May 29 saw South Africans participate in our most important election since 1994. As DA leader – John Steenhuisen – put it, all bets were off.
South Africa is grappling with a myriad of significant challenges, each posing a threat to our nation’s stability. From the Unemployment Crisis to the Energy Crisis and the Logistics Crisis, our ailing economy is teetering dangerously close to the edge of a significant calamity, as pointed out by many global observers.
There are promises of economic reform on the horizon. I recently read an article published on News24 which details what economists want following the election.
Fiscal prudence and regulatory certainty
The article points out that, as ETM Analytics said, first under the Jacob Zuma presidency and then under subsequent administrations, the ruling ANC has presided over “a steady decay in infrastructure, rise in debt, explosion of corruption, maladministration and an uncomfortably bloated civil service”.
In light of this, Sanisha Packirisamy, Economist at Momentum Investments, said the team wanted to see improved fiscal prudence to ensure that monetary policy doesn’t have to carry a heavier burden to rein in inflationary pressures and clarity in the regulatory environment with the passing of the outstanding legislation that’s hampering water and logistics reforms.
The article adds that Investec’s wish list is similar. It wants a continuation of key reforms, particularly in the energy and logistics segments, an increase in private-sector collaboration and the further reduction of red tape to improve the ease of doing business in South Africa so as to attract foreign investment.
Safe hands
The article points out that One thing that is known is that the SA Reserve Bank governor and his key staff all had five-year contracts put in place earlier this year, meaning that the central bank should remain in safe and experienced hands. But ministers in the finance and trade departments could change.
As Van der Linde said, “a steady hand at Treasury is non-negotiable.”
The article adds that he’d also like to see less rent-seeking in the form of abusive tender profiteering. But much as there are actions that would be good for the SA economy, there are also those that would be detrimental both in the run-up to the election and after.
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Lurking dangers
“The danger now is that political parties, most notably the ANC, will announce some measures out of desperation to try to secure more votes,” ETM Analytics said. “The announcement of the NHI was one such attempt, while the second was the announcement that an ANC government would aim to implement a Basic Income Grant within two years. It appears as though many ANC voters are undecided, and the ANC is trying to find reasons to sway them back.”
The article points out that what we don’t want to see are fiscal spending promises without a permanent revenue stream to fund these, according to Packirisamy. What we need instead is a reduction in the noise around business-unfriendly policy options, including prescribed assets, and a renewal of the contract for Operation Vulindlela with an expansion in the areas targeted for reform, she said.
Operation Vulindlela was announced in 2020 and is a joint initiative of the Presidency and National Treasury. Its aim was to accelerate the implementation of structural reforms and support economic recovery by modernising and transforming network industries, including electricity, water, transport and digital communications.
The article adds that, since 2020, those so-called network industries have all faltered. Eskom’s load-shedding reached record levels in 2022 and again in 2023, Transnet’s services slowed to a crawl, Johannesburg’s taps ran dry and apart from suffering breaks in undersea cables, satellite internet provider Starlink plans to cut off users because it can’t get a licence in South Africa.
Nonetheless, the government recently held a briefing to tell the public it had made “significant progress” on Operation Vulindlela.
Create jobs and grow the tax base
That programme aside, and countless others too in the past 30 years, what SA really doesn’t need are any policies that could reverse or disrupt progress that has been achieved so far – that would be highly unfavourable for the economy, Investec said.
It added that policies that drive sustainable growth and, in turn, job creation are essential.
The article pointed out that unemployment has only worsened in the past five years, narrowing down the number of people the government can tax and increasing the number of those needing social grants to survive.
“Doing the basics of running an economy is now paramount, and it is the one thing the ANC-led government has lacked for well over a decade,” ETM Analytics said. “It is in everyone’s interest that the government grow the tax base, raising economic growth and dynamism, and thereby raising the tax intake.”
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The article adds that, instead, ETM Analytics said that the ANC appears to be doubling down and pushing even harder in the same direction when it has become clear that the solution is for greater inclusion of the private sector, which is taking place with electricity production, the ports, and Transnet.
The lack of service delivery in many regions, the highest interest rates in 15 years, sticky inflation, the rise in unemployment and the almost stagnant economy have been difficult to bear for most people in SA.
The article points out that, as Oxford Economics points out, the past two years or so have been a particularly trying period for SA. It started with impeachment calls against President Cyril Ramaphosa in 2022, followed by the US accusing SA of supplying arms to Russia in 2023. “Heightened fears of a total grid collapse, disappointing economic growth together with South Africa’s debilitated fiscal position have exacerbated the situation, culminating in a protracted period of domestic uncertainty,” Van der Linde said.
Clinging to hope
The ANC has lost significant ground in this election. And when the rot starts to set in, any wrong foot will cost them dearly in future elections.
Hopefully, this is the precursor for President Ramaphosa to put his foot down and take a no-nonsense approach to implementing significant economic reform. Due to internal politics, Ramaphosa has been hamstrung when implementing reformist policies. However, when all cards are on the table, and the country’s future is seriously on the line, surely sense will prevail, and the ANC will put internal politics aside.
However, we have been in this position for some time, and this has yet to transpire.
We live in interesting times.
