PETER BRUCE | Leaders silent as crisis tests SA’s economic resilience

I’m not clever enough to be sure, but I have a real sense in South Africa today of a sudden expulsion of breath. Just months ago we were “turning the corner”. Business leader Adrian Enthoven started it all with a speech last November, declaring that “after a decade of decline, South Africa has turned the corner. Our economic trajectory is once again positive and improving.”

“The structural reforms,” he said of President Cyril Ramaphosa’s creation of Operation Vulindlela to oversee reforms in, initially, power generation and logistics and “which have not received the attention and recognition they deserve, are fundamentally transforming our economy and have unleashed an unprecedented wave of investment into the network industries.

“If sustained, they will be the impetus to start spinning our economic flywheel, unleashing a virtuous cycle of confidence and investment and accelerating economic activity that will drive prosperity for decades to come.”

That sparked months of optimism. We had escaped the Financial Action Task Force’s “greylist”, debt was falling, the government of national unity was working, the civil service was being professionalised, primary budget surpluses (which exclude debt repayments) were locked in, inflation targets were reduced and local government crises were being addressed.

But then on February 27, at the behest of Israeli Prime Minister Benjamin Netanyahu, US President Donald Trump began a furious attack on Iran. Now, some 70 days later, the world is in a crouch. The attacks have decimated Iran’s infrastructure but not the burning resolve of the religious fanatics who rule the country. With the vital Strait of Hormuz blocked, oil prices have skyrocketed.

More than 1-billion barrels of oil have been taken out of circulation so far by the war. The prices of literally everything we consume will rise and take years to normalise. South African industries, often operating at the very margins of profitability, will begin to struggle ― automobile sales will suffer and food prices will rise sharply as farmers struggle disproportionately with catastrophic diesel prices.

Local government is where the rubber hits the road and shielding rotten mayors and councillors with proportional representation robs voters of their right to accountability, of the right to directly elect mayors and fire them when they don’t do their jobs.

And in all of this sudden shock the government and its two main constituents ― the ANC and the DA ― are largely silent. Despite the lessons of Covid, neither had the playbook open at the disaster. Instead, I have just read something called the National Rail Master Plan, which was published in April, and it represents everything we know about the ANC in particular.

It is a long, dreamy treatise on what might be, promising a R1.9-trillion revamp of the entire railway system, including literally changing the gauge of the rails (the width between the rails) over many thousand kilometres of line by 2050. Clearly written by someone with a deep knowledge of rail, it is nonetheless a fantasy. Many of the economic sector master plans adopted in Ramaphosa’s early years have already failed, but at least they set tight deadlines.

And the further Ramaphosa gets from reforming the generation of electricity, which was relatively easy once Eskom management had brought load-shedding to a halt, the harder his reforms become to implement. Already-planned logistics reform is proving frustratingly slow, with Transnet battling to move at pace.

Reshaping local government, where dozens of municipalities cannot pay their bills, clean their streets or get clean water to their citizens, is way beyond this government. It thinks the problem is financial. But it’s philosophical. Local government is where the rubber hits the road and shielding rotten mayors and councillors with proportional representation robs voters of their right to accountability, of the right to directly elect mayors and fire them when they don’t do their jobs.

It is a recipe for persistent failure. Between them, municipalities and state-owned companies owe more than R700bn. That isn’t even counted in the national debt the finance minister tells the world at budget time he is getting under control. In turn, consumers owe local government a further R400bn. This spiral of debt is barely under control. What’s missing here isn’t money. It’s uncompromising leadership.

I listened to a former Greek finance minister saying the other day that “unfortunately, politics is structured in such a way that if you tell the truth to the people you can’t get elected” and that is so true. But our job must be to forget the PR we are constantly sold.

We will be awash with green shoots and corners being turned in the run-up to the local elections on November 4, but don’t accept the “pessimist” labels they throw at you just because you don’t join in. The ANC has a long-established form of wishful thinking. We were not nearly ready for what Trump and Netanyahu have done in Iran.

• Bruce is a former editor of Business Day and the Financial Mail.