There are two broad opposing schools of thought in SA about the country’s future: one patient and sanguine, the other mistrustful and deeply concerned.
Moody’s is in the first camp, along with Old Mutual Group economist Johann Els and other optimists. They believe the worst is behind us and confidence and growth will rebound convincingly after the 2019 election when President Cyril Ramaphosa is finally able to be his own man.
I am in the second camp with the sceptics and worriers. We fear that growth is more likely to remain at low levels even after the 2019 election, despite a temporary rebound if Ramaphosa achieves a solid victory for the ANC.
The first group believes SA is heading in the right direction. Since growth is bound to recover, Moody’s believes SA remains broadly on track to meeting its medium-term fiscal consolidation targets, despite the fiscal slippage it will incur in 2018-19. Els says SA has reached "peak pessimism" with regard to growth and bad policy and though it’s going to take years to fix SA’s problems, "the situation can’t get sustainably worse than it is now".
External factors don’t explain a decade of low growth. SA suffers from deep-seated structural rigidities and inefficiencies that manifest as low growth and high unemployment. This makes for a toxic cocktail when coupled with stark inequality, state incapacity and high crime levels.
The second group thinks things could definitely get worse. For starters, the fiscal implications of the economy’s inability to grow are becoming alarming. SA’s programme of spending is based on economic growth forecasts that have undershot for almost 10 years in a row. If SA doesn’t find a way to maintain robust economic growth to expand the tax base, it will not be fiscally sustainable. Austerity then becomes the only option, even though this would harm service delivery, which could fuel social instability.
The pessimists concede that SA has probably exited the recession already. They also understand that some of SA’s weakness is due to factors beyond its control, like the drought, the emerging-markets mini-crisis, global trade tension, US policy tightening and higher oil prices.
But external factors don’t explain a decade of low growth. SA suffers from deep-seated structural rigidities and inefficiencies that manifest as low growth and high unemployment. This makes for a toxic cocktail when coupled with stark inequality, state incapacity and high crime levels.
This group is particularly unnerved by the nasty populist streak in the ANC because it continues to make it almost impossible for the government to undertake pro-growth structural reforms, especially to BEE and the labour market. It is depressed by the populist drift in policy, as evidenced by Ramaphosa’s stance on land expropriation without compensation. It fears that no matter how he might try to finesse the issue, the ANC has lit a fuse it cannot control in promising that free land will create jobs and prosperity.
When the policy fails to live up to the hype and the real land invasions start, will Ramaphosa really send in the riot police? Will the ANC be willing to risk another Marikana?
What about the other unpopular trade-offs that may be required to return SA to health, like lowering the new national minimum wage if it results in significant job shedding?
The sceptics have a hard time believing that an ANC government is ever going to make the hard choices required. Nor does it seem probable that a party so mistrustful of business will fully embrace the private sector as its development partner and the engine of growth. If not, SA can expect to muddle along with low growth rates indefinitely. Per capita incomes will stagnate; fiscal and social pressures will rise.
The doomsayers want to be proved wrong. They have just stopped believing that they will be.
• Bisseker is Financial Mail assistant editor.
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