Trends, change and recovery: SA beyond Covid-19 is an attempt at sourcing a range of theories.
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President Cyril Ramaphosa. (Felix Dlangamandla, Netwerk24)
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The relief measures announced by Ramaphosa, though understandable, have the effect of the state forfeiting much-needed revenue while fiscal commitments grow, writes Mpumelelo Mkhabela.
President Cyril Ramaphosa has looked and sounded almost faultless in his handling of the Covid-19 outbreak. He has no shortage of compliments from many different quarters locally and abroad.
He has been described as empathetic in his appreciation of the threat posed by the coronavirus, bold in his socio-economic measures and decisive in the way he is steering the country.
There is little doubt he is playing the role of a national charmer-in-chief as well.
In hard times like this, it is necessary.
More so if you consider the consequences of the toxic mix of lack of empathy, egotism and abundant ignorance that has driven government’s decisions and posture in the United States of America.
Ramaphosa has earned himself a sizeable stock of moral-cum-political capital.
Unfortunately, those who see gaping holes in his approach, including in the ever-changing lockdown rules, are portrayed as ungrateful.
Yet, skepticism, criticism and even cynicism are necessary to ensure his administration continuously justifies its actions.
Indeed, one of the pillars of our constitutional democracy is rationality.
Executive decisions must stand to rational scrutiny regardless of whether we are under a state of national disaster or not.
Notwithstanding all that which looks good in his approach, there are landmines.
In the long run, that is, if we aren’t all dead, to paraphrase John Maynard Keynes, the British economist who seems to have anchored the thinking of Ramaphosa’s economic advisors, we might witness the president’s leadership stock crashing.
So what are the underlying dangers that his charming leadership is seemingly obscuring but not eradicating?
They include the following five mutually reinforcing factors:
The Standard Operating Procedure
The SOP of this country features corruption prominently. Ramaphosa's R500 billion Covid-19 relief-stimulus package has no doubt whet the insatiable appetite of the corrupt in the ANC.
Ramaphosa has spoken tough against corruption, threatening that law enforcement authorities would deal harshly with officials who divert resources from the mouths of the poor to their pockets. His tough talk has limits in its believability. He should rather act tough.
Doing so would mean dismantling what the corrupt in the ANC have turned into the SOP. Evidence abound of ANC community leaders hoarding or diverting Covid-19 relief resources to their comrades and families.
Covid-19 relief mechanisms are at the mercy of this SOP that has been in place for years. To dismantle it requires political will from within the party.
But, what are the chances of deleting the much-treasured stripes of the zebra?
Poor economic management
President Thabo Mbeki’s responsible economic management system, instituted in the face of strong opposition from the Left and earned the country the sovereignty that the Left is ironically concerned about today, was destroyed during the state capture era. Some in the Left were complicit in state capture.
Covid-19 struck when the system had hardly been rebuilt. Ramaphosa’s financial package, mostly funded by debt, comes at a time when the reforms meant to rebuild responsible management haven’t been implemented.
The twin tasks of mitigating a disaster that Covid-19 imposes on all of us while simultaneously fixing an old problem of this magnitude would require something of a miracle.
And no economy works on miracles.
The failed entrepreneur and ambitious regulator
One of Ramaphosa’s economic advisors, Mariana Mazzucato, who wrote an excellent book about the entrepreneurial state, has successfully sold her ideas to the president and his ministers.
It is tempting to think you can preside over a state like that. Indeed, there are many elements of entrepreneurial state in state-run research institutions.
But 26 years into democracy, the government would struggle to show any pool of successful entrepreneurial managers in state-owned companies.
Many of those who made it to the top, cut deals for themselves, friends and political bosses - they are not in short supply, though.
They dominate the SOE landscape.
What has this to do with Covid-19? It means one of the levers Ramaphosa could use for post-Covid-19 recovery, the SOE sector, won’t be available for these purposes because it too needs a recovery plan.
This almost certainly ensures that the government’s attempts to tell private sector players what to do - by way of exercising its regulatory authority - will continue to be received with skepticism.
First demonstrate that you can run a company, many private sector executives would think, quietly of course in fear of regulatory retribution.
Declining trust in the state
Ramaphosa’s posture has the benefit of giving a semblance of trust in the state. That’s because he lacks the characteristics of being a dodgy dealer - what we almost became accustomed to.
But that is not sufficient to build trust.
He works with many people who were themselves responsible for hollowing out state capacity.
The lack of trust, what Ramaphosa himself once described as trust deficit across many players in society, means a post-Covid-19 recovery will take longer than necessary because economic players, the state included, will view each other with suspicion when difficult decisions have to be taken.
The strongest arm of the state in the past 26 years, even with the nine-year of state capture disruption included, has been the South African Revenue Service.
Its ability to respond to government’s tax policies and fiscal commitments has been amazing.
The relief measures announced by Ramaphosa, though understandable, have the effect of the state forfeiting much-needed revenue while fiscal commitments grow.
In true Keynesian economics, there’s no fault in this as the president himself has said, the government’s plans seek to stimulate demand and supply.
However, it has to be accompanied by a clear plan to get the emasculated revenue capacity restored post-stimulus.
The worst thing that can happen is if the relief-stimulus packages that are implemented at great expense to the state’s revenue capacity, fail to yield positive results.
In the months to come, Ramaphosa will do well to broaden his consultative process to a bigger pool of South Africans beyond political parties, Nedlac, Minerals Council of South Africa, Business Unity South Africa and the Black Business Council.
He should spare no effort to seek out solutions.
But speed is of the essence as is his ability to pick the best advice unencumbered by narrow self-interests of whoever offers it.
South Africa’s finances are in a precarious state.
There isn’t the smallest room for blunder.
- Mpumelelo Mkhabela is a regular columnist for News24.
Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
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