President Cyril Ramaphosa did the optics well last week at COP27. He looked at ease as he made small talk with John Kerry, Rishi Sunak, Emmanuel Macron and Ursula von der Leyen during a Just Energy Transition Investment Plan (JET-IP) meeting in Sharm El-Sheikh, but his bonhomie with Western leaders isn’t the show of strength he would like us to think it is.
The reality of their dynamic was more apparent in the terms laid out in the sovereign loans made by the French and German public development banks announced two days later. In a carefully worded media release the National Treasury highlighted how “highly concessionary” the €300m of climate-linked loans are, possibly hoping no-one would notice that the loans are also “non-earmarked budget financing” that will be “transferred directly into the National Revenue Fund”.
I’m sorry to pour cold water on all the excitement, but there are two things that bug me. Firstly, a loan is a loan. It needs to be paid back with interest, and the interest must, at a minimum, be paid off by the upside in growth and development that results from the economic activity the loans generate. Perhaps these loans will do that, but I remain sceptical.
SA taxpayers already have to pay R311bn to service interest on sovereign debt this fiscal year. This number has ballooned over the past decade since the Zuma administration used the country’s credit card to buy bread and pay the school fees, all the while looting the capital investment projects that were meant to kickstart growth. What was looted should have been spent on sorting out our energy crisis, fixing our ports, roads and rail operations, and addressing various municipal failings that drag on businesses the country over. Then came Covid.
Anyhow, that money has gone and very little has been fixed. This has resulted in several outcomes: our credit record has been pummelled, we have a burgeoning debt-servicing bill that taxpayers are unable to afford, and we still have to spend billions on much-needed basic infrastructure.
This ill-discipline has resulted in a dramatic loss of fiscal elbow room, which is reflected in our politics. It will be interesting to see whether the ANC has the courage to even broach these topics at its December elective conference. The fact that the ANC national executive committee meeting this weekend was dominated by discussions about wads of cash and their provenance, it would seem they are too distracted to focus.
It is obvious to anyone who casts their eyes over the Treasury’s documents that a useful way to stretch scarce rands would be to eke out an iota of efficiency from our public service. Debt servicing and personnel costs add up to just shy of a R1-trillion of this year’s R2.16-trillion budget. However, the concept of public service efficiency is political, because it would require those deployed into positions for political expediency to be held accountable for their operational output, as opposed to their political loyalty.
That said, the government has started to show some stomach for this fight. Employment & labour minister Thulas Nxesi’s hard line on the 3% across-the-board cost-of-living wage hike for public servants may, as this newspaper argued last week, be a blunt tool. But it is certainly a necessary and laudable approach. The question is, will he be able to hold this line when there are unpalatable political consequences?
The second thing that bugs me is that we must accept that being given access to cheapish money is a part of a geopolitical power play by Western nations at a time when China is looking inward and Iran and Russia appear to be in the throes of self-immolation. Concessionary loans come with other costs, and the National Treasury may have disclosed the fiscal terms of the new loans and just energy transition loans, but it hasn’t been so keen to discuss other conditions attached.
Regrettably, we have opted to kick the hard work down the road, so that option is increasingly too expensive to contemplate.
As reasonable as these conditions may be, they are conditions imposed by the lender over and above just repaying the debt. This can be interpreted as an erosion of some degree of sovereignty, whereas money raised in international capital markets typically comes with only one condition: pay it back with interest.
Of course, if we could just get control of the finances and a handle on the personnel costs and graft, we’d not be clutching the begging bowl for sovereign cash at climate conferences. Any number of private balance sheets would be open for a country like ours, and pension funds the world over climb into ESG-friendly renewables projects.
Regrettably, we have opted to kick the hard work down the road, so that option is increasingly too expensive to contemplate. In light of this, it’s hard not to see the ANC national executive committee’s discussions this weekend about Phala-Phala, Ramaphosa versus Zweli Mkhize and the to-and-fro about who will be secretary-general and who will be treasurer, as being parochial to a point beyond satire.
Increasingly, our problems are post-political and as a result are drifting out of our hands. External forces — like our debt — mean the government has little choice but to address an inefficient public service that also serves as a client electorate of more than 1-million people. We cannot afford it, but the ANC cannot afford to alienate it. How it plans to win that battle for efficiency — for win it it must — without alienating a key constituency, and without incrementally handing over policy direction to foreign capital, will be interesting to watch.
It’s the real issue this December, but it doesn’t seem like anyone has noticed. The ANC doesn’t have long to make a plan before the electorate does it for it.
• Parker is Business Day editor-in-chief.
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