Optimism dashed by bungling state

TO get South Africa out of this slow-growth, high-inflation and confidence-sapping environment, government will have to at some point increase investment spending.

Presently, fiscal conditions don’t provide any space because of rising debt to GDP ratios and rather muddy economic prospects. For most, it’s a story that’s well understood and has been hammered in. Our politicians on the other hand, well let’s just say there’s still some convincing to be done.

But as weather conditions change, so does the economic climate. The data out of Europe, the long struggling economic story of the world, is looking much better. As the destination of a significant bulk of our exports, South Africa could see some fruits from this change.

A healthier Europe, with it more than 400 million inhabitants, will buy more goods from the world’s factory in China and its neighbours. These are nations without the raw materials that South Africa has in abundance, so once again we will benefit in the form of higher commodity prices.

This is still unfolding and when I put on my optimist cap, maybe in the next 12-18 months, all things being equal, the South African economic case is much more positive.

From a constrained position, there just may be some fiscal space to lend support to the South African economy.

By design, if the institutions of state are trusted with this spend, the mere mention of a spending government would almost instantaneously lead to a swell of confidence.

In the case of South Africa, I think we could be in a very different position should all things fall into place internationally to support a significantly less gloomy outlook.

The integrity of some of our institutions is so compromised that it’s getting harder to believe that they operate for the national good but rather for a faction within the ruling party.

Just how can government bungle welfare? Its expansion over the past two decades is the single most important success story of a country still grappling with its apartheid legacy.

Without its expansion, one wonders what state the country would be in today.

The social safety net has helped lift people out of abject poverty and while its detractors argue that it’s in the main been wasted spend, it’s helped feed a nation, educate its people and supported consumption in the economy.

Retailers — and only one really comes to mind here because of its presence in almost every township — Shoprite, has benefited rather handsomely from the payment of grants and pensions to the more than 17 million South Africans.

While the spend is singled out as a worrying expense for the country, it’s become ever more important in the medium term, at least when you consider the unsolved unemployment crisis.

Government’s most important job is to ensure that there’s a social net

The modernisation of the South African economy through all its industries will mean the unemployment rate will remain stubbornly high.

So in this, our harsh reality, the most important job of government is to ensure that there’s a social net to support its people from jobless townships to our rural hinterlands. Hinterlands that now have to support returning miners and other tradesmen from industries that no longer require their muscle.

It’s the one ball that simply can’t be dropped. But here we have a department led by a key player in party politics who has the country at the brink.

This factionalism makes me wonder what further ruin will come to the state’s ability to deliver.