Reserve Bank governor Lesetja Kganyago made two important points in a speech in late September 2022. First, that relative to the 2000s SA now has a weaker state that is spending a larger share of the country’s economic output as measured by GDP. Second, SA has earned a reputation of being good at planning and bad at implementation.
I would add a third: that the government has lost the political will and capacity to do things that are in SA’s best interests. It does things only when pushed by some foreign power. That’s bad for the credibility of public policy because it tells citizens their government chooses certain policies because of foreign pressure, not because those policies are in the best interests of the country.
It also shows an erosion of sovereignty, a term that refers to a country’s ability to exercise control over its territory and act independently in matters of international interest. This erosion of sovereignty is partly the reason the government’s argument that its stance on the Russia-Ukraine affair is based on its sovereign right is laughable.
For sure, the art of public policymaking does require that policymakers point to a country’s international obligations from time to time when they need to find a way around resistance by some vested interest.
The context to Kganyago’s speech was that SA once had the capacity to choose policy reforms and implement them. He used the Growth, Employment & Redistribution (GEAR) policy as an example of reforms that were implemented “over a relatively short timespan”, with the modernisation of the country’s macro architecture being achieved within five years.
GEAR, an economic policy that drove union federation Cosatu and the SA Communist Party mad, was implemented in response to the country’s worsening government finances. Debt was at 60% of GDP, leaving the country vulnerable to crisis.
“To the lasting credit of the democratic government, these challenges did not trigger a downward spiral. Instead, they inspired a series of reforms that modernised SA’s macroeconomic framework. These reforms steered the country through the emerging-market crises of 1998 and 2001. They then underpinned the longest period of unbroken growth in SA’s history. Finally, they created policy space for countering the global financial crisis in 2008,” Kganyago said.
My point here is not whether GEAR was the right or wrong policy choice. The point is that Nelson Mandela’s government decided that something had to be done about government finances, and it did it. Of course, there was political fallout with Cosatu and the SACP.
SA today no longer has that capacity or the political will to implement policies that are in the best interests of the country. And it shows. President Cyril Ramaphosa took office in 2018 fully aware of the devastating effect of energy shortages on the economy, yet five years later the country is worse off than it was back then.
Where there has been progress is in areas where the country has been forced to act. It took the placing of the country under increased monitoring — greylisting — by the Financial Action Task Force (FATF) to galvanise the government to revise and tighten policies concerning money-laundering and combating the financing of terrorism.
Clearly, the reduction of money-laundering and effective policing of the financing of terrorism is in the best interest of any country. A country whose financial system is used to finance terrorism or launder money places it and its citizens at a risk. Managing these ills and therefore making sure SA citizens are safe all the time is at the core of sovereignty.
But the SA government had to be told by the FATF to deal with these issues, and the government celebrated earlier this year after the task force noted progress on 67 of its recommendations to correct deficiencies.
There remain eight areas that the principal has told the schoolboy to address. These include the need for SA to demonstrate that all institutions responsible for supervising money-laundering and the combating of the financing of terrorism apply “proportionate and effective sanctions” on those who break the law. SA must address the remaining deficiencies by no later than the end of January 2025.
The country will no doubt benefit from these pressures, but the effect of all of this is to skew public policy choices and their implementation. It will mean only those matters that are subject to international pressure will get addressed, which will be a further erosion of sovereignty.
• Sikhakhane, a former spokesperson for the finance minister, the National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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