Picture: ISTOCK
Picture: ISTOCK

On October 8 2008, the world's leading central banks - the US Federal Reserve, the European Central Bank, Bank of England, and the central banks of Canada, Sweden and Switzerland, for the first time ever, cut interest rates in a coordinated manner. They did this to save the global economy. It was just under a month after the collapse of Lehman Brothers, which would trigger the deepest recession since the Great Depression of the 1930s. Following their lead, South Africa's Reserve Bank would cut the repo rate from 12% to 5% by July 2012.

This was a move that, along with the counter-cyclical fiscal policy followed by President Jacob Zuma's first years in office, would support the economy through the worst of the 2008 global crisis. It's a trick that worked well and the largest benefactors were retailers such as Mr Price and Woolworths. This was a period marked by a state increasing its wage bill and a Reserve Bank at its most accommodating in modern history.

But there would always be limits. The state would at some point have to close the tap, which in truth our Treasury has been able to do, despite the pressures faced by a president hell-bent on legacy-defining projects such as an ambitious nuclear programme.

Here some credit is deserved, but it has all been undermined by governance failures at leading state-owned enterprises such as Eskom and Transnet. Collapsing corporate governance was meant to open the purse-strings of what are the two most important arteries to an industrial complex. South African industry has long been struggling to compete with the world's factory, China, and its neighbours.

We are only just beginning to realise just how big a treasure trove these agencies have been over the past decade for those fortunate enough to be in the right faction within the ANC, or to be more specific, the Gupta family.

There were always going to be limits to what the government and its agencies could spend, especially as the largest employers in the private sector, miners and manufacturers, struggled. The balance sheet of the state and its SOEs are quite revealing at the moment, SAA being a highlight.

Outside of the US, which can just print more money as it is the custodian of the world's reserve currency, no country can spend in perpetuity, especially an emerging-market nation. There are harsh judges out there, ratings agencies being just some of them.

Those believing that China's decades-long growth, which had supported commodity-based exporters such as South Africa and Brazil, would continue without feeling the effects of a slowdown in Europe, the world's most affluent shopper, have long been proved wrong.

The Old Continent has been on its knees from a debt burden for close on a decade and Europe is only now beginning to emerge from this condition.

Deal with the governance failures that have enabled state capture, and do it in a manner that inspires confidence.

With easy money having dried up, we now have a Zuma presidency on its final lap looking for something or someone to blame for our economic woes. Our illness has been highly evident over the past five years, beginning in August 2012 - Marikana, a month after the last rate cut by the Reserve Bank.

"White" monopoly capital has been a useful rallying cry, especially as dastardly banks have closed the bank accounts of certain people's friends. The Reserve Bank, which apart from protecting the value of the rand also has to ensure financial stability, hasn't been much help either. A perfect target to blame for the country's sluggish economic performance is the central bank's inflation targeting mandate, which wasn't a problem in the years of plenty, but is now an impediment to growth. This is not new.

Out of ideas, many a government in recent history has turned to its central bank to lend support to the economy. America is a classic case in point, where the Fed's actions over the past decade have saved the country from the worst of the "credit crisis", and shielded it from its structural faults.

South Africa, much like the US, has its structural problems, but ours run much deeper. Unlike the world's biggest economy, the Reserve Bank can't paper over those cracks by simply cutting rates, which are actually at near-record lows. And, as we've seen in many an emerging-market nation before, to do so would prove disastrous to the long-term prospects of the country. We shouldn't be looking to further entrench consumption as the biggest share of the South African economy. Most of the goods we are buying are coming off ships, only further crippling an industrial base that's just bleeding jobs.

There's a better plan. Deal with the governance failures that have enabled state capture, and do it in a manner that inspires confidence.

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