Another year, another IMF report extolling SA’s “historic opportunity” to turn things around. But turning, and turning, in the widening gyre of annual IMF Article IV assessments, one can’t help but feel the falcon has long lost the falconer.
It’s a familiar script, brimming with bureaucratic optimism and laced with diplomatic niceties. We are told the government of national unity (GNU) has a fresh mandate to tackle long-standing economic woes. Growth forecasts creep up in decimal points, inflation is subdued, and there’s not a power outage in sight. What could possibly go wrong? Quite a bit, actually.
The announcement by ArcelorMittal SA (Amsa) that it will wind down its long steel business shows how deep the rot runs. SA’s largest steel producer cited Transnet inefficiencies and Eskom’s exorbitant tariffs as major contributing factors to the unsustainability of its operations.
Amsa’s plea for structural policy interventions to level the playing field for local steel production have gone largely unheeded. After a year of ongoing engagement with the government Amsa concluded that the necessary support would not materialise, leading to plant closures and potential job losses affecting up to 3,500 people. It’s a textbook case of how SA’s economic dysfunction is stymying industrial growth.
Yet the IMF’s most recent Article IV assessment reads like a polished budget speech, full of hopeful narratives that sound credible if you squint. Beneath the surface, though, is the crushing weight of history — of squandered opportunities, political inaction and institutional rot that makes even modest reform feel Sisyphean. If the IMF’s past advice is anything to go by, these prescriptions will be filed neatly away, right next to the National Development Plan.
Let’s start with fiscal policy, that perennial achilles heel. The GNU has pledged to rein in deficits and stabilise public debt. On paper the medium-term budget policy statement (MTBPS) looks promising: it proposes curbing spending while protecting infrastructure investment. Ever the hopeful tutor, the IMF applauds this newfound discipline but can’t resist pointing out a few “minor” details. For instance, ongoing support for dysfunctional state-owned enterprises (SOEs) and a public sector wage bill that makes Gwede Mantashe look positively svelte.
SA has the resources, talent and potential for greatness, yet it remains paralysed by its inability to act decisively.
The IMF also recommends implementing a fiscal rule, anchoring debt to about 60% of GDP, as though SA’s political class has ever met a rule it couldn’t bend, break or outright ignore. It’s a lovely idea, but one suspects this rule would be observed about as faithfully as January gym resolutions.
The SA Reserve Bank earns high marks for keeping inflation under control. We’re told recent rate cuts are “appropriate” and reflective of declining inflationary pressures. But even here the IMF can’t help itself. It floats the idea of moving to a lower inflation target — akin to asking a marathon runner to sprint the last mile while wearing lead boots. SA’s inflation isn’t merely cyclical; it’s baked into the structural inefficiencies of the economy. Think Eskom tariffs, transport costs and food prices. Each a monument to the ANC’s mismanagement.
The IMF’s structural reform suggestions are where the déjà vu sets in. Operation Vulindlela, the much-vaunted programme to fix energy and logistics, is name-checked with enthusiasm. Sure, there’s been progress — electricity generation has improved and logistics reforms are under way. But let’s not pop the bubbly just yet. Private sector participation remains minimal and regulatory uncertainty continues to stymie investment. SA’s ability to overpromise and underdeliver on reform is nothing short of world class.
The IMF loves SA’s green aspirations. It lauds the 2024 Climate Change Act and urges the country to embrace renewables. The logic is sound — transitioning from coal to renewable energy is crucial for sustainability. But the reality is far messier. Coal remains the lifeblood of the economy and of many communities, and transitioning too quickly risks economic and social upheaval.
The IMF’s suggestion to expand the transmission grid is vital but ignores a simple truth: SA’s bureaucracy moves at a pace that makes the Passenger Rail Agency of SA look sprightly. Meanwhile, private sector investors are understandably cautious, given the unpredictable policy environment.
The IMF’s optimism is admirable, if a little naive. It operates under the assumption that SA’s political and institutional challenges can be overcome with well-crafted policy advice. This ignores the elephant in the room: trust. Decades of corruption, mismanagement and unfulfilled promises have eroded public faith in government institutions.
Where I have to swallow my cynicism for a moment is what can be achieved at local government level with a little political will and old-fashioned hard work. I spent a day in Durban over December to watch the Sharks narrowly beat the Bulls in a URC clash and came away gobsmacked at how quickly the new administration has managed to clean up the grime. More of that please and you might start to turn even hardened cynics such as your columnist.
Ultimately, the IMF’s report reads like a prophecy — one that envisions recovery but fails to account for the rough beast of systemic dysfunction, its hour come round at last. SA has the resources, talent and potential for greatness, yet it remains paralysed by its inability to act decisively. Until the centre proves it can hold — until governance, trust and institutional integrity are fully restored — the promises of economic reform slouch ever further from Bethlehem.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at Badger@businesslive.co.za.
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