At the start of the year, economists, the Reserve Bank and the International Monetary Fund (IMF) were all predicting economic growth in SA of above 2%. In fact, growth is likely to come in below 1%, and SA surprisingly slipped into (and out of) recession during the year. Expectations were partly driven by the idea that SA has been lagging emerging-market economies in general, hence SA is bound to “catch up”.
They were also driven by “Ramaphoria”, the idea that SA is returning to a political framework that loosely coincides with modernity. Not for the first time, SA’s economists and political analysts laboured under the false notion that a reformed ANC under new leadership will naturally create a successful economy.
The miss underlined one of my pet topics of the year: a growing sense that SA’s economic watchers, both in government and outside of it, just have no idea how the actual economy works, and consequently keep pushing the wrong levers and keep being surprised when the result is not what they expect.
Just to put the miss in context, the IMF was more wrong in its growth prediction than for any other major global economy in 2018. The problem is multi-dimensional: SA’s economic growth is often correlated with commodity prices, which have less impact on SA than many expect because SA’s labour and mining laws have made the industry more or less defunct. The government focuses excessively on manufacturing, with the perverse result being that manufacturing is declining because the link between mining and manufacturing in SA is not recognised. There is more that should be obvious, but is clearly not.
The result of the continuing economic decline is that public and private finances are under strain and SA’s social problems are getting worse. SA’s overall poverty rate was dramatically declining until 2011, but since then it’s edged upwards. Investment rates have been decimated and investment by South African companies outside the country has just exploded.
The process of renewal at public institutions and state-owned enterprises continues apace, and one of the grand highlights of 2018 was new boards and/or CEOs at Eskom, Transnet, Denel, SAA, and so on. It gave hope of a return to a state of normal panic
Yet, some positive signs remain. Confidence in the ANC as a sound manager of the economy all but evaporated during the Zuma years, but aided by Ramaphosa’s well-conceived investment conference, it is slowly beginning to return. 2018 was supposed to be the year when the economy turned around; there is still a chance that SA can at least rebound to performing 50% worse than most emerging-market countries.
Ramapython — SA’s gradual institutional rebuilding
The popular news events of 2018 focused to a large degree on the gradual rebuilding of SA’s key institutions, and a kind of replay of the Truth and Reconciliation Commission, as it became apparent how our institutions had been hollowed by installing half-wits and dunces as the boss.
The surprise, in a way, is not the new approach but how long it’s taken to implement. Almost a year after it became clear that Sars was in the maw, for example, of the illicit tobacco industry, yet it’s only recently formally managed to oust former CEO Tom Moyane. Yet Ramaphosa has been content to proceed with the reforms in a slow and steady way, gradually suffocating his opponents.
However, progress has been uneven with, perhaps the best example being the SABC, which, like many other institutions, was run by a clown who did permanent damage to an already shaky organisation. After installing a new board and CEO, the government and the ministry was shocked to learn that restoring the patient to health might actually require some surgery. In order to try and halt the surgery, the ANC has pulled its apparatchiks off the board, which means it is now in limbo, and so is the surgical process. But at least SA now, also after a year, has a new head of the National Director of Public Prosecutions in Shamila Batohi.
Ramamargarine — SOEs still on the slippery slope
As noted, the process of renewal at public institutions and state-owned enterprises (SOEs) continues apace, and one of the grand highlights of 2018 was new boards and/or CEOs at Eskom, Transnet, Denel, SAA, and so on. It gave hope of a return to a state of normal panic. It’s a measure of the new standards that apply to SA that an ordinary crisis is not considered a big relief.
The problem is Eskom which is so large and whose problems are so entrenched that a mere board change is really not going to cut it. Hence, the debilitating prospect of power outages has returned. Eskom’s debt has ballooned from R387bn to R600bn over the past four years. Just to measure the scale of the disaster, R21bn in irregular expenditure announced at its recent results is two thirds of the value of Telkom. The parastatal has had 10 CEOs over the past decade.
South Africans pay four-times more for electricity than they did in 2010 and Eskom produces not one watt more of electricity. The scale of the Eskom disaster puts SA’s public finances at risk and constitutes SA’s most pressing single issue. Yet, Ramaphosa, typically slippery when it comes to difficult issues, seems happy to stay with the existing structure of Eskom and neither he nor the ANC seems particularly inclined to self-critically examine what went wrong.
Ramabuffalo — the land issue looms
Land has been the standout political issue of the year. The dynamic is beyond dangerous as it involves the EFF and the ANC engaging in a pissing contest about who is the most determined and most righteous about land reform.
In the process, the chances that political promises will be made that cannot be kept will escalate exponentially. Parliament has formally suggested that the constitution be changed to “clarify” that land can be expropriated without compensation for land-reform purposes. Ramaphosa has charged this measure through, transparently in an attempt to ensure the EFF does not have a distinguishable electoral platform to beat the ANC over the head with in the elections next year. But crucially, the dynamics of how the measure will work remain guesswork.
Ramadan — political re-alignment
Ramadan is the Islamic month of fasting and contemplation intended to bring believers closer to their God. Likewise, political parties are contemplating being brought closer to voters in the elections next year, and the political jockeying typical of these periods has already begun.
The ANC has apparently strengthened in the polls, but to me, it’s interesting not how much but how little progress the party has made. In the latest Institute of Race Relations poll, the ANC is projected to emerge with 59% of the vote; the DA 22%; and the EFF 10%, based on the most likely voter turnout of 69%.
The headline of the story suggested this was a big increase for the ANC and a calamitous decline for the EFF and the DA, based mainly on the outcome of the previous poll. This may be true, but on a longer-term outlook, that result would put the ANC below its 2014 electoral victory; the DA, in fact, unchanged; and the EFF up substantially. The big challenge now lies with the opposition parties who will have to find new ways to connect with voters.
• Cohen is Business Day senior editor.
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