SA must read the danger signs in the Greek crisis

09 July 2015

Note to Editors: The following address was delivered by the DA Leader, Mmusi Maimane MP, at an event hosted in Cape Town by the SA-German Chamber of Commerce and Industry.

Good afternoon, distinguished guests.

I was asked to speak to you today about the DA’s vision for growth and development in South Africa. 

Since the launch of our Vision 2029 – our blueprint for a South Africa after ten years of DA government – almost a month ago, I have been speaking of little else. I have travelled back and forth across the country explaining this Vision to many different communities and interest groups.

It is a Vision that excites all of us at the DA because it describes a stable, safe and prosperous South Africa, and it is a Vision we know we can achieve.

But before I get round to our Vision, I’d like to speak about something else first – something that has been dominating, and will continue to dominate, world news for some time.

The eyes of the world are on Greece. How this incredibly complex challenge plays out will shape not only Europe, but the global economy.

And while the focus is, quite rightly, on the immediate future – what will happen to Greek debt, what will happen to European banks, what will happen to the Euro and democracy in the EU – for us here in South Africa it is perhaps even more important to look to the immediate past.

And by the immediate past, I mean the history of recent events that led to the situation in Greece today. How a country deemed secure and stable enough to join the Euro 15 years ago managed to disintegrate to the point where an entire continent’s economy is threatened and ripples are felt across the globe.

Back in 2010, a journalist named Michael Lewis wrote a piece in Vanity Fair in which he got to the bottom of this apparent mystery. And while it makes for depressing reading from a Greek point of view, it is the parallels with the South African economy that really made me sit up and take note.

I’m not saying we’re the next Greece. But I am saying there are similarities we’d be very foolish to ignore.

The biggest – and overarching – similarity between Greece and South Africa is the pervasive culture of corruption and disregard for the rules that govern society, and specifically the rules that keep the economy functioning.

In Greece, the toxic culture of corruption spread from government and ultimately infected just about every aspect of daily life. Tax avoidance, bribery and a host of other forms of corruption became so commonplace that it stopped making the news.

And when I say “commonplace”, I mean everybody did it. From politicians to high-net worth professionals to street vendors, just about everybody in Greece under-reported their income, under-stated their property value and dodged their tax obligation.

If this was mentioned at all, it was usually in a joking manner with a knowing wink. Beating the system became a national past-time.

In Greece, only a fool would pay the correct tax. Only a fool would attempt to do business without bribes. Only a fool would not plunder the store-room at work. And only a fool, it seems, would slave away in the private sector for market-related income when the public sector had become the cash cow of all cash cows.

At the time of writing the Vanity Fair piece in 2010, the average government job in Greece paid almost three times the average private sector job.

And along with this hugely inflated public wage bill came incredible inefficiency. The state-owned national railroad, for example, generated revenues of €100 million a year, but had an annual wage bill of €400 million plus €300 million in other expenses. And there was always money available to prop up this completely inefficient, completely unsustainable enterprise.

I don’t think I really need to join the dots between this and our very own state-owned enterprises, and particularly the financial black hole that Eskom has become.

Again, we’re not quite there yet, but the signs are there that, in many ways, we’re setting out on the same path. We need to step off this path before it’s too late.

If you unpack the Greek crisis, you will find a several contributing factors that feel like they were lifted straight from our own situation. It is absolutely crucial that we recognise and admit to each of these issues in South Africa so that we can put measures in place to prevent our own Greek crisis.

I have identified five important lessons that we must learn from Greece, and right at the top of this list is corruption.

In Greece, the culture of corruption became so wide-spread that it caused a complete break-down in society. It eroded not only the trust between the public and government, but also the trust between individuals. Everyone was cheating the system, and everyone knew this. The damage this caused to the social fabric could now take decades to undo.

According to the latest Corruption Perceptions Index, Greece has the highest perceived level of public corruption in the EU. Tellingly, South Africa is one position above Greece on this list.

We need to nip this in the bud, and the only way to do this is by ensuring that there are real consequences for all offenders. One strict law for all citizens of the country with harsh sentences for anyone found guilty.

The first thing a DA government would do to ensure this, is to remove the corruption-busting unit, the Hawks, from the jurisdiction of the South African Police Service. By letting them operate independently, under the National Prosecuting Authority – the way their highly effective predecessors, the Scorpions, did – we will restore their credibility and give them real teeth in the fight against corruption.

