Austerity budget unpacked
The finance minister has said it’s not an austerity project. But the numbers and economists disagree
Government spending on critical functions such as healthcare has plateaued over the past decade. And the country can expect more cuts. The Mail & Guardian’s review of government spending from 2011 to 2020 and found that, although more money was doled out each year, generally the budgets for important functions had stagnated.
Notably, spending on healthcare is still below what it was in 2013, the year experts agree was the last before the country was thrust into austerity.
The health budget for the next three years will remain lower than it was in 2013.
According to the 2021 budget, released by the treasury last week, real main budget noninterest expenditure is projected to contract each year over the next three years. As a gross domestic product (GDP) share, noninterest expenditure will moderate from 29.2% in 2021-22 to 26.2% by 2023-24.
The budget marks the first cuts to nominal noninterest government expenditure in at least 20 years.
Healthcare, social protection and job creation will all experience cuts in the medium term.
Expenditure on health will decline from R247-billion in 2020-21 to R245-billion in 2023-24. The social grants budget will be reduced by R5.8-billion in 2021-22, R10.7-billion in 2022-23 and R19.5-billion in 2023-24.
Despite the country being in the throes of an enduring unemployment crisis, money allocated to job creation will reduce by 27% from R33-billion in 2022 to R24-billion in 2024. Spending on job creation grew by only 5% between 2018 and 2020.
A big target for Finance Minister Tito Mboweni’s budget cuts is the public sector wage bill, which will be reduced by R303.4-billion in the 2020-21 and 2023-24 financial years. As a result, health workers and teachers will face compensation freezes and early retirement.
In his budget speech, Mboweni emphasised fiscal consolidation. “Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, in this, we are resolute. We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”
But he was later also at pains to deny claims that the 2021 budget reflects the government’s austerity programme.
“When people talk austerity, I don’t know what they are talking about,” Mboweni said during a post-budget briefing of parliament’s standing committee on finance.
“If, for example, 56% of the budget is for social services ... anyway, it is in the nature of politics. People have to be seen to be saying something.”
Critics disagree
The Institute of Economic Justice (IEJ) said in a statement that the budget “reinforces treasury’s extreme approach to fiscal consolidation. This entails a fall in spending per person and leads to real reductions in health, learning and culture, and general public services. Giving the pressing social needs, enormously exacerbated by Covid-19, this is deeply irresponsible.”
The IEJ statement said the fiscal consolidation programme set out in the budget is “economic suicide”.
IEJ economist and researcher Busi Sibeko told the M&G that the budget represents austerity “by its definition”.
“There are cuts across the board — massive cuts — to things we need.”
Sibeko pointed out that if the child support grant, which has the highest nominal increase (3.4%) in 20202021 and 2021-2022, is compared with inflation it will be a decline of 0.83%.
“Women carry more of the burden of social provisioning and therefore require more access to public services, which austerity takes away. So women are disproportionately impacted by austerity,” said Sibeko.
On the negative effect of austerity, Sibeko said: “Government spending makes up 30% of our GDP. So what happens if you contract GDP? Then the debt to GDP ratio will increase unless there is growth. And this entire plan hinges on the idea that the private sector will come to the table and increase our GDP. But the private sector is also shrinking during this crisis.”
Sibeko is also the co-chair of the Budget Justice Coalition, which made its submission on the budget to the standing committee on finance this week. The submission notes that in 2022-23, the government will be spending R2700 less per person on public services than it did in 2019-20.
Economist Duma Gqubule said the treasury has historically overestimated the effect of structural reforms on GDP growth but underestimated the effect of austerity. When compared with previous “austerity lite” years the 2021 budget is more severe.
“There is no doubt that this is austerity. Every single page of the budget I am reading now talks of fiscal consolidation,” he said. “Everywhere in red ink, they are cutting. So it is an austerity budget. The minister must tell the truth.”
Last week Beeple, an artist in the United States with 1.8-million Instagram followers, resold an artwork titled Crossroads for $6.6-million, making it the most expensive digital art piece ever auctioned on the secondary market.
Crossroads is a non-fungible token (NFT) or a digital collectable, which was traded on the Ethereum blockchain platform. The artwork has a unique encryption with the artist’s digital signature, which ensures its authenticity and that it cannot be duplicated.
