to investors and conducive to investment, where the security of assets was assured, and reasonable profits could be found.

This, incidentally, was not just about foreign investment, but about local businesspeople too.

One fatal decision, taken shortly after the Constitution was adopted, was the intentional and deliberate politicisation of the civil service through the pernicious practice of cadre deployment. This stifled the emergence of the meritocratic, career-oriented civil service that South Africa desperately needed. In this lay, for example, much of the dysfunction of local governance. The ruling party assures us that this practice will continue.

Counterproductive policy, foremost, here, race-based legislation – Broad-Based Black Economic Empowerment and affirmative action – has chewed at both investment and hiring decisions. And in what may have seemed incomprehensible to optimists a year or so ago, the government remained steadfast in pursuing this agenda during the pandemic. The president has said that this remains non-negotiable; more intrusive, ministerially determined employment edicts are on the cards.

Property rights – the bedrock of a successful economy – have meanwhile come progressively under pressure. Most obviously, this relates to the drive for expropriation without compensation (although it has antecedents, for example in demands for the cession of equity in empowerment policy), a matter of constitutional, legal and economic concern. The damage this has done has been recognised by the government, and even – obliquely – by the president himself. The president has, however, pushed this reckless agenda (‘We are going to take land and when we take land we are going to take it without compensation’, he bullishly declared in 2018).

Indeed, a move on property rights is likely to extend well beyond land, to ‘improvements’, and ultimately to all assets that excite official attention. ‘We do not have the money.’ That might be found in confiscation or prescription.

Underwriting each of these pathologies is the influence of ideology, a messianic self-conception that the ruling party has of itself and its mission. Yet its own policy programme has crippled the institutions on which it would notionally depend. President Ramaphosa has repeatedly spoken of the government’s plans for recovery. But until the roots of the problem are recognised, the implications understood and a pragmatic alternative adopted, South Africa’s decline will continue. It is difficult to see any alternative.

‘We do not have the money’. No, we don’t. And whether we will be able to turn this around will hinge on whether the dictates of a failed ideology, or the imperatives of a moderate pragmatism, prevail.

Written by Terence Corrigan, a project manager at the Institute of Race Relations, a liberal think tank that promotes political and economic freedom 

https://www.polity.org.za/article/why-no-money-2021-01-28

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