When the budget failed to put up social grants in line with inflation there was much negative comment but fairly quickly this was overtaken by the self-righteous demands of public service workers for a 7.9% increase. This in turn was quickly displaced by angry student demands for free higher education and then by renewed demands for a Basic Income Grant (BIG) which, in its original form, would “target 33 million people”, although targeting more than half the total population means not targeting anything.
An examination of these demands shines a garish light on the higgledy-piggledy nature of ANC decision making. Social grants began to take off in 2003-2004. Initially 6.8 million people received such grants, which included 2 million old age pensioners. This bold attempt to launch Africa’s only welfare state occurred in the midst of the commodity super-cycle which saw South Africa’s growth rate soar to 5%. The Mbeki government decided happily but very unwisely that this was to be the new normal. Thereafter spending soared so that today over 18 million people receive such grants.
In effect the government had given in to Cosatu’s demands which created a small labour aristocracy earning high wages and enjoying a high level of legally reinforced job security. This guaranteed that South Africa could not compete with its emerging market peers and thus ensured that a large and increasing proportion of the labour force would be unemployed.
The rational thing to do would have been to liberalise the labour market, allow wages to fall in the more competitive environment thus created and gradually claw one’s way back into export markets. But the ANC did the opposite: in effect it accepted that high unemployment was a permanent state of affairs and that all you could do was hand out public charity to the poor. So unemployment and inequality got steadily worse.
Public service workers had regularly got generous pay increases ever since 1994 but the situation got completely out of hand during the financial crisis of 2008-2009. Faced by a collapse of demand in the international economy the IMF encouraged governments to meet the crisis with Keynesian means. Typically, this meant borrowing heavily in order to launch a major infrastructure programme which would soak up a good deal of unemployment and usefully strengthen the economy ready for the recovery.
To the IMF’s utter horror the Zuma government borrowed big – and then gave most of the money away in a huge pay increase for public sector workers. That is, instead of helping the unemployed the government simply gave more to the most privileged section of those already in work.
As the IMF bitterly commented, “Raising real public sector wages during the peak of the recession contributed to one of the largest job-shedding experiences among emerging markets during the financial crisis.” This was probably the most nakedly anti-poor policy ever implemented by the ANC and made a complete mockery of Zuma’s vaunted radicalism.
This has encouraged ambitions among the public service unions which can only be described as fantastic. The current demand for a 7.9% increase when the economy has suffered a 7% shrinkage is simply preposterous. But read the small print and you will see that the unions are also demanding more leave, higher housing allowances, a bonus of 12% of annual salary for any public service worker who gets Covid-19, a special bonus for any worker who is the victim of gender violence, subsidies for workers whose children are in boarding schools and various other bells and whistles. Such demands constitute a studied insult to the poor.
The students are not far behind. They are by far the most privileged members of their age cohort, for most of their peers are neither in jobs nor receiving education or training. The government regards as poor any student whose parents are earning R350 000 a year or less – i.e. five times the income of a domestic worker. Many of the students come from homes with much higher incomes than that and all of them have much higher lifetime earnings expectations.
The Heher Commission which examined the situation recommended that South Africa adopt the British system of raking back student loans by taxation of the students’ incomes once they enter the labour market. This entirely sensible suggestion was, however, simply thrown away by Zuma who wanted a populist policy to help him sway delegates to the 2017 ANC conference, the objective being to keep the Guptas in power.
The solution to the university funding crisis favoured by the students is that the vice-chancellors should “lobby the government for a bail-out”, as if this was to be easily achieved. In reality it reflects the fact that the students neither know nor care how these things work. What is a great deal less funny is that of the R1 billion that Wits students owe their university no less than R538 million is regarded as “bad debt”. Which is to say that the university has already been forced to write off more than half of all student debt as unpayable.
No financial institution can survive a debt repayment rate of only 50%. This suggests that no system which relies on lending money to students is viable. If one assumes that other universities have similar bad debts to Wits on their student loan account the implication is that a number of them will soon be bankrupt.
Nonetheless, the government has rushed to “find” extra money for the students – again responding readily to the more privileged, taking the money directly from the unemployed. And now comes Lindiwe Zulu, the Minister for Social Development, agitating publicly for a BIG. Somehow Ms Zulu seems not to have heard of the concept of cabinet government.
For she was in the cabinet which approved the budget, which she is duty bound, by virtue of collective responsibility, to support. Yet here she is gaily proposing extra expenditure of R100 billion a year or if the BIG only went to the unemployed, R42 billion. Either would make nonsense of the budget – and of future budgets too. This is not policy-making, it’s chaos. Astonishingly, the DA is supporting BIG too.
It is the same with the SABC. Mboweni said that South Africa cannot afford more taxes but the SABC immediately came up with a suggestion for a new tax to replace the TV license – i.e. to pay for its bloated and overpaid staff.
Several points emerge. First, the ANC – and some of its critics – would have us believe that the government is engaged in a steady progression towards the National Democratic Revolution. This is simply not true. The government lacks all foresight or discipline. It makes and unmakes policy at the drop of a hat, neglects to allow for quite foreseeable political pressures and, despite its pro-poor rhetoric, quite routinely gives in to the most privileged pressure groups. If the government was an animal the argument would be that it should be put out of its misery.
Secondly, we have had an ANC government for 27 years. Its mistakes and blunders are legion and yet it has learnt nothing from them. We are now in the fifth or sixth generation of mistakes, each building on the other. The result is an almost indescribable mess. As in the Irish story where a labourer is asked the way to Dublin and replies, “Well, you can’t start from here”, one has the feeling that the only way out of this mess will come when a fresh government starts again from scratch.
Finally, it is sobering to remember that the only way out of our fiscal crisis is for the government to hold a steady, disciplined path through relative austerity as it pays down the debt. What are the chances of this government doing that? Obviously, none at all.
This article first appeared in Rapport newspaper.