Click on the website of the Presidential Infrastructure Co-ordinating Commission, the inter-ministerial committee that oversees the government’s vast infrastructure spend, and you’ll be greeted by the warm but always fatal grin of one Jacob Zuma. The website, nominally under the control of the department of economic development, has not been updated since late 2016.
Zuma’s welcoming note to the site says, in part: "In SA joblessness is still unacceptably high even with recent growth in jobs numbers. Global economic prospects remain fragile. In response, the government of the Republic of South Africa has taken a bold decision. We have chosen a path of counter-cyclical spending driven by catalytic infrastructure investment. We are striking a fine balance between protecting our sovereign integrity while leveraging the multiplier impact of fixed capital formation."
Ramaphosa is in a tight spot. He has a jobs summit and an investment summit coming up and his finance minister has to present a mini-budget. And none of the numbers look right.
Ah, the good old counter-cyclical days, eh Mr President? I’d advise economic development minister Ebrahim Patel to update the site or take it down. We have gone ex-cyclical. We are no longer in the cycle. Largely because of you, as it happens, but you’ll soon be telling your economic policy story to a judge, so we have something to look forward to.
Around the rest of the world, the cycle looks quite healthy, Donald Trump’s efforts to ignite a populist trade war with China notwithstanding. We spun out of the cycle when, under Zuma, the ANC stopped running the country and concentrated on infighting, looting, appeasing the Guptas and complaining about the nightmare state we’re in.
Now President Cyril Ramaphosa has plans to present a new fiscal stimulus plan, which, according to my well-informed colleague Carol Paton, will see the creation of an infrastructure fund run out of the president’s office. I’m sure he doesn’t mean any sleight to Patel, but the fund would need to attract capital from the private sector, which is not always enthusiastic about Patel.
Ramaphosa is in a tight spot. He has a jobs summit and an investment summit coming up and his finance minister has to present a mini-budget. And none of the numbers look right.
We are in a recession, unemployment continues to grow, the rand is weak and inflationary pressures are growing. Worse, the economists Ramaphosa (rightly) takes seriously would also argue that our problems are not cyclical (see above) but structural.
Our economy has been so badly disfigured by the ANC and Zuma that pouring more money into it won’t work. Primarily, the state is too big. Under Zuma the number of civil servants grew over 50%. We now borrow money to pay their salaries.
His other problem is that we have promised the international ratings agencies that we will cut our fiscal deficit. But how does Ramaphosa provide a stimulus if he has no new money and is committed to actually cutting public spending?
The only possible answer is that he will have to find it outside of the state. That means either private sector capital at home, or from other countries, or from the IMF or World Bank.
Oh, yes, and he has to have a plan. How will his stimulus stimulate? How many jobs can he create? We will know it all in a few weeks; some of it in days.
He might as well go big. To get back into the counter-cyclical swing Zuma thought he was in we simply have to borrow more and spend it. But this time spend doesn’t mean steal. Private sector co-management of any spending we do under a stimulus plan is vital. If we borrow from the IMF or the World Bank, or China, the ratings agencies will fall into line if the plan makes sense.
And there’s nothing unconventional about a stimulus provided it fixes what is wrong and breaks new ground. John Keynes would approve. Here that would mean, for instance, partly privatising some costly state assets, and job losses, while leveraging R370bn of promised Chinese investment to create jobs.
In other words, save our money and use promised investment from China and the Middle East to compensate for the job cuts that have to happen at Eskom, Transnet and, say, SAA. Hell if the Chinese are mad enough to want to occupy an entire 60km² special economic zone in Limpopo and stuff a 4,600MW coal-fired power plant into it, a 5-million ton-a-year integrated steel plant and a sizeable new town, why would we complain? It’s their money and their bet. I would not even whinge about coal-fired power. We’re in trouble here, people.
Ramaphosa is about as good as it’s going to get, and if he needs another coal-fired power station to stay in office, I say give it to him. It would at least get Luddite unions angry about coal jobs being lost to renewable energy off his back.
Whatever plan he presents, it’ll be imperfect. Try not to complain too much though. We know what it feels like to not have a plan. That’s what it feels like today. Remember how different the ANC vote last December could have been. And count your lucky stars.
• Bruce is a former editor of Business Day and the Financial Mail.
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