EDITORIAL: Cyril’s pretend-pretend recovery
One can hardly blame a president for wanting to put a positive spin on things, but by being so out of touch Ramaphosa just makes himself seem deluded
The government’s approach to post-Covid reconstruction is to draft a recovery strategy that builds on the areas of agreement between the ANC and Business for SA’s plans, especially where they align with reforms already embarked on.
This is a sensible strategy and there are solid points of overlap. Everyone seems to agree that a joint infrastructure push, which draws in private sector skills and funding with a strong focus on green energy-related investments, is the place to start. There is also broad consensus that SA must improve the efficiency of all the network industries — energy, rail, water and telecoms — including by expediting digital migration and spectrum allocation to reduce data costs.
Focusing on unblocking the barriers to regional integration to boost SA’s flow of exports into Africa is another no-brainer.
But it is a huge leap from agreeing in principle to a few broad policy brushstrokes, to the assertion President Cyril Ramaphosa makes in his weekly newsletter that "we have all the ingredients for an economic recovery".
Ramaphosa goes so far as to say that by the time the global recovery takes hold, "our initiatives to reform and improve the business environment will establish a firm platform for industries with high potential to flourish".
This is clearly wishful thinking in an economy that has been deindustrialising for years and where the key policy reforms required to unblock economic growth have been in the works for the better part of a decade. In SA, economic reform takes years, not weeks.
Even before the Covid-19 crisis, SA was in a terrible position, lacking most of the ingredients for an economic recovery. At best, there are a few green shoots of promise amid the ruins of an economy shattered by the pandemic. One can hardly blame a president for wanting to put a positive spin on things, but by being so out of touch Ramaphosa just makes himself seem deluded.
SA’s economy entered the crisis in recession, having slowed nearly every year for the past five years. Because of the pandemic, its growth potential has eroded even further, with about 3-million jobs and thousands of firms lost, not to mention a cohort of children who’ve lost almost a year of schooling. Business and consumer confidence are shattered, and faith in the government hangs by a thread. Moreover, the spectre of higher taxes looms over the economy to pay for the country’s reconstruction, including the possibility of a basic income grant.
As if this weren’t enough, the SAA debacle and the government’s reluctance to allow the SABC to retrench tell us the state is nowhere near ready to change its thinking on state-owned enterprises. Until it does, they will remain a drain on the fiscus and a drag on growth, bidding up the cost structure of industry and destroying firms’ ability to compete.
In any event, there is no money — not for the "well-crafted public employment schemes" Ramaphosa contemplates, nor for anything else new. SA is heading into a fiscal crisis, not an economic recovery.
As the government discovers that it must cull entire programmes, it will be increasingly tempted by alternative policies, such as prescribed asset requirements and quantitative easing. Adopting them would shock investors and wipe out the buds of policy convergence Ramaphosa is trying to coax into bloom.
The problem with forging ahead on the basis of a flimsy consensus and false hope is that you set aside the hard decisions and trade-offs that must still be confronted. It’s high time we stopped pretending everything will be OK in the end if we all work together.
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