Crossroads “was designed as a response to the 2020 presidential election. Depending on the election’s outcome, one of two videos—one featuring a victorious [Donald] Trump, the other featuring a despondent one—would play”, according to Artnews.
Trump was “deplatformed” when Twitter banned him after the riot at Capitol Hill. Others followed suit, including Facebook.
The record-setting sale came just days before another Beeple piece,
a collage of 5000 artworks created over 5000 days, was put up for sale by British auction house Christie’s. The auction of Everydays: The First 5 000 Days, will make Christie’s the first established house to sell an NFT and the first to accept crypto.
Beeple’s profile has skyrocketed, so much so that on Sunday, crypto art boutique Makersplace crashed amid a drop of 105 limited editions on sale for only $1 each.
An NFT can be a number of things. Last week the Nyan Cat GIF sold for about $561 000, according to Artnet. Even the NBA has cashed in by making their own digital collectables. On Monday, a video highlight of Lebron James reportedly sold for $208 000.
Carel de Jager, of the Blockchain Academy, explains that when something is non-fungible, its value cannot be directly compared to a similar item. “Apples are not fungible. You get good apples, and you get bad apples. And art is not fungible. You get good art, and you get bad art. So every piece is unique.” This sets NFTS apart from cryptocurrencies such as Bitcoin, which are fungible.
De Jager says NFTS are useful because they are 100% auditable. “The magic of the blockchain provides that. You can see that it is authentic. You can make a copy of a JPEG, just like you can take a photo of the Mona Lisa. But that doesn’t mean it’s the real thing,” he says.
“And the real thing still has value. So NFTS provide us with that authenticity layer. It shows us with 100% certainty all the previous owners of that asset, and it provides us with a 100% transparent revenue record.”
NFTS emerged in 2017, when the blockchain game, Cryptokitties, was launched. The game allows users to collect and sell one-of-a-kind digital cat characters as they would Pokemon cards. According to the Cryptokitties site, the game takes out the seriousness associated with blockchain technology.
The NFT market has only recently started to boom. Nonfungible.com, an NFT market discovery tool, says the highest average token price in 2017 was $205. On Monday, the average token was $1 189.
Covid-19 probably has something to do with the NFT boom, De Jager says. “With Covid, I think we’ve seen how the world can operate digitally … We’ve now for the first time actually experienced what it’s like to attend digital concerts and digital art galleries.
“Before, creators were kind of stuck in a hole because they couldn’t get their content out. I think that was definitely a catalyst for it because it’s such a wonderful way to connect creators to the market.”
Within China’s online gaming community (at 640-million, 26% of all gamers in the world), a trend has emerged among players whereby they pin success in gameplay to racial stereotypes: gamers who are “lucky” are called “Europeans” and their “unlucky” counterparts are called “Africans”.
The rise of social networks and an explosion of African digital media in the past two decades have raised expectations of more positive or, at the very least, nuanced portrayals of the African continent and its people.
Yet, a study by Foreign Policy magazine looking at China’s stereotypes of Africa in 2015 showed that the prompt “Why is Africa” had dampening results. On the world’s most popular search engine Google recent searches from “Why is Africa so poor?” to “Why is Africa so backward?” and worse, it would appear that the continent is still largely pigeonholed as a place where only bad news exists.
Asking the world’s other popular search engines yields hardly different answers (with Yahoo! adding “so messed up?”).
Search engine prompts are not cases of bias by chief executives and their data scientists. Rather, they are a mirror of society. As the article explains, when a user starts typing into the search bar, an algorithm generates a list of suggestions to complete the query, made possible through scouring the search engine’s archives for frequently searched phrases. Autocomplete suggestions, then, are indicators of popular trends and in that sense a manifestation of the cognitive biases held towards an issue, person or region by its users.
Understandably, this infuriates a sizeable portion of the continent’s populace and its close observers who have dedicated their careers to understanding Africa and communicating its complexities. They are dissatisfied with the continent’s continuous portrayal in bad terms and wish there were more accurate portrayals of it.
Yet, by claiming the continent should be portrayed pleasantly, they play into the problem they are seeking to correct, namely generalisation about more than 50 countries with vastly different characteristics.
