We’re in the final act of a tragedy

Clearing my desk the other day I came upon a story I had printed out with an alarming headline: “SA on one-way ride to a debt crisis, warns Michael Sachs”. Sachs is a seriously wise economist and former head of the National Treasury’s budget office. He quit rather than bend the knee to Jacob Zuma and the Gupta brothers.

It was Wednesday, the same day finance minister Enoch Godongwana delivered his medium-term budget policy statement, warning that we will spend more than R550bn a year (R1.5bn-plus a day, including weekends and holidays) paying interest on our debt, which by 2026 will reach about R6-trillion.

“Our challenge,” Godongwana told MPs, “is that rising debt service costs are crowding out important social spending, and our economy has not grown fast enough to support increasing expenditure or our current debt levels.” His strategy, he said, was about “avoiding a fiscal crisis and preventing the build-up of systemic risks to the economy”.

That was all on November 1 2023. The news story I had stumbled across with Sachs’s warning, written by Carol Paton for Business Day, appeared on October 27 2020, three years earlier! Sachs’s warning was prescient and we are now deep in the very fiscal crisis he was talking about.

It is not that our debt is outrageous. It is about 73% of GDP — much lower, for instance, than Japan, where the ratio is about 120%. But the Japanese economy can afford it and we can’t. To raise debt (to borrow) we have to issue bonds, but foreign buyers have vanished and the only way we can continue borrowing, if only to keep up paying off older debt and public sector salaries, is to issue very shortterm bonds. That leads to more and more pressure. Until we default.

Basically, Sachs’s message is that where interest rates are higher than the economic growth rate and politics makes it impossible to cut spending, a fiscal crisis becomes “almost certain”. This is where we are now and will be for years. The malignant logic of it all is inescapable. When you can’t pay your debts you lose your freedom to choose.

This is the ANC’s economic pantomime laid bare. The politics, the theatrics, the empowerment of a few, the deployment posing as transformation, the corruption, the neglect, the whisky and champagne, the waste, the arrogance and the disdain are all leaving the stage now. We’re in the third act.

Quite how the ANC dies as a government is impossible to predict. Despite most polls signalling a collapse in the ANC vote it may be able to form a government after elections next year. But I doubt it is going to be able to control parliament the way it does now. That promises a much rougher ride for President Cyril Ramaphosa.

Not that he shows any sign of alarm. Answering questions after the budget speech he said infrastructure development was going to be a key focus. He’s been saying that for years and while there’s lots of paper being copied and distributed, there’s not much infrastructure to show for it. That’s because the ANC is not competent to run a complex economy.

Still, we are apparently fast-tracking “growth-enhancing reforms” and we have a cool new financing mechanism for big-ticket infrastructure projects such as dams and waterworks. “We want those projects to move ahead,” the president said. “We have reached a level where we are now unleashing all that and we are going to see a lot of infrastructure projects strewn right across our country.”

“Unleashing ”… crikey, you just have to shake your head. This government isn’t unleashing anything. It is, in fact, a menace to us all. And when he says “a lot of” or his other favourite, “a number of”, you can be sure it’s because he doesn’t know how many projects are going to be unleashed. He just hopes you believe him.

What cool new financing mechanism magically gets private finance into a dam in the Transkei that’s been on the cards for close to 70 years? The government couldn’t even get a local ports company like Grindrod to bid for the container terminal concession Transnet offered at Durban port.

Anyone desperate enough to do business with the state needs to understand that it also means doing business with its master, the ANC. The lies and the deceit start the moment you sign, and Ramaphosa can’t protect you. Fortunately, this drama is almost done.

This government isn’t unleashing anything. It is, in fact, a menace to us all