JABULANI SIKHAKHANE: SA in the dark over what trade-offs it needs to make

There are times when a leader must depart from tradition to deal with the most pressing issue facing a nation. In SA that time was last week.  

President Cyril Ramaphosa should have put aside the traditional approach to the state of the nation address and placed before the nation the detail of the difficult trade-offs that must be made to fix government finances and cushion the most vulnerable citizens. These are the two most pressing issues facing SA today.

Instead, those difficult trade-offs were laid out in an article by Michael Sachs, an adjunct professor of economics at the University of the Witwatersrand (“Political courage is crucial ingredient in income support”, February 9). Sachs is the former deputy director-general at the National Treasury responsible for the budget office.

What’s clear from Sachs’ article is that SA faces a clash between social and economic (fiscal) policy. It’s a clash whose resolution — and that resolution must come from politics — requires South Africans to agree on the trade-offs. Without such an agreement, the trade-offs made will have serious economic and political consequences for the country’s future.

But for such an agreement to be reached South Africans must understand what trade-offs and sacrifices they are being called upon to make. In that regard, Ramaphosa missed a golden opportunity last week to spell it out to the nation. Rather, he stuck to the traditional formula for a state of the nation address, adding a bit of ice-cream here and there.

It was a missed opportunity because the state of the nation address is the most important date the president has with South Africans. It sets the political and economic agenda and tone for the government as well as the nation. Given SA’s economic circumstances, agreement on the difficult trade-offs to be made must surely be the single most important issue on the Ramaphosa agenda.

The state of the nation address would have been a perfect moment for him. He did refer to trade-offs and the need for consensus on these, saying the social partners had begun discussions on the trade-offs and “what contribution we will each need to make”. He added that SA needed a new consensus “born out of a common understanding of our current challenging situation and a recognition of the need to address the challenges of unemployment, poverty and inequality”.

It is precisely because of the need for a common understanding of the challenges facing the country that Ramaphosa should have used his most high-profile address to the nation to place before it what the trade-offs are and what they mean for each of the social partners: the government, business, labour and communities.

Sachs set out these trade-offs, pointing out that mass unemployment has been a feature of SA for 25 years. It is therefore not unreasonable to assume that it will remain a permanent feature in this country. He is doubtful of SA’s ability to successfully implement a programme to change the structural foundations of inequality and economic stagnation.

“It seems sensible, therefore, to design social policy on the assumption that a large share of workers will remain permanently excluded from formal employment ... As social policy it is a compelling argument. But does it make economic sense?”

A permanent social grant will add to SA’s fiscal burden, leading to high interest rates on government debt, which will crowd out social spending.

Sachs sees value in income support for the poor and unemployed, describing it as “a new element of SA’s fiscal constitution, a contract on which sustainability of democracy depends”. But this will require sacrifices (through higher taxes) by the wealthy and the employed.

To get there, as Sachs explains, requires acceptance by the government that providing basic income support to the unemployed is not a question of the government “being generous”, because the money will come from taxpayers. It’s taxpayers “the president should be calling upon to be generous, while explaining clearly why he believes it is necessary that they pay higher taxes”.

Ramaphosa did none of that in his state of the nation address. American political scientist Harold Lasswell’s definition of politics suggests that Ramaphosa should have done so. Lasswell defined politics as who gets what, when and how.

SA’s success in getting its social and economic policy ducks in a row — the sequence of who benefits, when and how — will determine the sustainability of our democracy.

• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.