Let us give Cyril Ramaphosa his due. At least he did not promise to "kickstart" the economy with the stimulus package he announced last month. His view that his "stimulus plan" will "ignite economic activity" is nevertheless fanciful – so much so that his supposed "long game" appears to be less that of a crafty politician than that of a man increasingly out of his depth in handling the economy.
Firstly, the plan is devoid of major policy ideas. Even the minor improvement of relaxing visa requirements has been botched by a minister who should have been fired long ago. Secondly, the only good thing about the R400 billion for infrastructure is that this spending is already in the budget, so that it will supposedly not add to the fiscal deficit.
Designating this money for a new infrastructure fund to be run out of the presidency is a re-branding gimmick that will not overcome the government's inability to spend it timeously, honestly, and efficiently. Year in and year out we have heard promises of infrastructure programmes. Most have fallen short of expectations. This is a government which cannot even meet its targets for building lavatories at schools.
In July 2015, the then deputy minister of trade and industry, Mzwandile Masina, promised that emerging black industrialists would play a key role in a R5 trillion infrastructure programme. In November 2016, the then secretary general of the African National Congress (ANC), Gwede Mantashe, announced a "massive" infrastructure programme that would "turn South Africa into a construction site". In July last year, the ANC's treasurer general, Zweli Mkhize, said the government was ready to invest R3 trillion in infrastructure, although only when the construction sector had been "transformed".
Well, the construction sector has been "transformed". Several major companies, citing the paucity of government infrastructure projects, are in liquidation or business rescue. Others, also blaming some of their problems on the dearth of such projects, have long since decided to seek new opportunities elsewhere – like the mining companies before them. Among those complaining at the lack of government work are a big black company. And, of course, when the government does hand out work, it often fails to pay.
Using figures published by the National Treasury, the Institute of Race Relations (IRR) has kept track of some of the spending shortfalls. In 2011/2012, for example, R290 billion was budgeted for public sector infrastructure, but the amount actually spent was R208 billion – – only around 72%.
As government current expenditure has spiralled out of control, spending on infrastructure has suffered. The R290 billion budgeted for 2011/2012 was 9.8% of GDP, whereas the R286 billion budgeted for 2020/2021 – a big drop in real terms – is only 4.9% of expected GDP.
Six years ago, the National Development Plan said public infrastructure was "crumbling" and that the plan might fail "because the state is incapable of implementing it". Since then, the state's capacities have dwindled further. Although Mr Ramaphosa has started to stem some of the rot in state-owned enterprises (SOEs), he has done nothing to tackle other major causes of state failure, among them cadre deployment and racial targeting.
Over the next three years, according to the 2018 budget, municipalities will be responsible for the largest single slice of government spending (excluding SOEs). Yet a few months ago, the government reported that 62% of municipalities were almost or completely dysfunctional. Last month the finance minister, Nhlanhla Nene, produced figures which showed that fewer than half of municipal accounting and financial officers met minimum competency requirements. Only about a fifth of municipalities have engineers at the head of their technical divisions.
Now in office as president for nearly eight months, Mr Ramaphosa has had ample time to show that he understands the depth of the economic crisis facing the country and that he also understands what needs to be done about it. Yet his only major policy announcement has been that he intends to expropriate land without compensation. The main beneficiaries of this, as a recent IRR opinion survey showed, are the Economic Freedom Fighters. Mr Ramaphosa is failing politically as well as economically.
* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom. If you agree with what you have just read then click here or SMS your name to 32823.