If President Cyril Ramaphosa had proper advisers they would tell him the ANC can get more than 50% of the votes in the 2024 national elections if it changes its failed economic policies. During the 2021 local government elections the ANC lost 2.7-million votes when compared with the 2016 elections. But none of these votes went to its two largest competitors.
The DA lost 1.5-million votes, while the EFF retained 1.2-million votes. Many ANC supporters stayed at home. They wanted to support the party, but its dismal record on the economy and governance made it impossible for them to do so.
A year after the local government elections Ramaphosa is taking the ANC on a suicide mission that will again make it impossible for people to support it in 2024. Two recent polls show that it will get between 38% and 42% of the national vote if the elections were held now.
The part I do not understand is how a party that has a vested interest in staying in power would not develop a plan to revive the economy. The ANC has just had a policy conference that did not discuss economic policy. It is so committed to its failed economic policies that it is prepared to throw the next election.
Unemployment, poverty and inequality are macroeconomic policy issues we cannot tackle through structural (or microeconomic) reforms or projects. If I were the adviser I would tell Ramaphosa that the three most important macroeconomic policy tools that can turn the economy around before the 2024 national elections are the energy availability factor (EAF) and fiscal and monetary policies. A low EAF, austerity policies and rising interest rates will guarantee a national vote of less than 50%.
Eskom should get an award for SA’s best ever propaganda campaign. The company has convinced the government and the public that there is a generation capacity shortage of 4,000MW-6,000MW. It blames everyone else for the shortfall. But Eskom itself has created the “shortage”. Due to unprecedented plant breakdowns, the EAF has collapsed from 78% during the 2018 financial year to 57% in April 2022. If Eskom had an EAF of just 75% there would be no shortage.
Ramaphosa’s recently announced energy plan did not properly deal with this issue. It provided gimmicks such as purchases from the Southern African Power Pool and rooftop solar, which will add very little new capacity in the short term. There is zero chance of connecting new capacity from independent power producers to the grid before the national election.
The short-term solution to the power crisis is to replace the Eskom board and CEO and get engineering specialists to fix the plant breakdowns. For the past four years Ramaphosa has been talking about a social compact to revive the economy. But the government’s proposed social compact — a 32-page document — is a disgrace that does not have a single macroeconomic target or policy tool.
According to Economics 101 the economy cannot grow while the Treasury is cutting government spending and the Reserve Bank is increasing interest rates. The proposed structural reforms add up to precious little new investment in the economy.
That is why forecasts show the economy will grow only 1.5% a year between 2022 and 2026. A social compact should have a GDP growth target of 6% that is binding on the Treasury and the Reserve Bank. If it blends consumption and investment spending there could be a fiscal multiplier of 1.5.
The government would need to spend an additional 3% of GDP —about R180bn — during the first year to cover the shortfall between the growth target and the forecasts. What is the alternative?
For the economy to recover, there must be an end to austerity and interest rate hikes that are pointless in the face of a supply-side shock, and will only reduce demand and increase spare capacity in the economy.
• Gqubule is research associate at the Social Policy Initiative.
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