KZN has fallen off the fiscal cliff
THE province of KwaZuluNatal continues to find itself in a perilous financial position as, year in and year out, it tries to do more with less, while cutting departmental budgets in order to balance the books.
Certainly, this has been the case for several years now and at some point it gets to the stage where it is not possible to make any further cuts without departments starting to haemorrhage.
Regrettably, the situation means that proper service delivery is the first to be affected.
This has been evident in KZN for some time.
The DA has long warned KZN’s ANC-led government about the looming fiscal cliff.
The reality is that KZN has officially fallen over the edge into uncharted and desperate economic times.
The worst part of this freefall is that the poorest of the poor will be the hardest hit and that, with very little financial muscle left, the ANC government will certainly not be in a position to achieve its so-called radical economic transformation.
The economic meltdown is not entirely of KZN’s own making.
Nor can it be blamed entirely on external influences.
It is also man-made – literally the doings of one man, Jacob Zuma, and his self-serving decisions.
His latest cabinet reshuffle again saw the collapse of the rand and the downgrade to junk status by two rating agencies.
While some may argue that Zuma has the right to make these changes, the questions remain: Why in the dead of night?
Why on the basis of an apparent intelligence report, drafted by a Grade 6 official, relating to some absurd plot to overthrow the government?
Why when there was no logical reason forthcoming?
Why when senior ANC leaders were not made aware of the imminent reshuffle?
This type of behaviour can only be attributed to a leader who is a narcissist with clear psychopathic tendencies.
One needs only think back to the now rather hollow warning used by KZN Finance MEC Belinda Scott in her 2016/17 budget debate: “Speculation is rife that the rand could fall by another 20% against the US dollar, should South Africa’s credit rating be cut to junk status.
“This situation needs to be avoided at all costs.”
Yet many within the ANC intimate that a downgrade to junk status is nothing more than a western imperialist system foible that will not have much effect on our economy.
Or that the demise of the rand is manipulated by white monopoly capital and has little or no meaning to our economy.
Some even go so far as to suggest we don’t need foreign currency!
The reality is that we cannot operate in isolation from the rest of the world.
We need to acknowledge this and operate within these factors.
South Africa is not an island.
The reality is that it is now almost impossible to avoid a recession in our country, and as a result, in our province.
In her 2017/18 budget address, MEC Scott sounded a clear warning that KZN needed to reduce its debt in order to continue balancing the books, thereby maximising its liquidity in order to achieve sustained and effective service delivery – and that the reverse would negatively impact on service delivery.
That time is now upon us.
For the ordinary man or woman in the street, junk status means higher interest rates, fuel price increases and higher inflation, bringing soaring food prices and ultimately less disposable household income.
It also means less money in the commercial sector, along with predictable job losses, a shrinking commercial sector and ultimately a reduction in the tax base.
Every action has a reaction and what ensues is an “economic death spiral” with the end result that people get poorer and desperation sets in.
Looking at KZN’s recently tabled budget, it is clear that the ANC’s much mooted “radical economic transformation” will have to take a back seat, as everreducing resources will have to be spent on keeping the ship afloat.
It is also increasingly apparent that, in order to achieve radical economic transformation, South Africa needs radical political transformation.
In a nut shell, when our debt costs rise it means less disposal income for service delivery, economic development and job creation.
This is backed up by Dr Azar Jammine, chief economist at Econometrix, who commented: “On a more serious note and what we should be concerned about now, is that business confidence in South Africa will continue to decline as a result of the downgrades.
“Long-term interest rates are going to be affected and government will have to spend more. If Moody’s downgrades us, this will be the final blow and all confidence will be lost.”
If Moody’s downgrades South Africa, we will lose membership of the World Government Bond Index and R140 billion will be at stake, resulting in the further fall of the rand.
No one likes to be a prophet of doom, but unless government starts to offer credible leadership, with clearly defined economic policies, under the direction of a capable state, it will ultimately destroy everything that South Africans hold dear.
Our country needs a government with a proven leadership and with an effective and clean governance record.
Campaign slogans will not change the lives of ordinary citizens in our province.
It is only when the needs of the people are placed at the forefront of government’s economic agenda that the social injustices facing our people will be addressed.
And this will only be achieved through building a stable economic base.
The time has arrived for all the people of KwaZulu-Natal to make their political choices based on economic rationality.
They can no longer be purely based on blind patriotic support, while the poorest of the poor suffer.
Francois Rodgers is the leader of the DA in the KwaZulu-Natal legislature. He serves on the province’s Finance and Office of the Premier portfolio
committees.