People looking for “good portrayals of Africa” will always find “bad analyses of Africa”. In other words, those producing unjustifiably general narratives about Africa and readers looking for broad stories about the continent will always find each other. Fundamentally, Africa does not exist. It is only geographical shorthand invented for the convenience of European explorers and subsequently a term of aspiration for unity by leaders since the independence era.
Africa, as a single political and economic unit, is yet to be realised. It is a decades-long project that has produced the voluntary-membership African Union instead of a single country that spans the entirety of the territory. The AU is flanked by regional organisations that are in some senses more powerful.
Coverage of the continent, as best anyone can realistically expect of coverage of a continent, tends to rely on macrotrends.
The Economist, in a period of just more than a decade, pronounced on both Africa’s doom and its potential. In March 2000, the periodical saw an Africa that was a “hopeless continent”, but it spoke of an “Africa rising” by December of 2011.
The trends had changed in many countries and shifted the picture of the whole. Two years after the 2000 cover, numerous African countries entered the centre stage of developmental discourse by being among the world’s fastest-growing countries with annual growth rates averaging 5.8% between 2002 and 2012.
There is a cynicism that underlies the expectation of positive stories about the continent. It essentially implies a blanket amnesty on the failings of the leaders and officials of the numerous countries on the continent’s numerous capitals under whose watch numerous disappointing statistics persist or change in the wrong direction.
Such a take would be out of touch with the views held by many citizens with regard to their governments. In its 2013 survey, for example, Afrobarometer found that an overwhelming majority of citizens (about 76%) felt as if their governments had fared badly in reducing income inequality.
About 71% thought these governments were ineffective in creating employment opportunities.
Uncritical coverage is unthinkable in our everyday engagement with the political process of individual countries; why should we expect it of a continent?
More nuanced inquiries can only be attained through an interest in individual countries. Positive or negative developments in countries such as Ghana, Ethiopia, Nigeria, Kenya, Botswana and South Africa are covered and are easy to find. Such nuance is to be seen in the search engine prompts of specific countries.
For example, “Why does South Africa have three capitals?” is one of the leading autocomplete suggestions on Google. On the other hand, the Chinese search engine Baidu’s top suggestion for Egypt asks why that country is more ancient than China. Foreign Policy concludes that “the pride with which Chinese people compare their civilisation’s long history to that of Europe, and especially to that of the US, wilts somewhat in the shadow of the pyramids at Giza”.
On the same platform, users asked why Côte d’ivoire and Ghana came to be known as Ivory Coast and Gold Coast. Queries about Algeria and
Libya ask about attacks upon the countries by French and Nato forces.
The mention of a few specific African countries is not accidental. The effect is consistent across the board: only a handful of countries generally stand out in any continent. Europe means typically the UK, Germany, Italy, France, Spain and perhaps the Netherlands, Portugal and Belgium. Citizens of Slovakia, Albania, Belarus, and Bulgaria surely feel undercovered and misrepresented.
Similarly, South American coverage consists mainly of Brazil, Argentina, Chile, and Venezuela. Ecuadorians, Surinamese and Guyanese must also envy the disproportionate attention enjoyed by their neighbours.
But economics may present an explanation for this skewed effect. In a data set that ranks a country’s GDP to the number of Google searches, more commonly than not, the ranking of countries within a region along economic lines (that is, its share of the region’s collective GDP) is reproduced in terms of searches on Google. There are some underperformers and overachievers (i.e., countries whose economic size is so disproportionate to the searches as to disrupt the ranking) but these are extremely few.
There is a correlation between a country’s economic size and the interest it enjoys from global netizens. Image matters. It has economic and identity implications. It can affect foreign investment and tourism. Concern over the global portrayal of the continent is well justified.
But there is good news: an image can be improved and even reversed when the pattern on the ground changes and a new reality emerges. In the 1980s and 1990s, foreigners in Ethiopia and Rwanda were likely to be aid workers or correspondents, there to cover a famine or a genocide.
Today, they are likely to be investors attracted by the stability (at least until recently in Ethiopia) and growth rates of these countries, which turned their fortunes around, and the world’s perception caught up with them.
Ultimately, then, there is no shortcut; the continent’s image will experience a reversion when the majority of the countries on its face pass several critical thresholds and when integration is fully attained such that undertakings are justifiably attributed to the broader body as a whole.
