Of economic windfalls and political disasters

Karl Lagerfeld, the fashion genius at the house of Chanel who died this week in Paris, was described by a peer as “the creator of dreams”.

Whoever conceived the

2019 ANC election slogan, however, must be living a nightmare right now. To quote the party billboard:

“The Power is in Your

Hands — Grow SA”. The party’s reminder of where the power lies, in these dark times, invites the voter to cut the power of those who have shuttered the nation.

On the twin promise of economic growth, Wednesday’s budget revealed a governing party that has shrunk growth down to a miserable 1.5%. GDP figures do not determine electoral outcomes, but when SA’s growth was peaking at about 5% in 2004, the ANC was rewarded with its highest poll percentage to date. Difficult to estimate the vote-suppressing effect of the current gloomy numbers, but a recent Ipsos poll records that 59% of South Africans “do not think the government is doing a good job with the economy”. Not a vote of high confidence on the eve of an election.

Talk of the “developmental state”, or a promise by the president to “unleash an agricultural revolution” and a pledge that every pupil will receive (an electronically powered) tablet, amounts to pretentious piffle if the same promiser cannot keep the lights on.

And here the budget is distorted — and the deficit dangerously widened — by the need to bail out Eskom from its serial managerial, financial and transmission failures by a whopping R150bn over the next decade.

But all this is smoke and mirrors, since the first tranche of R23bn will be used to cover the utility’s interest and debt repayments, all of which in turn has to be borrowed by the government at ever-escalating interest rates. Talk about robbing the taxpayers just to keep their lights on.

“Too big to fail” was President Cyril Ramaphosa’s term for the Eskom fiasco and the dead weight of its monopolistic size jeopardising the country’s economy.

He borrowed the phrase from the bailout frenzy of 2008, which obliged central banks in the US and Europe to prop up some shockingly, indeed recklessly, mismanaged banks during the global financial crisis. Their sheer size in the world economy insulated them from taking the fall for their own greed and even criminal conduct.

“Wall Street got the bailout, Main Street got the pain” ran a headline at the time — something similar to the bailout as a “reward” for the profligacy and plunder of

Eskom over the past decade, the results of which have caused such pain to businesses large and small.

“Moral hazard” is the term for the lack of incentive — even unintended encouragement — to guard against risk when you are protected from the consequences of your own misconduct. Some parallel here at state-owned companies that are shockingly mismanaged across the board — with a few exceptions, such as the Land Bank. Just pray that Tito Mboweni’s stern conditionality for future relief, announced on Wednesday, is followed through in the next months and years. He asked the right question about their continued existence, but his silence on answering it is telling.

One reason for the government hanging on, with grim intensity, to some state dinosaurs can be traced to the 2004 election. Then, PetroSA illegally dipped into funds — via a front company — to funnel over R11m into the coffers of the ANC.

Financial Mail deputy editor Sikonathi Mantshantsha delivered his verdict on this literal cash-guzzler just before budget day, via Twitter: “PetroSA a co. owned by the people of SA and managed by the state, spent years searching for gas off Mossel Bay. Lost more than R15bn. Found NO GAS. Then Total, owned by investors in Europe searched and found HUGE RESERVES of gas and oil off the coast of Mossel Bay.”

Ah, those pernicious and rapacious foreign capitalists. They might be the one thing that saves us. Historian CW de Kiewiet once wrote: “SA progresses through economic windfalls and political disasters.” Let’s hope — some 70 years later — that he is still right.

Ah, those rapacious foreign capitalists. They might be the thing that saves us