3 November 2019
Conscience of a Centrist
“Time is out of joint,” Hamlet anguished in act one, scene five, expressing his frustration that his world is not sound and that things are not as they ought to be.
Centuries later, SA’s moneyman, Tito Mboweni, stood before an anxious nation and basically told a defeated people that the economy is out of joint and government is struggling to arrest the nation’s runaway debt, which is expected to rise to above 70% in just 36 months.
Those who stood by idly during Jacob Zuma’s “wasted nine years” (this includes President Cyril Ramaphosa and his cabinet) should hang their heads in shame. They collectively inherited a well-oiled economy following the ousting of Thabo Mbeki.
To understand the damage inflicted on this economy by the charlatans who unashamedly (mis)led this country, one ought to open the curtains of memory and peruse the numbers; they, after all, seldom lie.
It takes true swindlers to run down an economy built on the backs of the masses of South Africans in just 11 years. Not so long ago SA prided itself in having a strong fiscal position. However, the medium-term budget policy statement painfully tabled before MPs this week painted a bleak future.
It is equally painful to retrace the missteps taken by the Zuma administration that has led us to the current sad state.
The country’s finances strengthened significantly in the mid-2000s as the ushering in of the inflation-targeting regime in 2001 saw a period of macro-economic stability. This period also saw a boom in commodities and robust revenue collection by the taxman.
For example, by the time president Mbeki was ousted from office, the debt-to-GDP ratio stood at 27%. In 2018, the country recorded a government debt equivalent to 56.7%, projected to hit 71.3% in 2022/23 unless government arrests this downward spiral path.
Much of the fiscal space built up in the mid-2000s has been eroded by widening budget deficits, an ailing economy, a plethora of bailouts for state-owned entities, low tax revenue and rampant corruption.
It is not far-fetched to imagine SA soon going cap in hand to the IMF for a bailout – a situation that will see government ceding its policymaking powers to the lender of last resort.
For example, Ghana’s economy in 2015 ran into difficulties, stymied by a widening budget deficit, a depreciating currency and rampant inflation. Accra’s woes were made much worse by out-of-control government spending, largely to pay salaries of an overgrown civil service. Ghana then turned to the IMF for a $918m (R14bn at the time) loan to help stabilise the economy.
The government limited hiring and wage increases and eliminated subsidies for utilities and petroleum products. New revenue sources included a tax on luxury cars.