We will also restore the independence of the SARS anti-corruption wing as well as the NPA by reversing the political appointments made by the president to protect his own interests.

The second lesson we should learn is how to properly manage our debt. While nowhere near the Greek figure of 177%, our debt to GDP ratio has doubled in the past five years from 21.8% to 40.8.

Our government’s response to its growing expenditure challenge has been to increase income tax and to expand its borrowing programme. If the Greek crisis has taught us one thing, it is that you cannot fund the state on more debt.

The only possible solution lies in a growing, more inclusive economy with an expanded tax base. If that is not at the heart of your economic policy, then you really should not be running the country.

The most effective way to achieve this is by building a far bigger and far more diverse middle class. And for this, we need a vibrant and efficient private sector that can step up and end our over-dependence on the public sector to provide for all the needs of our people.

The third lesson has to do with tax collection. Now, we don’t have anywhere near Greece’s revenue problems, where tax collection has become almost non-existent. Up till now, SARS has been highly efficient in meeting and exceeding its targets.

But looking at the events at SARS over the past ten months – with the dismissals and resignations of senior officials and clear indications of political interference to prevent investigation of the President’s and the ANC’s tax bills – the warning lights are definitely flashing.

It is crucial that SARS remains independent and beyond reproach, and that no one is allowed to avoid their tax obligations.

The fourth lesson is something I touched on earlier: bringing our public sector wage bill under control. This bill has grown from 5% of total expenditure in 1994 to 40% of total expenditure in 2015 and now costs us over R450 billion a year.

We have one of the biggest, most ineffective governments in the world, and our state-owned enterprises have become places of sheltered employment and guaranteed performance bonuses.

A DA government would rectify this by immediately slashing our Cabinet to a lean and mean 15 ministries, and by introducing measures that ensure real accountability for performance.

And the fifth lesson we must learn is how to increase our savings. While a country like Germany has a savings rate of around 26%, the Greek savings rate fell all the way down to 6% in 2011. This is completely unsustainable and undoubtedly played a role in the collapse of their economy.

South Africa’s savings rate of 16.2% is the lowest of all the BRICS nations. If we’re serious about boosting our economic growth and creating jobs, we need to raise this to at least 20%

These are lessons that all governments around the world should take to heart, but they seem particularly applicable to South Africa. If we heed them in time, we can avoid a situation in future where the world says: “How could they allow this to happen?”

It boils down to being responsible, being accountable, being honest and living within your means. And, as with so much else in life, the people follow the example set by government.

If government officials expect to get away with corruption, then so will the people.

If government officials make bribes and kickbacks part of their daily lives, then so will the people.

If government officials cheat – whether it’s their taxes, their travel allowances, their gift declarations – then so will the people.

If government officials decide which laws and court rulings are worth obeying and which ones aren’t, then so will the people.

And so I am happy to tell you that the future government of this country – the Democratic Alliance – understands this concept only too well. For us, the Constitution and the Rule of Law trump everything else.

Which brings me to our Vision for South Africa. As I said earlier, Vision 2029 describes a country after ten years of DA government.

It describes a safe and prosperous country with a clear strategy for growth and jobs. It describes a country where the government recognises the role of the private sector in creating these jobs; where the government gets rid of obstacles to entrepreneurship instead of creating them.

A country where the key to its growth lies in the ease with which new enterprises can get off the ground, the ease with which foreign investors can bring their business here and the ease with which we can trade with our African neighbours and the globe.

Our Vision 2029 describes a country where children are no longer denied a quality education because of unions, incompetent teachers and the damaging effects of handing out jobs for pals.

This is a country with stable, affordable electricity. A country with sufficient infrastructure spend on growth-enabling projects such as high-speed broadband and our road and rail networks.

Under Vision 2029, we see a South Africa rebuilt on Freedom, Fairness and real Opportunities for all its people.

Of course, if Vision 2029 describes our country after ten years of DA government, this begins in 2019. And a victory for a DA-led coalition in 2019 will be built on a strong showing in next year’s Local Government Elections.

For the first time, we will be competing for three new Metros, other than Cape Town. Victories in one or more of Tshwane, Johannesburg and Nelson Mandela Bay will propel us towards 2019 with just the right kind of momentum.

If you look at a graph of ANC vs DA support, the lines are fast converging. Now it is just a matter of getting the timing right.

We certainly have our work cut out for us over the next year, but I can assure you we are more than up for the challenge. 

Thank you.

Statement issued by DA leader Mmusi Maimane, July 9 2015