Be careful what you wish for. RW Johnson, whose work I read just to practice writing and thinking, warned in a piece on Politicsweb last week that our fiscal collapse is imminent now, and welcomes the inevitability of it all.
“In fact, an [International Monetary Fund] bail-out will be a happy ending,” he writes. “It will bring down the curtain on a disastrous period of misgovernance and force proper structural reform to be undertaken at last.”
Parts of Twitter exploded with joy. Finally, the uncertainty, the endless doing of nothing, would end. We would have a new beginning, though not quite what Nomvula Mokonyane had in mind when she thought we could collapse the rand and start from scratch.
No-one should want the IMF in here. Cost cuts and labour market reforms are just the beginning of a restructuring. The political effect is frightening. The current government is immediately replaced by its own party and then, as austerity bites and the years of survival pass, the ANC shrivels and the EFF grows. An IMF bailout 100% fuels populism.
In Argentina, they are in a second IMF bailout in two decades. The result of the first was rule by the nutty Kirchner family, first Nestor and then his wife Christina. Things under her got so bad it was illegal to report the true rate of inflation. She lost an election to a businessman, Mauricio Macri, but he has got into trouble and guess what? The smart money is on Christina replacing him.
Is this really what the ANC and its trade union allies want? Have they absolutely no ability to see the reality that we face? If Moody’s downgrades us to junk in November, a whole range of investors legally have to withdraw from SA. That means we have to sell government bonds at lower prices and, consequently, higher interest rates. We already borrow just to pay salaries.
And what on earth are President Cyril Ramaphosa and his close circle of ministers (Pravin Gordhan, Ebrahim Patel) doing about it? An anxious country has adopted the foetal position and is under the table, waiting. Under Jacob Zuma we had an economic illiterate running the country. Ramaphosa can count, but the results (sans corruption) so far are the same — higher government debt and soaring unemployment. And our cancer, Eskom, R450bn in debt, is being treated with Panado. What's the plan, Mr President?
I ask because, apparently, there is a plan. More than one. But he is rooted to the spot, if not by the public protector then by the unions or the ratings agencies. Instead of bold, confident action, we have the ridiculous appointment last week of the head of the SA Institute of Chartered Accountants as head of the office of the chief restructuring officer at Eskom, whatever that is. They only started looking for a CEO last week.
You can tell by the body language that things are bad. There’s a sudden vagueness. Business is climbing the wall. When the CEO of Nedbank uses his results press conference to say “significantly more urgency is required to institute structural reforms to stem the economic and fiscal deterioration currently being experienced in the SA economy”, you know that inside he is absolutely screaming at Ramaphosa to do something. Business could fix our finances in a week if the ANC got out of the way.
And that obviously is the problem. Ramaphosa and Gordhan et al are hemmed in. They have a debt restructuring plan, except no-one knows what it is, and especially whether the unions and the ratings agencies support it.
Gordhan has spent five years trying to stop this country from being downgraded. Is it all to be in vain? Do he and Ramaphosa have anything in the tank that Moody’s might regard as ratings positive? We are on Moody’s lowest investment grade, but still with a stable outlook. Normally we’d have an outlook downgrade before a full-on ratings fall.
We’d be lucky if Moody’s stuck to tradition, though it doesn’t have to. Perhaps Gordhan will win his interdict of the public protector’s proposed actions against him in the SA Revenue Service “rogue unit” saga when judgment is delivered today. That would put a spring in his step. He knows he blew the Eskom CRO appointment.
And he must come up with a positive deal for the unions, who understandably want a “just transition” from Eskom coal to green energy. Make them rich. Start a major project to clean up coal mining’s environmental mess. Give the mining unions the entirety of the coal mining industry’s slurry. Briquetted, there’s enough to supply Eskom for 20 years at a fraction of the cost of coal still being mined. Briquetted slurry works and I’ve seen evidence that Eskom says it works.
Use mine rehabilitation funds as working capital for union-owned slurry clearance and briquette companies, fix a price for briquetted coal with Eskom, and you have an inclusive and long-term transition that leaves mine-scarred Mpumalanga all green and bushy and ready for a new future in 2040.
Oh yes, and expropriate, without compensation, the Gupta-owned Optimum coal mine and its Richard Bay exporting rights, and give it all to the unions and communities around the mine.
Just do something.
• Bruce is a former editor of Business Day and the Financial Mail
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