Let’s face it and fix it
Fear-mongering about the extent of SA’s “debt trap” is unhelpful, but government still needs to acknowledge the facts
Can we please get over the denial? After all the attention it received, I read RW Johnson’s book on SA’s current situation,
Many of the observations on governance have merit, but the economic chapter which concludes that SA is on the brink of bankruptcy is particularly weak. By Johnson’s assessment, SA’s economic collapse is imminent as there is a debt trap looming. A debt trap is when you are forced to borrow simply to make interest payments on your previous borrowings.
The debt trap, he suggests, will force SA to turn to the IMF, which will impose austerity, and the result will be regime change.
SA is a long way from a debt trap — provided the expenditure ceilings finance minister Nhlanhla Nene specified in the February 2015 budget are retained. I expect they will be. Unfortunately this means that the higher-than-expected public sector wage hikes this year will result in net job losses in the public sector as posts are frozen and will further stunt capital expenditure. The rapid increase in public sector wages — without any real improvement in service delivery — will have negative consequences. But one of them is not (yet) an impending debt trap.
The negative story-line on SA has always been excessive. Therefore it is not surprising that there is frustration in government about the inordinate pessimism that pervades discussion in society.
Unfortunately, government also needs to face facts. Obfuscation and ostrich-like behaviour are pernicious. Here is a simple fact that government needs to own up to.
Second, the new visa regulations imposed on tourists from many countries — particularly China — and the documentation required for children travelling abroad are harming the tourism industry. I’ve heard deputy home affairs minister Fatima Chohan attribute the drop in tourism numbers to some combination of deteriorating global growth and Ebola.
Goldman Sachs recently warned of the negative impact on Thailand’s growth from slower growth in tourist numbers — due to weaker regional growth and the Mers disease. They see less growth — not a 30% yearon-year contraction in tourism arrivals, as SA recently experienced. Therefore the problem is not weaker global growth.
Ebola is also a red herring — SA had a bumper 2014/2015 Christmas season. International arrivals into Cape Town airport went up by 3,2% y/y in December 2014. The growth in January 2015 was a bumper 8,2%.
The peak of global news flow on Ebola was between March and November 2014. Having ignored Ebola then, did tourists suddenly awaken to the problem in June 2015, when arrivals were down 30% on June 2014?
In a recent address, Chohan noted that SA was the largest recipient of asylum seekers globally and that, as a country, we had a responsibility to protect our national interests.
I’d guess that very few of those asylum seekers arrive by air. And most of the illegal immigrants walk across our porous borders. Europe can implement harsh visa regulations because it is rich enough to do it. SA is not. The home affairs department needs to acknowledge it made a mistake and implement pragmatic visa regulations that promote job growth.
SA’s biggest problem is the high level of unemployment among unskilled and underskilled young men. One sector that could quickly absorb the unemployed is tourism.
Trying to change the narrative by denying the basic facts is pointless. It will not solve the growth or unemployment crises currently plaguing SA.
If the ANC government is planning to change the narrative by directing its advertising spend away from those media outlets critical of it, that is a short-term, weak plan. It will not improve our sovereign rating. It will not create growth. It will not create jobs.