Ramaphosa should forget the consensus and push on with fixing the economy

By some measure, this year’s South Africa elections are likely to be the most populist so far, and that doesn’t augur well for the country and its prospects of improving on what was a dismal year on the economic front.

The general consensus would seem to be that we shouldn’t expect much until the elections, which should take place in May but in theory could be held as late as August.

In terms of the constitution, the National Assembly and provincial legislatures finish their current terms on May 6 and new polls must be held within 90 days after that.

President Cyril Ramaphosa has indicated that he intends to proclaim elections before the end of May, and most people are working on the assumption that they will be held that month, which makes sense for a number of practical reasons, not least the weather. It’s in all the parties’ interests that the participation rate is as high as possible, and asking voters to come out in winter would be counterproductive.

If we assume that the elections are held in the middle of May, that’ll be more than five months into 2019. That’s a lot of time to waste — that is, if the idea the government should remain paralysed until then is allowed to take hold.

And the problems are not small. To recap: after contracting by 2.6% and 0.4% in the first two quarters of 2018, meaning the country slipped into its first recession since the global financial crisis a decade ago, growth for the full year is likely to be pedestrian at less than 1%. That dismal performance meant the unemployment rate continued to rise, climbing to 27.5%.

While the economy returned to growth in the third quarter, it wasn’t all rosy, as demonstrated by the 5.1% drop in gross capital formation, reflecting declining levels of investment in physical assets such as machinery and buildings. The role of capital formation in boosting economic development, productivity and general welfare is undisputed and it’s hard to imagine how we escape our low-growth, high-unemployment trap if we don’t get economic actors to start investing.

After some relief during the Christmas period, South Africans will again be reminded about how far removed the nation’s biggest state-owned company is from its stated role. Rather than being a driver for growth and development, Eskom is better described as an albatross, killing industry with astronomical price increases and an unreliable supply of energy.

It’s most likely that load shedding will return next week and may well be worse than we were led to believe at the end of 2018.

Eskom’s debts of more than R400bn are by far the biggest risk to the sustainability of the country’s finances, and failure to deal with this will likely bring us closer to losing the last investment-grade rating we have, which may lead to a painful increase in the government’s interest bill. And that, we should always remember, means more money going to bondholders instead of fixing our broken schools and hospitals.

And then next month, finance minister Tito Mboweni will probably have to decide how much of taxpayers’ money he will throw at SAA. Late in 2018, its executives told MPs the airline needed about R17bn in government bailouts or refinancing from banks by March in order to stay afloat. Mboweni’s idea of closing it down seems to be off the table.

There are big problems everywhere you look, which makes it odd to hear that the electorate apparently has no appetite for solutions. Are we then really supposed to act as if we don’t have a government for the next four months?

We can only hope Ramaphosa hasn’t fallen for this flawed thinking. He may not have an electoral mandate yet, but his personal approval ratings and surveys showing greater support for the ANC since he took over would indicate that most of the country is behind his reform agenda and does want to see change, which was needed yesterday. – Business Day

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