JOHN STEENHUISEN: Put aside the interests of the connected few to save the rest of us
After the triple blow to the economy last week we need structural change now more than ever
The Covid-19 virus may be the latest cause of our economic distress, but we were in recession even before it hit thanks to bad policy choices. Both short-term and longer-term considerations now argue for swift, fundamental changes to the rules of our economic game.
We need immediate structural reforms, both to mitigate the damage during this crisis and to ensure that our society and economy recover as swiftly as possible once it has passed.
SA’s economy was dealt a triple blow last week, with the massive run on our bonds, our country going into lockdown, and our credit rating being junked. The immediate result will be a sudden drop in tax revenue coupled with a steep rise in the cost of borrowing. In other words, our state is going to have a lot less money than expected at a time when it needs to ramp up its spending to assist people, households and businesses to survive this passing storm.
Furthermore, the risk of long-term economic decline — a shrinking economy and runaway debt — and massive social instability has intensified strongly this past week. That puts lives at risk from threats other than the coronavirus — threats such as falling health care and social grant budgets, malnutrition, starvation, and increased violent crime.
We need to urgently shift our economic strategy from one of strangling state control to investment-led growth. President Cyril Ramaphosa admitted this much on Monday, saying to finance minister Tito Mboweni: “We now need to move boldly on the structural reforms programme.”
It could be argued that structural reform brings short-term pain ahead of longer-term gain, so now is not the time for it. But if we consider specific reforms we see that they make sense both in the immediate and longer term.
Take SAA, for example. It should be closed immediately and the assets sold off where possible. There is no justification for spending the budgeted R16bn to keep it going (subsidising public transport for the wealthy) when this money could rather be spent on boosting health care, or saving small businesses and jobs by paying wage bills during this time.
The rank unfairness and irrationality of this trade-off decision are now clear for all to see. In fact, we must put an immediate stop to all further bailouts of failing state-owned enterprises. To protect unproductive jobs at the expense of people’s lives and the productive, value-creating economy at a time like this is unconscionable.
There is similarly no justification for April’s scheduled above-inflation wage increases for largely unproductive, overpaid, non-frontline public servants at a time when jobs are being lost in the productive private sector and frontline public services such as nursing are under severe strain. The government may well need to approach the IMF or World Bank for funds in the very near future, and these institutions will resist helping us if we insist on maintaining this huge patronage budget.
Nor can we justify delaying opening our energy market to full competition from independent producers. This will make electricity cheaper and more reliable, taking considerable pressure off households and businesses in the coming months and years.
Likewise, reforms to our rigid labour legislation are now urgent. Small businesses need maximum flexibility and freedom to adapt to rapidly changing circumstances. Otherwise they are left with a straight choice between breaking the law and going bankrupt. It is in no-one’s interest that successful small businesses die during this sudden-stop economic period.
The DA has long been calling for these reforms. They will help us get to the other side of this nightmare, and thereafter they will reduce inequality by enabling more people to be economically active. And it is now clearer than ever that SA’s high level of inequality, the key driver of which is joblessness due to policies that artificially exclude people, is detrimental to our nation, morally unjustifiable, and practically unsustainable.
It is simply reckless for our state to continue to put the interests of a connected few ahead of the wellbeing of the great majority.
As with lockdown, the true test is whether stated intention leads to actual implementation. Ramaphosa and Mboweni face opposition from within their own party ranks, but they can get past this by relying on votes from the DA and smaller parties to push these reforms through in the National Assembly.
This moment calls for cross-party co-operation and swift action. It’s all about trade-offs: lives over ideology; country over party.
• Steenhuisen is interim DA federal leader.