Last week Japanese Prime Minister Yoshihide Suga said he would step down (not aside) — allegedly because he had failed to control Covid-19.
In SA, as I watched President Cyril Ramaphosa answer questions in parliament it became clear that nobody understood the scale of the country’s public health, humanitarian and economic crisis.
At the time of writing, Japan, which has double SA’s population, has had 16,369 deaths. This was 19.6% of SA deaths of 83,419. Japan has fully vaccinated 47.2% of its population. SA has fully vaccinated only 10.8% of its population. SA’s humanitarian crisis saw 10-million people and 3-million children go hungry during April and May 2021, according to the national income dynamics study coronavirus rapid mobile survey.
According to Statistics SA there were 11.9-million unemployed people during the second quarter of 2021. The economy has created 173,000 jobs since December 2008, while the labour force increased by 6.1-million people. The number of unemployed has soared by 6-million over the period.
We now have unemployment rates of 74.8% for youth, 48.7% for black Africans, 53.2% for black African females, 53% in the Eastern Cape, 50.3% in the Northern Cape and 49.9% in Limpopo. But Ramaphosa will not be stepping down.
In parliament, the president misled the nation when he said the government had implemented a R500bn stimulus package, which was allegedly one of the largest in the world. According to my calculation, the real stimulus was R123.5bn or 2.5% of GDP. By comparison, world stimulus packages totalled $16-trillion, equivalent to 17% of world GDP.
The government’s lame structural reforms do not add up to an economic recovery plan, especially because its own infrastructure fund, which was announced in 2018, has underspent and not taken off. SA has an investment ratio of 14.2% of GDP. The annual shortfall to achieve the 30% target in the National Development Plan is almost R900bn.
The planned liberalisation at Eskom is only expected to generate investment of R25bn a year for three years. Transnet’s reforms are expected to attract private-sector investment of only R10bn a year over a decade. If successful, both reforms will add less than 0.6 of a percentage point to GDP a year for three years, and close only 4% of the annual investment shortfall.
After the revision of GDP statistics there is no reason not to dump austerity and have a proper stimulus package. At the end of March the government had gross loan debt of R3.9-trillion, equivalent to 71.3% of GDP. After subtracting cash balances of R333.9bn, the government had a net loan debt of R3.6-trillion, equivalent to 65.2% of GDP. Within the context of a post-pandemic economy there is no universe in which SA has a high debt ratio, even when benchmarked against many upper middle-income countries.
In his address to the ANC lekgotla at the weekend Ramaphosa said: “With the onset of the Covid-19 pandemic there has been significant shifts in global economic policy trends that we can learn from. In several advanced countries there has been a shift from a conservative, neoliberal approach towards the encouragement of fiscal spending.”
But when finance minister Enoch Godongwana made his presentation it became clear that the more things change, the more they remain the same. There was an emphasis on fiscal stabilisation and no mention of the increased fiscal space that is now available.
After the annual meetings of the World Bank and IMF in October 2020 Financial Times’ economics editor Chris Giles wrote: “This was the week we witnessed the funeral of austerity. Those who used to worship at its altar now urge countries to throw caution to the wind.”
If SA had a credible growth story nobody would care about its short-term public debt trajectory.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.