Crunch time for the ANC

William Saunderson-Meyer writes on South Africa's increasingly desperate fiscal situation


In its audacity and frustrations, it reminds one of NASA’s search for life on Mars. I’m referring to our odyssey to discover whether there is intelligent life in President Cyril Ramaphosa’s government.

The results are not dissimilar. 

In the United States, the National Aeronautics and Space Administration recently announced that despite initially exciting results, verifiable signs of life have yet to emerge on the red planet. Likewise, here, a recent National Treasury report briefly ignited South African hopes that there was cognitive activity in that fetid morass known as President Cyril Ramaphosa’s Cabinet. 

Unfortunately, sentience doesn’t necessarily mean intelligence. The unusually forthright report, which was leaked to the Sunday Times before the Cabinet had seen it, predictably was denounced by the government’s alliance partners, the SA Communist Party and the Congress of SA Trade Unions, as well as by individual ministers and the party apparatus.

The report laid down bluntly the minimum actions the government needs to take to avoid the country’s fiscal obliteration. That the Treasury dared to produce such a brutal analysis, given that there's a general election looming next year, is evidence of the extreme seriousness of the situation. Although its efforts at saving the ANC from itself appear to have been to little avail, at least Finance Minister Ernest Godongwana will later be able to say, “I told you so…” ___STEADY_PAYWALL___

The report, which was preceded by the Treasury informing the provinces last week that no new spending would be countenanced in next year’s financial allocation, put on the table the necessity of swingeing cuts to government expenditure. Among the options were cutting more than 100 state programmes and the amalgamation of half a dozen ministries, a freeze on new public service jobs, stopping procurement contracts for all infrastructure projects, and again reneging on promised civil service salary increases.

While the detail of what might occur is what is driving the reaction to the analysis, with all affected loudly arguing the critical and sacrosanct nature of their toiling, they’re missing the most important aspects of what Godongwana and his team are saying — that it’s crunch time. Action can no longer be deferred, the options have narrowed; there is going to be wailing and gnashing of teeth, with blood on the floor.

There are no easy choices and none is particularly palatable. Treasury pointed out that just to sustain the R350 a month Social Relief of Distress Grant (SRD) into the next financial year would necessitate picking from a smorgasbord of budgetary pain elsewhere — a 2% VAT increase, the shutting down or major cutbacks in programmes such as visible policing, public works, or the Mine Health and Safety Inspectorate.

Treasury is not overstating the perils. All the statistical indicators are flashing red.

Tax collection is flagging, down R22 billion on budgetary estimates in the first five months of this financial year, but the head of the revenue service has warned that further tax increases would be counterproductive. 

Tighter financial conditions have made it difficult to borrow more and at affordable rates. Foreign investors are staying away despite the attraction of a depreciating rand. Local investors are shunning government bonds.

Speaking at a conference this week Godongwana said there was “tremendous strain” on the government’s financial resources to address its service delivery priorities. “Continued load shedding, the poor performance of our logistics sectors, and the lasting damage done by state capture to our institutions, have made the difficult fiscal situation even more challenging.”

For a short while, it seemed that Ramaphosa was behind this new dawning of reality. Last week the Presidency said that “unsustainable public debt levels”, including low growth rates, were forcing Ramaphosa to consider cutting the government's size to stabilise the economy. The howls of protest from within his party, however, may yet dissuade our conflict-adverse president, who reportedly has told the Treasury to rework its numbers to deliver a happier solution.

Then came the backlash. At a virtual meeting with Ramaphosa, one union federation leader said that the Treasury’s analysis spread “much panic” in its membership and added threateningly that it created “the risk of anarchy”.

On Wednesday, ANC’s economic transformation head Mmamoloko Kubayi, who is also the Minister of Human Settlements, came with the most important response, suggesting that the Treasury was constitutionally out of line. It was “attempting to usurp” Ramaphosa’s powers and had failed to consult properly with the party. “On something like this, the mandate of government is that of the ANC.” 

She then lashed the Treasury for its “lack of innovation”, presenting a “used template” and not doing “proper modelling.” Consequently, the analysis “wouldn’t even plug any holes … it was a popularity letter”, she said.

The subtext here is a none-to-subtle warning to Ramaphosa. The party is in control and unless you co-operate, you may find yourself fired. 

There are already signs of retreat. Godongwana told Parliament the same day that the government did not intend to cut spending on infrastructure and social services. The government had “no intention of having a negative impact” on social services. There was also “absolutely no rational” basis for fears that existing infrastructure investments would be curtailed. The Treasury also excluded Transnet and Eskom from its cost-containment proposals.

What the denouncers of the Treasury — the slurs are coming thick and fast, with “neoliberal” vying with “out of touch” and “insane” for the most stinging insult from the Left — are also missing is that if a determined effort is not made to right the economic ship in November’s Medium-Term Budget Statement, the pain is going to be even greater by the time that Budget Speech is delivered in February next year, perilously close to the election.

There are few signs that the ANC leadership comprehends this. Or if it does, that it is willing to do what is necessary.

The party is in survival mode — more accurately, close to panic mode — and will do everything and anything, whatever the cost to South Africa, to placate its supporters. The party’s Youth League has since resolved at its 79th-anniversary celebrations that never mind continuing to pay the SRD, the government should at once implement a monthly Basic Income Grant of R1,500. 

Like any malignancy requiring treatment, the longer the delay, the grimmer the prospects. The ANC needs to seize the nettle outlined by the National Treasury but its deeply rooted instinct for expediency makes it impossible to do so. 

And just like Mars, the ANC is a planet hostile to any form of intelligent life. Ask the Treasury.

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