ANC bickering poses serious risks to consumers - economist


Already cash-strapped consumers could ultimately bear the brunt of the ANC's internal war, cautioned chief economist at Efficient Group Dawie Roodt.

This follows contradictory remarks from the ANC's top brass on the expansion of the SA Reserve Bank’s mandate. It also comes on the news of a massive 3.2% contraction in the economy in the first quarter.

Roodt said typically economies tend to bounce back after large Q1 declines, however he warned against political infighting within the governing party that has recently played itself out publicly.

"What is hugely important is that Ace Magashule stops contradicting the finance minister, Tito Mboweni in particular with regard to the so-called expansion of the Reserve Bank’s mandate to include job creation," Roodt said in a statement.

"If ever there was a time for the governing party to unite this is it otherwise consumers could end up paying a heavy price for the bickering that is going on in the highest ranks of the ANC," he said.

"This type of raging debate – over the core issue that hampers South Africa's return to economic legitimacy – is set to undermine the country to an even greater extent than the ravages of state capture," wrote political analyst Daniel Silke in a column for Fin24.

"After all, further GDP contractions will destabilise almost every aspect of a very fragile base – from rising inequality, joblessness and social upheaval."

'A bloated govt wage bill'

Furthermore, Roodt emphasised that the importance of slashing government’s wage bill. He suggested directing this money to stimulate the small and medium business sectors which he said was where real job creation should be taking place.

"At the moment the fiscus is paying vast sums of money to service the country’s massive debt and to paying the government’s colossal wage bill.

"This is neither sustainable not desirable because ultimately consumers – who are already at their wits end – are going to end up footing the bill for really bad economic policy," Roodt said.

With gross consumer debt at around R1.73 trillion and the government’s gross loan debt at R2.2 trillion in 2016/17 financial year, it is clear that South Africans are in for a very rough ride, warned Debt Rescue CEO Neil Roets

He said although President Cyril Ramaphosa’s new cabinet blows a breath of fresh air into the political landscape, it remains to be seen whether it will be enough to placate the ratings agencies who may see Eskom’s spiralling debt as enough reason to downgrade the country’s sovereign bonds.

Roets said for most South African consumers, budgets were already stretched to the limit and it is difficult to see where the money was going to come from to deal with the latest round of price increases that are going to follow hot on the heels of the latest fuel price increase.

"Most consumers have cut out luxuries from their spending some time ago and will now have to start cutting on basic necessities just to stay alive," he said.

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