The expectation of positive stories about the continent … essentially implies a blanket amnesty on the failings of leaders
Will Cyril Ramaphosa be a one- or two-term president? That is the red-hot political question that will hang over the next 22 months. In December 2022, at the ANC’S next five-yearly national elective conference, Ramaphosa’s fate will be sealed and the question answered definitively, with huge consequences.
Either he will be re-elected as president of the ANC or he will be opposed and lose. If it is the latter, then his time will soon be up as president of South Africa, perhaps even before the end of his current term, if his successor is in a rush and of a vengeful mood.
Starting with the State of the Nation address (Sona) early last month, there are several milestones that will mark the journey towards Ramaphosa’s — and South Africa’s — next date with destiny.
This is not hyperbole. For progressive democrats, Ramaphosa’s survival is essential, not because he is the perfect leader, but because there is not one single plausible scenario in which he is replaced by anyone better suited to lead South Africa from its interlocking economic, fiscal, governance and social crisis.
His is a steady hand on the tiller in the most turbulent of waters — arguably too steady, in that this epoch cries out for a strategic giant, capable of transcending the hurly-burly of partisan political life to offer a unifying and compelling vision for a very different post-pandemic future.
That is not Ramaphosa. And it can be argued in the other direction: that this is no time for flashy expansiveness, but rather for careful, shrewd management of a crisis situation.
Moreover, it is not as if he faces any major challenge to his hold on power — at least not from any other party, such is the parlous state of the opposition. No, the threat to his rule comes from within the ANC.
Sona was underwhelming. Deliberately so, according to Minister for Trade and Industry Ebrahim Patel’s speech in the debate that followed, in that, according to Patel, the strategic vision was set out in the economic recovery plan announced last spring.
Instead, Sona was all about the nuts and bolts of the implementation of that plan. Patel’s argument is well made, as was his vigorous defence of the solid progress that is being made with his industrial sector development strategies.
Forgive me for being old school, but it should be for the lieutenants and sergeant majors to deal with the nuts and bolts, not the general. Ramaphosa’s own reply at the end of the Sona debate was a much better piece of statecraft and speechwriting, but too little too late. It could not paper over the failure of his presidency to get big things done this past year — such as the energy sector reform package, held up by a disobedient minister for energy.
The next milestone, the budget speech, contained at least two major hostages to political fortune. For the first time since the admirably effective establishment of a welfare state in the 1990s, the social wage will not keep up with inflation.
The social security grants that have cushioned poverty, mitigated social disintegration, and served as a bulwark to the ANC’S electoral success over five national elections since, will have diminished purchasing power.
The negative effect of this may not have been fully absorbed by indigent voters by the time of the municipal elections later this year, nor will it make much difference to the balance of power in the ANC, given that Ramaphosa’s enemies in the “radical economic transformation” (RET) brigade care little for the needs of the poor. But by 2024 it could well have loosened the loyalty of much of the ANC’S base, perhaps providing the Economic Freedom Fighters with one last shot at serious electoral advance.
Second, the fiscal consolidation required to reduce mounting debt, which Finance Minister Tito
Mboweni pursues with such thickskinned resolve, still depends almost entirely on delivering on the massive reduction in the public sector wage bill first announced in his February 2020 budget speech.
This is also politically awkward — but potentially in a much shorter time frame. As the public sector unions justifiably argue, it is not that the state needs fewer employees — in fact, there is a need for more police officers and nurses — but that it needs a cull of highly paid, but unproductive, middle managers.
These people, however, are often the very same people who run ANC branches, decide on branch delegations to conference and who then constitute those delegations. About 70% of voting delegates at ANC elective conferences work for the public service. Hurting their interests at a time when Ramaphosa needs to retain their support is risky.
The political aftershocks of an austerity budget could yet reverberate around the halls of the ANC’S national general council (NGC) in mid-year, assuming that the pandemic relents sufficiently to allow such a gathering
If by then Ace Magashule is still secretary general of the ANC, then the risk calculus in relation to Ramaphosa’s longevity in office should be adjusted, such is the power that the secretary general holds over the internal machinations of the organisation, especially branch numbers and, therefore, the size of their delegations.
