Since 2011, South Africans have experienced weak economic growth, high unemployment, low commodity prices, declining investment levels, greater household dependency on credit and policy uncertainty.
This period has seen people’s fortunes drop considerably, dragging some families down into poverty.
More than half of South Africa’s population was poor in 2015, with the poverty headcount having increased to 55.5% from 53.2% in 2011.
Unemployment currently stands at 27.2%. The economy shrank by 2.6% in the first quarter of 2018, and by a further 0.7% in the second quarter, resulting in a technical recession.
The parliamentary inquiries into state-owned entities and the Steinhoff debacle, together with the Nugent Commission of Inquiry into the SA Revenue Service and the Zondo commission of Inquiry into State Capture, are all telling us about the malfeasance that has run riot in the state and in society at large.
Rather than defer to politicians, we are now all being called to play a bigger role as citizens and to save our country from being stolen.
South Africa is suffering from a crisis of confidence on the consumer and the business front.
This lack of confidence has been driven by economic mismanagement on the part of the ANC, both in terms of attacking corporate South Africa by labeling it “white monopoly capital” and re-purposing resources that were directed to people in need but ended up in individuals’ pockets.
As a result, service delivery has been affected and those denied their right to such resources continue to engage in protest action.
Since his appointment, President Cyril Ramaphosa has focused on restoring confidence, which is urgently needed.
A recent development, notably by the ministries of mining and tourism – which have begun working with partners to stimulate joint ventures and private sector investment – is encouraging.
What else needs to be done?
The restoration of our constitutional democracy and institutional rebuilding are major priorities when it comes to setting our economy on a positive trajectory.
The global economy is forecast to grow at 3.9% both this year and in 2019.
Therefore, I propose that South Africa needs an augmented form of the Washington Consensus. In simple terms, we need urgently to bring back the macroeconomic discipline that we had experienced in what the South African left calls the Class of 1996: the development and promotion of the market economy and a focus on intra-Africa trade.
In the implementation process, I would begin with macroeconomic stabilisation similar to what we did in the Growth, Employment and Redistribution macroeconomic strategy, rebuild institutions that have been hollowed out by the governing ANC, and focus on the merits of a wealth tax.
National Treasury has recently alluded to some form of stimulus, which is concerning.
It should rather focus on fiscal consolidation, given the risk of revenue collection amid a struggling economy.
A fiscal deficit above 3% is a primary source of macroeconomic dislocation and could push inflation up in a period of low demand, putting South Africa in difficulty.
Moreover, the state of public funds means that the government is servicing interest and consuming most of the budget rather than investing in infrastructure.
Fiscal deficits, and the capital flight that follows fiscal populism, will result in a major decline, as witnessed by recent events in Argentina and Turkey.
Some may say my concerns about inflation and fiscal deficits should take a back seat and that a stimulus package, as espoused by Ramaphosa to boost consumption and job creation, is the correct prescription.
But can we trust the capability of the state, given that it was responsible for bringing us to this current crisis? The hollowing out of institutions by the ANC will affect any stimulus package that the state supports. We should rather focus on stabilising state-owned companies by improving governance and looking at new ways of financing them and turning them around.
And, importantly, we need to bring those involved in corruption to book.
Mondi is a senior lecturer at the School
of Economic and Business Sciences
at the University of the Witwatersrand