A CRI­SIS EV­ERY­ONE SAW COM­ING

If re­cent his­tory is a mea­sure, SA’S debt to GDP ra­tio will con­tinue to hur­tle on to­wards the 100% mark

Financial Mail - - AT HOME & ABROAD - @jus­tice­malala by Jus­tice Malala

The Covid-19 pan­demic did not break our econ­omy. It merely sped up the jour­ney to where we were headed any­way: into the arms of the In­ter­na­tional Mon­e­tary Fund (IMF) and other loan sharks. It didn’t need to be this way, but here we are. We are here be­cause of po­lit­i­cal spine­less­ness.

The warn­ings about where we were headed have been there for ages. Back in Oc­to­ber 2018, fi­nance min­is­ter Tito Mboweni told a joint sit­ting of par­lia­ment’s stand­ing com­mit­tee on fi­nance and the stand­ing com­mit­tee on ap­pro­pri­a­tions that our eco­nomic growth was pa­thetic.

“If we do not do any­thing in our sit­u­a­tion in outer years we will face a debt-to-gdp ra­tio at or about 60% of GDP,” he said. “When that hap­pens we are very close to hav­ing se­ri­ous con­ver­sa­tions with the IMF. Whether you like the IMF or not — ide­o­log­i­cally or prac­ti­cally — if we end up in a debt trap, that’s where we will end up.”

He was not the first to ring the warn­ing bells. Back in Fe­bru­ary 2016, our debt to GDP stood at 44.3%. The then fi­nance min­is­ter, Pravin Gord­han, (he had been rushed back into the job fol­low­ing the dis­as­trous four-day term of the hap­less Des van Rooyen, a Gupta

ap­pointee) said in his bud­get speech that his tar­get was to sta­bilise debt at 46.2% of GDP in 2017/2018.

“Th­ese bud­get pro­pos­als sig­nal gov­ern­ment’s com­mit­ment to a pru­dent, sus­tain­able fis­cal tra­jec­tory,” he said.

Gord­han must have been jok­ing. Af­ter that bud­get speech he was fired and re­placed by fish-out-of-wa­ter Malusi Gi­gaba. Mean­while, pres­i­dent Ja­cob Zuma kept the fis­cal taps open, rack­ing up even more debt and giv­ing the fin­ger to those who warned of dis­as­ter. By Oc­to­ber 2018 Na­tional Trea­sury di­rec­tor-gen­eral Dondo Mo­ga­jane was at one with Mboweni, warn­ing that a loan from the IMF “is some­thing to avoid at all costs”.

Last week Mo­ga­jane told jour­nal­ists that debt lev­els risked breach­ing the 100% mark in 2023/2024 in a “pas­sive” sce­nario. By “pas­sive sce­nario” he meant that if SA con­tin­ued along the “spend, spend, spend” path it was on. He said a more “ac­tive” ap­proach — do­ing what needs to be done — would see debt sta­bil­is­ing to around 87.4% by that date.

If his­tory is a mea­sure, what do you think SA will do? It pains me deeply to say that the his­tory shows that debt lev­els will hur­tle on to­wards the 100% mark. The rea­son is po­lit­i­cal spine­less­ness. It is fail­ure to make choices now that will bear fruit in the fu­ture.

The cur­rent ANC ad­min­is­tra­tion led by Pres­i­dent Cyril Ramaphosa is as bad at this as the pre­vi­ous one was. In 30 months of the Ramaphosa ad­min­is­tra­tion there has been no in­di­ca­tion that cul­ture and prac­tice have changed an iota. Debt is still ratch­et­ing up as re­lent­lessly as it did be­tween 2009 and 2017.

It con­tin­ues to sur­prise me that when­ever the bud­get is loom­ing or is de­liv­ered, we look to the fi­nance min­is­ter and his team. The truth of the mat­ter is that with­out po­lit­i­cal back­ing and the req­ui­site po­lit­i­cal will, there is noth­ing th­ese peo­ple can do. They need the po­lit­i­cal cen­tre to co­here and to pro­tect them to do the job they have been given. If their ef­forts to sta­bilise our fi­nances are un­der­mined by po­lit­i­cal play­ers then, well, we are go­ing nowhere.

Pres­i­dent Thabo Mbeki em­pow­ered his fi­nance min­is­ter and fiercely pro­tected the cen­tral bank. Nowa­days the pres­i­dent hardly ever stands up for his fi­nance min­is­ter or the in­de­pen­dence of the Re­serve Bank. Even the deputy min­is­ter of fi­nance has had a go at the bank. It’s a free-for-all, ac­com­pa­nied by a deaf­en­ing si­lence from the Union Build­ings.

Ramaphosa, the man in charge, has done pre­cious lit­tle to bring co­her­ence to ANC and gov­ern­ment eco­nomic pol­icy or to al­low Mboweni and Co to rein in ram­pant gov­ern­ment spend­ing. He talks a good game but the num­bers don’t sup­port him. He is not back­ing his own team. He can­not even curb the dam­ag­ing, non­sen­si­cal cig­a­rette ban, clearly fear­ing min­is­ter

Nkosazana Dlamini Zuma.

This is a very neg­a­tive prog­no­sis. How­ever, it is based on the his­tory. Ramaphosa does not have the courage to stop this debt spi­ral.

The ANC led by Pres­i­dent Cyril Ramaphosa is as bad at keep­ing debt un­der con­trol as the one led by Ja­cob Zuma was

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