The extent to which the criminal justice system is able to do Ramaphosa’s dirty work for him, given the ineptitude of the ANC and its cack-handed inability to enforce its own “step aside” resolution, could be decisive to his future. This itself is a risk, as the acquittal of ANC MP, Bongani Bongo — a fully paid-up member of the RET brigade — shows.
In 2016, the ANC suffered its first significant electoral bloody nose, losing its majority in three former strongholds — Tshwane, Johannesburg and Nelson Mandela Bay. This was the moment the ANC recognised that Zuma had gone from being an electoral asset to a liability; it was another milestone in his own demise.
It’s possible that something similar could happen to Ramaphosa, but unlikely. The opposition parties have made an absolute pig’s ear of building sustainable coalitions in all three metros, and so may well have missed an extraordinary opportunity to make their case for government.
If anything, voters are more likely to return to the capacious political bosom of the ANC. Even if they don’t and instead stay away, the evidence of multiple by-elections late last year suggests that the opposition are unlikely to benefit greatly from ANC weakness and division.
Neither have they presented irresistible visions for a brave new world. On the contrary, the Democratic Alliance’s John Steenhuisen and the EFF’S Julius Malema whine and whinge with equally shrill impotence in a dismal race to the bottom.
Which is why a frequent refrain among progressive democrats is that, although it is now well understood that the ANC is broken and far beyond redemptive repair, South Africa still needs the reasonable, sane part of the ANC to prevail; to ensure that, as Thabo Mbeki was so fond of saying, “the centre holds”.
This takes us back to Ramaphosa and his prospects for a second term. The low-road scenario to political hell has been described with such apocalyptic zeal by the pyretic scribes of certain online journals; let me end with a rather less exciting alternative scenario.
The Ramaphosa administration continues to fudge the big policy decisions and so the structural economic constraints remain.
Despite this, there is steady implementation of the recovery plan as a better-than-expected vaccine roll-out eases the misery of the pandemic, a politically workable, if fiscally precarious, deal with the public sector unions is reached. Internal ANC opposition to an International Monetary Fund loan is overcome. The economy avoids a sovereign debt crisis and a subsequent tailspin.
The Zondo commission wraps up its work with surprising alacrity and a powerful report lands, with precise findings and recommendations that push the RET brigade further on to the back foot. The pace of state capture arrests picks up again, removing key opponents of Ramaphosa and his reform programme, and their money men, from the battlefield.
The NGC passes without much excitement, as Ramaphosa has done just enough on a sufficient number of Nasrec policy resolutions to avoid undue discomfort.
The municipal elections pass off quietly, and with no significant damage to the ANC, which is returned to power in at least one of the metros it lost in 2016. Magashule is forced out, and a more congenial secretary general defends the integrity of ANC branches and minimises the risk of RET manipulated gerrymandering. Ramaphosa wins again.
Don’t forget, Deputy President David Mabuza stands quietly in the wings, ready to pounce, as eager to prevent Magashule prospering as Ramaphosa. Only if Ramaphosa looks weakened and wounded, and the RET brigade is gaining momentum, will he step in to protect his inheritance. But that part of the story is best saved for another day.
The extent to which the criminal justice system is able to do Ramaphosa’s dirty work for him, could be decisive to his future
“In Cuba only a few old people have TB,” explained Dr Leandro Ruyz. “In 1959 we had a revolution and everyone born after that was vaccinated at birth.”
A day after arriving in South Africa, Ruyz was sitting in the superintendent’s office at the Klerksdorp hospital, a facebrick pile where the entrance is almost impossible to find. The hospital, built for whites in the then Western Transvaal, now stands in the middle of a province where it is not uncommon for people to travel all day to find even the most basic medical services, and where 60% of public health posts are filled by foreigners because South African doctors have left for the private sector or overseas.
Ruyz was among 14 doctors assigned to the North West who are undergoing a twoweek briefing in Klerksdorp, before heading into the remote fragments of what used to be Bophuthatswana.
Some are fluent in English, some speak the language haltingly, and South Africa’s other 10 languages are incomprehensible to them. But, as Ruyz’s remarks about TB in Cuba indicate, the doctors are going to have to learn more than languages. They will also have to cross an immense cultural divide. — Mail & Guardian, 1 to 7 March 1996