Daniel Silke | Time's up, Minister Mboweni

Daniel Silke
Daniel Silke
  • SA is running out of options as coffers run dry.
  • Without the ability to keep on increasing the state wage bill or forcing through more guidelines to industries hitherto unregulated, the ruling party stands to confront its voters in a different way.
  • We are unlikely to see any major movements of meaningful policy shifts in the short-term.
  • Support for the poor and unemployed will be critical.

It would be easy to use the well-worn clichés for the upcoming adjustment budget from Finance Minister Tito Mboweni. A 'crucial budget', 'on a knife's edge', 'make-or-break' and 'bold decisions' all come to mind.

Yet there remains much less clarity on the type of event we might see unfold – and on the events likely to more broadly unfold within the political economy of South Africa in the weeks to come.

It's is now public knowledge that South Africa faces a massive decline in growth and an equally staggering increase in debt levels. This equation now remains untenable in the medium-term. It's the stuff of budgetary nightmares – and it's with us now.

A combination of the Covid-19 lockdown, a state with no savings and almost as little credibility and an economic policy direction as clear as mud all contribute in equal parts.

Temperatures rising

As the country digests the vast economic losses from the regularity burden experienced over the last three months, both physical and political temperatures are rising. Politically important constituencies to the ANC are susceptible to both the implementation of austerity measures (reducing the public servant headcount and salary increases) and tougher conditional assistance grants like the taxi industry.

In both cases, the coffers are now bare. Holding together the many constituencies that support the ANC has largely been predicated on patronage and largesse. Without the ability to keep on increasing the state wage bill or forcing through more guidelines to industries hitherto unregulated, the ANC now stands to confront its voters in a very different way than in the past.

When the cash finally runs out, you are left with two choices – take the disastrous Zimbabwe route by hiking civil servants salaries by 50% (in local currency terms) or take the more necessary – but politically riskier route – of applying measures that will be good for the fiscus but tough for the livelihoods of constituents.  

Only this week, the more regulated – and even onerous – conditionalities announced by Transport Minister Fikile Mbalula for Covid-19 financial relief to the taxi industry – have created a new fissure in those largely ANC-supporting sectors of our economy.

While government has buckled before to this industry, the issue is of much more bread-and-butter consequence on the ground that what may or may not happen in parliament on Wednesday. And, with the broader Covid relief packages set to expire in October, the ANC will experience a fresh wave of discontent at that juncture.

With the major indicator of voter support – municipal by-elections – now postponed to November at the earliest, it is tough to gauge the potential political fallout of the handling of the pandemic on the South African voter.

But, if Finance Minister Mboweni's depressing economic prognostications are anywhere near true (and it's likely they are), economic and social factors will begin to heap pressure on the ANC and up our domestic political risk quotient in the process.

Lonely voice

So we are in a crisis management mode where in the short-term support for the poor and unemployed will be critical. Whatever this author thinks, we are unlikely to see any major movements of meaningful policy shifts in the short-term. It's likely to be more of a stop-gap budget process designed to reprioritise spending to critical Covid line items and affected departments.

The question is what kind of messaging will be included in all of this. And it's a messaging that needs to extend beyond Tito Mboweni who constantly suggests he represents a 'lonely' voice amongst his ANC cadres.

Minister Mboweni requires the entire Cabinet and the President to sing-from-the-same songsheet. He needs back-up. We should not wait for a Budget to notice his more maverick suggestions yet find little stomach for them from many of his most senior colleagues.

For the hungry, issues of debt and loans from the IMF are hardly a factor. The pressure therefore will be for the ANC to swallow their all-to-rigid 'pride' and accept the loans from the International Monetary Front. Putting food on the table will be a lot more important – from both a political and practical point-of-view – than worrying about the conditionalities of such loans.

Secondly, the message on Wednesday really must move beyond the uninspiring rhetoric last week from President Ramaphosa where he was at pains to talk about the need for the state to lead a post-Covid recovery.

Although work at Nedlac has brought the state and the private sector closer, a reversion to a command economy messaging will ultimately have a negative impact on both domestic and foreign investors.

The talk should be much more about public-private partnerships. It should welcome a private sector that remains skilled and deeply committed to the revival of the domestic economy. After all, the last decade has seen the state largely fail in its 'developmental' goals suggesting it really should not assume a leadership role until it can prove its mettle.

While there still may be no answer about the South African Airways (SAA) business rescue plan, any commitment this week or in the weeks thereafter to throwing more good money after bad will set back the state in its efforts to secure greater global and local business buy-in.

Dose of reality

Thirdly, armchair critics like this author equally need a dose of reality. We clearly also need an urgent commitment to enhancing our infrastructure and managing the risk of climate change, food and water security, energy (both green and yes, even nuclear in the mix). And for this, government indeed must play an important role – alongside an enabled and enthusiastic private sector.

It is time for spending on our future security and big-ticket items require the state and require capital injections secured on global financing markets. Minister Mboweni ideally will need to make reference to this since it's not just about doling out cash – it's about creating a sustainable set of critical assets for the future of the country and budgeting for it now. This will bring hope – and more importantly, jobs. But let's action it. Let's implement it. And let's not just talk about it.

Fourthly, with so much talk about de-globalisation, now is the chance to revitalise manufacturing and bring (at least some) jobs home. There are substantial swathes of manufacturing outsourced over the last 20 years that can return. A targeted industry and product-by-product approach to this can get South Africans working again – albeit within the context of a tough worker retraining regime.

The essence of government's messaging has to be less about consumption expenditure (although that is critical for immediate poverty alleviation) but rather more about creating sustainable wealth and tangible assets for the next generation of South African.

But, despite their rhetoric to the contrary, the ANC might simply not have it within their grasp to fully achieve this as frustrations on the ground boil over and internal political inertia (and factional contestation) persists. It will therefore be up to a new coalition of forces to drive this in the years to come.

And so, the stage is set for an uncertain period as government tries, once again, to succeed with aspects of dependency and even patronage while battling its own demons (and empty coffers) to secure growth. All alongside a shifting political landscape in which new players and actors are itching to make a stand.

The budget on Wednesday simply cannot afford to confirm yet another inadequate scenario. If it does, it's the voter on the ground who will take issue – and in a much more significant way than this author.

Daniel Silke is the director of the Political Futures Consultancy in Cape Town. Twitter (@DanielSilke) and at www.danielsilkeglobal.com. Views expressed are his own.

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