Finance minister Tito Mboweni. Picture: SUPPLIED
Finance minister Tito Mboweni. Picture: SUPPLIED

In the Business Beyond Covid series, CEOs and other business leaders and experts in their sectors look to the future after Covid-19. What effect has the pandemic and resulting lockdown had on their industries and the SA economy as a whole? Which parts will bounce back first and which will never be the same again? Most importantly, they try to answer the question: where to from here?

The upcoming reprioritisation budget to be delivered by finance minister Tito Mboweni has much riding on it. Workers hope it will be used to lay the foundation of a new economy, the sort of a development state we envision and need post-Covid-19.

The capacity of the state has been severely tested during the lockdown and the country’s social inequalities have been laid bare. The government needs to learn lessons and use the budget and other available economic mechanisms to close these identified gaps and lay a foundation for a more inclusive economy.

Before the Covid-19 lockdown 29.1% of working-age people were already unemployed. The latest jobs and economic projections paint a dire picture of the pending economic firestorm in the next months, with even more people facing unemployment and poverty. Millions of workers will depend on the state for their wellbeing and that of their families.

For this to change decisionmakers will have to acknowledge that poverty is not accidental but flows from the logic of the capitalist system that has been propped up by government policies for more than a quarter of a century. One of the fundamental features of the national situation has been the inability of policymakers to find a solution to the systemic and deep existential crisis of the SA capitalist system.

The economic crisis has persisted for more than a decade since the global financial crisis of 2008. In our account of the deepening socioeconomic crises that are engulfing SA we need to look at the misguided macroeconomic policy framework that has been implemented over the years, especially over the span of the recent fifth democratic dispensation.

The fourth democratic dispensation that was elected amid the 2009 recession succeeded to a degree in pulling the economy back to growth by adopting a countercyclical fiscal policy stance, based on the Nedlac framework response to the international economic crisis. That growth trajectory was short-lived as it decelerated year after year as the expansionary spending on infrastructure by the public sector (more than R2-trillion over 10 years) was accompanied by declining private sector investment.

Narrow interpretation

The New Growth Path (NGP) introduced in 2010 proposed a new macroeconomic package, seeking to strike a balance between looser monetary policy and more restrictive fiscal policy, as well as proposing the creation of a state-owned bank. But this was summarily replaced by the National Development Plan (NDP), adopted in 2012. Thus the NDP was used to restore and ensure continuity with the old neoliberal macroeconomic policy paradigm.

The rentier monopoly finance-capital that oversees the country’s monetary policy at a distance, as well as the neoliberal deep-state within the government and the SA Reserve Bank, succeeded in displacing a paradigm shift proposed in the NDP, since the latter favoured the development of the real productive economy. Since then flimsy arguments have been presented to defend the current narrow interpretation of the Bank’s mandate.

The Treasury’s most recent budget, presented in February, was an austerity budget that was geared neither towards achieving structural economic transformation nor inclusive growth. Its sole mandate was to contain the public debt and reduce the budget deficit through fiscal austerity — mainly fixated on the so-called bloated public service wage bill.

Too much emphasis was placed on these service and primary sectors to the exclusion of manufacturing, where there is real value creation

This slide back to neoliberal macroeconomic policies was epitomised by the abandonment of the perspective of the capable developmental state, which is supposed to be the overarching thrust of the role of the state in terms of the NDP.

Rather than focusing on diversifying and building the productive capacity of the economy, the Treasury in its most recent budget, as in its economic policy document, narrowly placed emphasis on tourism and agriculture as the core of its proposed industrial policy.

These are important sectors as they are labour-intensive and would help the country with foreign earnings. But their importance was overplayed because they are also both largely low-wage sectors that are vulnerable to adverse natural, geopolitical, and global economic contingencies over which government has no control, as the Covid-19 outbreak has shown.

Too much emphasis was placed on these service and primary sectors to the exclusion of manufacturing, in which there is real value creation. This approach is not transformative in terms of the neocolonial structure of the economy, or in terms of SA’s location in the international division of labour.

The Treasury has to confront and adjust its economic philosophy, which has led to the fragmentation of the state and rendered it a mere “regulatory state” through the “rightsizing” of the public service and “downsizing” of the public sector through privatisation and deregulation.

Logically, as these cuts intensified inequalities have widened and more jobs have been lost. Due to the increase in inequality working families’ purchasing power has been significantly diminished.

To fix this, there is a need to dispense with the illusory assumption that the state is above class conflict. The current socioeconomic situation reflects the class character of the policies that have been implemented by the state since 1996.

Capable state

The state is a powerful force with much influence. It holds the monopoly to tax, print money and engage in borrowing on behalf of the country. It influences who has access to national productive resources and determines how they are deployed and used. It is within this context that the role of the state should be understood and framed.

SA needs a capable developmental state that responds to the constitution, which states that “public administration must be development-orientated”. The constitution further states that the “people’s needs must be responded to, and the public must be encouraged to participate in policy-making”.

These constitutional injunctions place the public service and the broader public-sector at the centre of socio-economic development and elevate the need for people-centred development programmes.

Regarding this the constitution is in keeping with our perspective of building a participatory developmental state. These constitutional injunctions run counter to the neoliberal model of governance and the operation of the public sector that largely characterises the postapartheid state.

The collapse of service delivery, as symbolised by public protests, can only be traced back from the decision to push for the reduction of the headcount of personnel in the public service and the commercialisation of state-owned entities (SOEs) in their mode of governance. This right-wing push for SOEs to operate along the lines of the private sector is the source of the inefficiencies and corruption we have seen.

Evidence shows that introducing private sector practices such as public-private-partnerships, outsourcing, agencification and privatisation helped weaken these institutions. The attempts to curb spending on the salaries of public servants, and treating public spending as consumption rather than an investment, is a source of the shortcomings we have seen during the Covid-19 lockdown.

The country needs a new public sector model that will refrain from commodifying public services such as health, education and road infrastructure. Citizens cannot be treated as “customers” or “clients” in the practice of the delivery of public services.

We cannot continue with a system of tender and procurement contracts between the state and private businesses (both black and white) that has spawned an industry of corruption and fraud. This system has caused many senior public servants to advance their own narrow personal or nepotistic interests.

The country needs a capable developmental state to implement a uniquely SA developmental economic model. This state will not be declared in boardrooms, nor will it be judged on its intentions, but on what it does to resolve the inequalities and liberate the millions still trapped in poverty.

• Ntshalintshali is Cosatu general secretary

READ OTHER ARTICLES IN THE BUSINESS BEYOND COVID SERIES