South Africa’s economy needs real change
Were you ever woken up with a cold splash of water to the face? I sure was, and what a rude awakening it is. There is no gentle transition from sleep to consciousness. It is unexpected and bracing.
That’s what it must have felt like this week for all those who have been lulled to sleep the past few months by the election of a new President. The news that South Africa’s economy shrunk by 2.2% in the first quarter of 2018 was like a bucket of cold water. A 24% collapse in agricultural production. A 9.9% collapse in mining. And a 6.4% in manufacturing. All the sectors that employ lots of people.
I hope this bracing wake-up is also a reminder that it will take more than talk shops, conferences and PR launches to change the trajectory of our economy. The same policies, sold by a new President, will not deliver real job creating growth.
The hard, cold reality is that just about every key metric that describes the SA political economy today is heading quite dramatically in the wrong direction. And our government’s response has generally been to aggravate the situation, even as investors, analysts, ratings agencies and international organizations spell out the change we need.
National debt is rising and is expected to hit R3 trillion - over 50% of GDP - by 2020/21, meaning in future we’re going to be spending more on interest than on higher education and policing combined.
It’s a double whammy. People are getting poorer while the government is less and less able to help them. Less and less able to dismantle the system of deprivation that denies them the opportunity to build their own lives.
Households are being forced to pay the mounting cost of failed policy, even as their incomes are falling. The recent VAT and steep fuel levy increases are driving up the cost of living.
The poor desperately need municipalities to deliver essential services. And yet half of all municipalities are either broken or bankrupt. And corruption is endemic: municipal irregular expenditure increased by 75% between the 2016 and 2017 financial years to R28 billion.
Unemployment increased by another 264 000 people in the last quarter to 9.5 million jobless adults today. Life is getting harder and harder for more and more families, while the state’s capacity to help the poor (through social grants) and to help them help themselves (through improving their health and education) is diminishing.
Our health system is on the verge of collapse, with more and more hospitals unable to provide beds or medicine and unable to avoid avoidable deaths. According to the Office of Health Standards Compliance, only 5 out of the 696 hospitals and clinics it inspected in the 2017 financial year complied with sufficient norms and standards to achieve an 80% pass mark. Less than 1% do a good job.
Our education system is considered one of the very worst in Africa, with 4 out of 5 children emerging from foundation phase still unable to read with meaning.
Meanwhile, our public-sector wage bill is growing, even as our essential water, electricity and transport infrastructure is crumbling. We are not even repairing the infrastructure we have, let alone building what we need to enable growth.
I say all of this not to send you rushing for the nearest cliff. These metrics show that we cannot be lulled into thinking the ANC are capable of fixing our country.
To turn our economy into a place attractive to investors, a place of growing opportunity for all, a place of hope and possibility, we need deep structural reform. Smart, stable policy that works for all rather than a few.
Eskom’s sole objective must be the provision of affordable electricity to all not protected employment to a few. Mining policy must focus on growing jobs and tax revenue not on enriching a small, connected elite. Labour policy must focus on growing jobs and competitiveness, not on widening the gap between the employed and the unemployed. It must free up the job-creating SMME sector rather than protect big businesses and big unions from any new competition.
Our schooling system must prioritise the education of children, not the placating of teacher unions. We must commit to appointing public servants who can get the job of service delivery done. We must harness our private health sector for the good of all, not destroy it. And we must insist on the rule of law – one set of rules for everyone. Herman Mashaba’s zero tolerance approach to lawlessness and corruption in Johannesburg must become our new norm across the country.
We must decisively reverse the trend towards a greater centralization of power in the state, in favour of bringing power closer to people. We must devolve more power to cities to enable them to lead their own development.
Redress for past injustices must be achieved by implementing our Constitution, not changing it. Our strongly progressive tax system must be harnessed to a capable state that can spend tax revenue effectively, be it on delivering services to the poor, an excellent education to children, or title deeds and farming support to more and more black people.
We need these reforms and we need them immediately. Within his own party, President Ramaphosa does not have the support he needs to push them through. That is why the DA has long advocated a realignment of SA’s politics, so that all those who cherish our constitutional democracy and who support an open economy enabled by a capable state can work together.
This is how we can build a freer, fairer South Africa that extends opportunities to all. A DA-led coalition government in the future is the best, in fact the only, way to fight poverty, unemployment and inequality and to bring about a future of peace and prosperity for all.