This is no time for populism’s simplistic economic solutions

In an age of populism, when to win an election one need only speak the loudest from the highest rooftop about simplistic economic solutions that at their centre require more spending and not less, one wonders how an increasingly unpopular ANC is going to win next year’s elections and, for the sake of its president, by a wider margin. This is the question for President Cyril Ramaphosa and his most senior cabinet minister, Tito Mboweni. It will require Ramaphosa to urgently rein in the largesse of his state, which is under the close scrutiny of ratings agencies, while ensuring his party can get its voters back to the polls. The last time the ANC went to the national polls — led by president Jacob Zuma, who was becoming more of a liability by the day — was four years ago and at that stage the heat wasn’t on emerging-market nations such as ours, though the warning signs were very apparent. Ignoring them, though, wasn’t as detrimental, and the party could head to those polls with spending plans and no thought given to shrinking the cabinet.

With government debt now set to hit the 60% debt-to-GDP mark, the story that investors, and especially those gathered at the Sandton Convention Centre this weekend, want to hear is one of a state that is ready to accept the reality that it has run out of fiscal space.

Japan has a debt-to-GDP ratio of 254%, the US’s is some 105% and that bastion of fiscal prudence, Germany, has a debt-to-GDP ratio that sits at 64%. Higher than ours, but it is nowhere near as reliant as SA and other emerging-market nations on external funding.

For these nations, 40% is the suggested debt-to-GDP ratio that should not be breached on a long-term basis.

We’ve been in breach for some time, hence the wolves at the door ready to punish the country for any fiscal misadventure by selling the rand.

Mboweni this week warned that the biggest wolf of all, the International Monetary Fund, may very well find itself dictating our fiscal spending. Should that come to pass, we should understand that sovereignty is all but lost.

Against this, Ramaphosa has to ensure that his ANC wins next year’s polls at a canter if he is to keep the wolves in his party from snapping at his heels.

The only hope he and his faction within that broad church of a party have of doing this is to get investment flowing into the economy from the private sector.

Business confidence has languished for far too long, and the longer it remains in such a place, the louder the noises from the populist branch of our domestic politics.

There have been positive steps from Ramaphosa’s government to get the private sector more bullish on the country’s prospects, such as a rehashed Mining Charter.

The willingness of the government to launch various commissions of inquiry has also proved that the new administration is open to some introspection. Though they have been frustratingly slow for many, there are changes afoot at the National Prosecuting Authority, the South African Revenue Service and the National Treasury.

Surely this is the time for big business to release spending, much like the R4.6bn Naspers announced this week it would be spending in our tech space, and the money Discovery is dedicating to build its banking platform.

Though these sectors aren’t as job-absorbing as a new mine shaft, it is investment in the new battleground of the fourth industrial revolution — a stage that SA simply can’t leave for developed nations and emerging Asia navigate without being involved.

The state can’t play a stimulatory role in the economy as in years past. The only way to ensure it doesn’t bow to political pressure and try to stretch itself even further — and is given time to adjust its fiscal position — is for business to step into the breach.

This is a call to ensure parties across the political spectrum find no place for the easy, populist economic solutions that turn into long-term and sometimes irreparable harm.

The only hope is to get investment flowing in from the private sector