Govt has run out of money

Douglas Gibson says the day we cannot pay salaries, pensions and social grants is looming

Government has run out of money

7 July 2020

“There is no such thing as ‘safe’ socialism. If it’s safe, it’s not socialism. And if it’s socialism, it’s not safe. The signposts of socialism point downhill to less freedom, less prosperity, downhill to more muddle, more failure. If we follow them to their destination, they will lead this nation into bankruptcy.”

That statement was not made about the ANC, it was made by Margaret Thatcher. But it is just as true of South Africa and the ANC as it was about the UK forty or so years ago.

An often-quoted statement by Thatcher is: “The problem with Socialism is that you eventually run out of other people’ money.”

The truth of those statements, however unfashionable Margaret Thatcher might be in certain circles, is incontrovertible. South Africa is on the point of running out of money. It is not Covid-19 that caused that; it is the ruinous policies followed by the government over the generation it has occupied the seats of power. Covid-19 has made the situation much worse but so have the corruption, the looting, the deliberate breaking or ignoring of financial laws and regulations and plain incompetent management and government at every level.

Auditor-General Kimi Makwetu, an inspired appointee and an inspiring public official, reporting on the 2018/2019 audit results (i.e. long before Covid-19), wrote as follows, “The financial statements show increasing indicators of a collapse in local government finances.” He said further that the financial health of 79% of municipalities was, at best, “concerning,” and at worst, required “urgent intervention.” Nearly a third were in a “particularly vulnerable financial position.”

To my knowledge, there has been no governmental response to the AG Report; the minister of Co-operative Governance and Traditional Affairs (COGTA), Dr Nkosazana Dlamini Zuma, has no doubt been too busy with the Pandemic to say anything about the fact that in the Western Cape (under DA governments) 45% of municipalities received clean audits, whereas in the Free State and North-West, not a single municipality had a clean audit and the other provinces under ANC control varied from 2% to a high of 11% in Mpumalanga.

The same story could be told about government departments at provincial and national level and the state-owned enterprises (SOEs). In a decade or so, South Africa has managed to turn a budget surplus and one of the lowest borrowings in the developing world into a close-to appalling budget deficit and borrowings going through the roof. During much of that period, Pravin Gordhan was the Finance Minister and President Ramaphosa was first the deputy president and then president, while the ANC enjoyed majority support in successive elections.

The president was also the head of the ANC Deployment Committee, responsible for some of the disastrous cadre deployments that saw numerous “loyalists” appointed to positions for which they were clearly unqualified.

Many financial experts and economists are dubious about the accuracy of the figures and the predictions by Finance Minister Tito Mboweni. They doubt the government has the courage to face down the “let’s spend more” brigade and the Socialists and bring expenditure under control. By carrying on borrowing, spending more than we earn and borrowing more to help us service the old debts, we will be forced to go to the International Monetary Fund (IMF) to beg for money that will be granted subject to stringent and unpalatable conditions of austerity.

The day we cannot pay salaries and pensions and social grants because the government has no money is looming.

Douglas Gibson is a former opposition chief whip and a former ambassador to Thailand. His website is: douglasgibsonsouthafrica.com

*This article first appeared in The Star.