Put SA first by taking local councils to task

IN a custody battle, the courts will make a judgment based on what they deem to be in “the best interests of the child”.

I was recently asked by a 702 journalist what advice I’d give to two senior government officials who are reported in the media to have a turbulent relationship, and my answer was: whatever they decide, they should put the country first.

The legal rationale of putting the child first is to protect against the dysfunction or disorder that arises from a broken relationship.

An advocate friend of mine believes that no one has put the interests of the country first as much as lawyers. He also said economists had not been all that sincere about the state of the economy and therefore had not put the country first.

He said we talked about fiscal constraints, reducing the spending ceiling and the need to raise money for infrastructure development, yet we seldom talk about wasteful spending in municipalities and how that is blocking infrastructure development, especially in areas that need it the most.

Last week, we learnt that the value of irregular and unauthorised expenditure in municipalities over the past five years has ballooned to about R30-billion.

Only 54 out of 272 municipalities achieved clean audits, and 23 municipalities have failed to yield a clean audit in the past five years.

A badly run municipality puts financial strain on the fiscus and creates social tension that often results in the destruction of government buildings, which require rebuilding, using government funds.

Which brings me to the poor first-quarter GDP numbers released by Stats SA this week. The economy contracted by 1.2% compared to analysts’ expectations of about 0.1%.

The main drag to the firstquarter GDP number was mining, which contracted by 18.1%. Agriculture contracted for the fourth consecutive quarter, mainly due to the drought, which hit output. The sector contracted 6.5% and, given poor winter rains in the Western Cape, it is expected to show low growth in the next quarter.

There were smaller contractions in the utilities and transport sectors and sectors that usually post strong growth, such as the financial, real estate and business services, grew at a slower than expected pace.

On the expenditure side, household consumption contracted at an annualised pace of 1.3%, after expanding by 2.1% in the last quarter of 2015, as a result of a sharp fall in durable goods purchases and spending on services. Investment spending slumped, falling at an annualised rate of 6%. Exports and imports declined sharply at an annualised rate of 7.1%.

The contraction in the first quarter highlights the headwinds faced by the

A badly run municipality puts strain on the fiscus

economy. Poor growth this year will force policymakers to make tough monetary and fiscal decisions.

The Reserve Bank has increased interest rates by 75 basis points this year to anchor inflation expectations and counter rising inflation risks, and the National Treasury has tightened fiscal policy to deliver a faster pace of fiscal consolidation.

South Africa has been given some breathing room by ratings agencies, thanks to Finance Minister Pravin Gordhan and his team. But just as we gain confidence as a country, reports such as the one released by the auditorgeneral remind us that those who don’t put the interests of the country first take us a few steps back.

Leoka is an economist at Argon Asset Management