To say that this is South Africa’s most important Budget since 1994 is an understatement. The reality of a declining economy deeply entrenched in a seemingly endemic inability to break out of downfall mode has left both domestic and foreign investors despondent, demoralised and downright depressed.
Frankly, to expect the proverbial rabbit to be pulled out of the hat to prevent the dreaded ratings agency downgrade seems unlikely. It may just be too late.
And, for once, economists and their related species, political analysts, should take some credit for the many warnings issued over as many years. If you fail to address policy paralysis – and also fail to encourage a diversification of your economy to the demands of the future – you will simply be left behind.
So here’s the rub: President Zuma (and Finance Minister Gordhan) has set Budget 2016 up as the critical speech to watch. It’s almost Rubicon-esque in importance. If it fails to deliver, expect the depression now to cascade to disaster mode.
South Africa’s economic woes have been a long-time coming. With the complex and confused ideological approach (and structure) of the ruling ANC Alliance, policy paralysis and populist experimentation has long contributed to the precipice we currently face. Not to mention the creeping cronyism and patronage network of ‘Big Man’ politics that not only creates immense wastage but also denudes the country of efficient service delivery and management skills.
When you look at these factors, there are few signs that the big picture malaise can be turned around in the short-term. Indeed, the political structure of the ANC and the power politics as practiced by President Zuma largely prevents this. These are deep-rooted structural and largely political issues that have placed access to power and resources first and put economics deeply in second place.