SoD’s law looms over budget

So much for the spending, now for the future

Today’s South Africa, breaking and bent, anxious and violent, is the true end of apartheid and colonialism

Finance minister Enoch Godongwana may as well have kept his hat on when he delivered the budget on Wednesday. There were no more rabbits to pull out of it.

There was already enough international alarm about our power supply, our unemployment, our education and our levels of crime before President Cyril Ramaphosa decided to pick the low-hanging political fruit inherent in the state of disaster (SoD) he declared two weeks ago.

That was Ramaphosa’s choice. He made it for purely domestic political reasons — the ANC is on the back foot electorally and the SoD is a way of trying to rally voters behind a single cause (the end of load-shedding) for elections next year instead of having to explain why the country is on its knees and the ANC’s role, and his own role, in putting it there.

All he has done, of course, is to announce to the world the disaster that we are, so Godongwana was already deep in a hole when he started speaking. The fact is, there will by now be some kind of debt watch on South Africa. The rand, normally resilient when the dollar is flying like it is now, is the second-worst-performing emerging-market currency this year after the Argentine peso. Argentina has defaulted on its debt more times than anyone can remember.

Fortunately, our dollar-denominated debts are relatively low in proportion to the total, but we have begun to borrow steadily from the World Bank and the International Monetary Fund (IMF). It is getting to the point where creditors, even well-meaning ones such as the World Bank and the IMF, will be fidgeting a little when we (inevitably) ask for more.

Without enough electricity, we have no way of trading our way out of debt or high unemployment. Given all the known constraints, it was vital that Godongwana stick to his guns on fiscal consolidation. He sort of did.

“The fiscal outlook has improved somewhat

over the past year as a result of higher than expected revenue collection,” the National Treasury reported in last year’s Budget Review. “This revenue will be used to fund pressing policy priorities, and to narrow the deficit and reduce the borrowing requirement. As a result, government expects to realise a primary surplus where revenue exceeds non-interest expenditure

by 2023/2024, a year earlier than projected in the 2021 medium-term budget policy statement. Achieving this objective will enable government to bring consolidation to a close. The consolidated budget deficit is projected to narrow from 5.7% of GDP in 2021/2022 to 4.2% of GDP by 2024/2025. Gross loan debt is expected to stabilise at 75.1% of GDP by 2024/2025.”

The Treasury has quietly dropped the “bringing consolidation to a close” line for the dodgy signals it might be sending the markets while Eskom visibly collapses.

But besides announcing on Wednesday that the government would take over more than R250bn of Eskom’s frightening R440bn debt over the next three years, Godongwana somehow held his government debt “ceiling” to 73.6% of GDP by 2025/2026. That’s slippage from the 71% the Treasury was talking about last October but better than the 75.1% at budget time last February.

Partly, that’s great mining company tax revenue from a continued commodity cycle, but also efficiencies at the revenue service.

All in all, not a bad result, though you have to wonder what trickery there might be in that forecast.

Ramaphosa and Godongwana know the entire country knows what is at stake. Without some really good news before an election, likely to be held in May 2024, the ANC will lose its parliamentary majority and will be forced into coalitions at national level and probably in KwaZuluNatal and Gauteng.

The immediate result of a loss of hegemony would be the disappearance, almost instantly, of the ability to reward supporters with tenders and jobs. Hegemony has been the key to the ANC’s ability to finance itself. It will enter a potentially precipitous slide if it cannot hold the purse strings of the country’s biggest budgets.

The coalitions it forms will be critical to the country’s future. A worst case, in terms of investment and business, would be the entry of the EFF into government as a partner of the ANC. Sadly, while this is an implausible scenario, it remains possible.

On the opposition side, the DA is in two minds about what it would do in a hung parliament. There are cases to be made for and against governing in coalition with the ANC. To an extent it would depend on how desperate each is.

Former DA leader Helen Zille used to believe the ANC would split, with a wing falling in with the EFF and another, perhaps led by Ramaphosa, with the DA. This looks less and less like happening.

First, Ramaphosa looks less the business-friendly leader it was hoped he would be when he took over from Jacob Zuma in 2018. He has given strong backing to state involvement, indeed leadership, in the economy, and has backed ideologically driven leftist ministers in trade, industry & competition and in public enterprises. He has presided over the collapse of the Post Office, the freight and passenger rail system and, obviously, secure generation of electricity has proved too much for him.

Second, the ANC base is well to the left of the DA. It is hard to think of any ANC leader with a constituency who might be persuaded into a coalition with the DA, or whom the DA would regard as a suitable partner. Ramaphosa, popular in the country as he may be, would be stranded outside the party.

But one never knows. Coalition thinking has changed a lot since I first heard Zille map that scenario around 2015. There are more parties trying to eat the DA’s lunch, for a start.

The elections will be a great leveller, though, and I doubt any party is as well organised or prepared as the DA.

It lacks a central political banner capable of attracting votes around the country, in my humble opinion, but the rest of the opposition are playing either ethnic or racial politics in local government and often have more sound and fury than substance.

Nonetheless, from the moment Ramaphosa declared an SoD in the state of the nation address on February 9, campaigning for May 2024 began. Perhaps it was ever thus?

It is amazing, looking back, how little is changed and how completely the country is changed. We have a dominant nationalist government with a mix of radical, liberal and conservative opposition parties, just as we had in the late 1980s under PW Botha. And our politics has always been, one way or another, about race, and about opponents fighting for fragments of the nationalist centre.

I think it is helpful to see today’s South Africa, breaking and bent, anxious and violent, as the true end of apartheid and colonialism. Why should those systems have ended well with a peaceful election in 1994? Surely there is a price to be paid for centuries of neglect?

The ANC is a direct creation of racial discrimination. All its life, it has been twisted by resentment. Why expect the result to be an infinitely deep pool of wise and cautious leaders? Why would anyone expect its rule to end well?

This, now, us, is what the end of apartheid looks like. Not a promising new era but a battered and bruised country with the demented child of a loveless past in charge.

Perhaps that is, finally, the good news. That it cannot go on. Our agony, though, is not to know what renewal looks like. To be in the dark, waiting for the creature slouching towards us to reveal itself.