Finance minister Enoch Godongwana’s revised budget has landed with all the grace of ANC first deputy secretary-general Nomvula Mokonyane trying to pick up the rand, a feeble and ineffectual attempt to course-correct an economy the ANC has spent the past two decades merrily gutting. The lying since, about the DA’s alleged demands and horse-trading, underlines how duplicitous the ANC is.
And yet the real debate is not about VAT. It’s about the great question economists, investors and the public are asking in increasingly urgent tones: why has SA stagnated? Why has an economy, blessed with abundant natural resources and a young, growing population, been shackled to the corpse of government failure, cronyism and ineptitude?
A recent paper by Tumisang Loate and Nicola Viegi of the University of Pretoria attempts to dissect this very question, using something the stats nerds will love — a Bayesian vector autoregressive model — to analyse the relationship between macroeconomic variables and policy decisions in 2012-19.
Their conclusion? The stagnation cannot be squarely blamed on monetary and fiscal policy. If anything, the historical relationship suggests SA should have experienced higher growth during this period. But reality diverged sharply from economic models, so something else is at play.
In the wake of the 2008 financial crisis SA initially adopted a countercyclical policy mix, with fiscal and monetary levers being deployed in a bid to stimulate growth. But by 2011 the economy had started its inexorable downward trend. Debt-to-GDP ratios climbed, business confidence wavered and the much-anticipated Keynesian payoff never arrived.
Loate and Viegi highlight a crucial inflection point: post-2010 SA hit a “speed limit” at which deficit-financed expansion turned from stimulus to deadweight. Investors, witnessing the ANC’s incompetence and addiction to patronage, began demanding higher risk premiums. Corruption metastasised into every aspect of governance, transforming state-owned enterprises into feeding troughs for the connected elite.
By the time Eskom’s lights began flickering and Transnet’s tracks rusted, the game was up. Business had no confidence. Foreign capital fled. The debt mountain grew and with it the cost of borrowing. And still the ANC ploughed ahead, mistaking looting for leadership.
The numbers tell a story of staggering failure. Before 2010 government borrowing had no clear correlation with GDP growth. But after 2010 the relationship turned sharply negative. Why? Because corruption, mismanagement and bad policy choices turned public spending into an exercise in self-enrichment rather than nation-building.
State-owned enterprises became casinos for cadres. Infrastructure budgets became vehicles for obscene kickbacks. A nation desperate for investment was left with rolling blackouts and a railway and water system better suited to the 19th century than the 21st.
SA’s monetary policy has long been a political punching bag, blamed for everything from sluggish growth to high unemployment. The SA Reserve Bank’s alleged “antigrowth bias” (a phrase often thrown around by talking heads and business leaders) suggests the central bank’s focus on inflation has come at the expense of job creation and economic expansion.
But Loate and Viegi’s counterfactual analysis tells a different story: even if interest rates had been frozen at 6% instead of being hiked from 2014 onward, growth would still have remained stagnant. The real problem is not interest rates, but an economy strangled by structural failure.
If monetary and fiscal policy alone cannot explain SA’s prolonged stagnation, what can? Loate and Viegi’s findings reinforce what many have long suspected: supply-side constraints, not demand-side policy failures, are the primary culprits.
Energy insecurity, a dysfunctional logistics network, declining education outcomes, the broad-based BEE premium and hostile labour market dynamics have collectively stifled economic activity. The authors estimate that power shortages alone account for nearly 40% of the growth slowdown since 2010. No amount of fiscal stimulus or interest rate cuts can offset the damage wrought by rolling blackouts and collapsing infrastructure.
The ANC’s internal political instability and erratic policymaking have deterred domestic and foreign investment. The abrupt sacking of finance ministers, the weaponisation of state-owned enterprises and persistent regulatory uncertainty have left businesses in a perpetual state of hesitation. Why invest when policy direction is as predictable as the next cabinet reshuffle?
Adding further weight to this argument, the World Bank recently issued a scathing assessment of SA’s economic policies, singling out excessive regulation and BEE policies as major impediments to growth.
This is not an ideological argument against transformation but a recognition that policy design matters. BEE in its current form has not broadened economic participation as intended, but has instead entrenched elite enrichment and discouraged foreign and local capital from taking risks.
Which brings us back to Godongwana’s revised budget. Where is the structural reform? Where is the attack on red tape that throttles small business? Where is the infrastructure build out to finally end load-shedding and fix logistics? Where is the plan to restore investor confidence?
Nowhere. Because the ANC has long since abandoned even the pretence of economic leadership. This is a party that governs for its own survival, not for the prosperity of its people. So much for the government of national unity.
SA does not need a new VAT rate. It needs a new government. It needs leaders who understand that growth is not an ideological choice but an existential necessity. It needs policies that attract capital, not chase it away. It needs a government that sees business as a partner, not an enemy.
The ANC has failed, utterly, catastrophically, irredeemably. And every passing day of its dead hand on our future is another day stolen from SA’s children. The only real economic reform left is at the ballot box.
• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at Badger@businesslive.co.za.
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