Fri, 03 Jul 2020

Daniel Silke | SA needs a Ramaphosa reset

03 Jun 2020, 17:13 GMT+10

It comes as no surprise that as South Africa moves through Covid-19 and begins to confront the reality of a post-Covid operating environment, the contestation for future economic policy has become more vocal and politically charged.

It is also not surprising that many sides of the ideological spectrum seek an opportunity to lobby for a new 'default' position that the country should opt for. Given that the catch phrases of 'new normal' or 'economic reset' or 'reimagined future' are being bandied about, there are pretty good reasons to attempt to gain a head-start on the way forward.

The last few months have seen a number of ANC heavyweights weigh in. Most recent has been Ekurhuleni Mayor Mzwandile Masina, who unashamedly tweeted his support not only for nationalising the economy but also for the EFF leader Julius Malema's approach in dismantling white economic ownership.

Although rebuked relatively swiftly by the ANC, Mayor Masina clearly was deliberately provocative. It's not the first time either. It throws down the gauntlet to President Cyril Ramaphosa, who is increasingly embattled as the aftermath of Covid-19 sets in.

And, as the trial of former president Jacob Zuma nears, the proponents of 'Radical Economic Transformation' will increase in volume as a means of 'boxing' in the president and those supporting more pragmatic reforms.

A weakening economy on the back of pre-Covid vulnerabilities presents considerable opportunity for populist visions and socialist dreams to take root. With an expected two million job losses just due to Covid, a collection of factions, parties and personalities will be able to more easily ply those visions for South Africa.

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As the effects of the limited recovery package wears thin and even ends in the months to come, rising poverty can be a recipe for social unease. In this atmosphere, the messages of Messrs Masina and Malema can be seductive. Adding complexity is a not insignificant overlap of support for these positions amongst both the ANC, EFF and smaller entities like the ATM amongst others.

For President Ramaphosa, these competing world views were already swirling prior to Covid-19. Only in mid-February, has the ANC taken some very baby-steps towards the much vaunted 'structural economic reforms' headlined by chief sponsor, Tito Mboweni and Treasury.

The February Budget - now seemingly distant history - contained a faint dawn of a revised approach from government: holding the line on personal tax increases, reviewing public servants' salary increases, opening the door to disposing of South African Airways as well as loosening of the obsession with SOE's to stimulate private sector investment.

The key question, some 14 weeks since that Budget, is whether Covid-19 and the ever-combustible internal ANC political dynamics have shifted the thinking on these very reforms.

Of course, Minister Mboweni's position in support of these tentative steps were themselves fraught with contestation from within the Alliance, and it was only Covid-19 that largely paused a seemingly inevitable showdown with COSATU over the state wage bill.

So here's the rub. Covid-19 has exacerbated unemployment. Can you still restructure SOEs with job losses in the current environment?

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If it was difficult pre-Covid, it's even more so now. And, with South Africa's GDP expected to shrink dramatically as the country hurtles towards a local government election next May, there may be little political stomach for significantly trimming jobs.

Already, the efforts to keep the national airline (SAA) alive in a new guise - but at huge costs - indicates that the stomach for major retrenchments is simply not there.

While Minister of Public Enterprises Pravin Gordhan might be less married to the intoxicating 'prestige' of having a national flag-carrier, allowing the airline to dissolve would be yet another contributor to a jobs bloodbath, with eventual political consequences for an ANC still reliant on COSATU votes at election time.

Secondly, the Masinas of the world are not isolated to South Africa. A call for the return of big government or a big State will perhaps be one of the enduring legacies (at least in the short-term) following Covid-19.

Those with a propensity for a command and control economy - or those with a desire to return to the damaging patronage-based politics of the Zuma administration - will clearly and forcibly lobby for this.

Excluding the more nefarious tendencies, the move to enhance the State's role in the economy will first gain traction in a revived roll-out of the National Healthcare Insurance (NHI) in the country.

Since reducing inequality in healthcare will be a critical plank of the ANC's social redress and political platform, the attractiveness of state intervention may be extended to other terrains.

There may be much justification for a post-Covid world where social upliftment and major infrastructure projects gain traction. Those with a pro-State bias will want to control these efforts.

Unfortunately, South Africa's recent track record in leaving developmental issues largely to the management of the state has proven a disaster. Our infrastructure has flatlined or decayed and the State penchant for graft and corruption has set us back more than a decade.

If we are serious about resuming structural reforms, government will need to unambiguously recommit to increasing public-private partnerships rather than be swayed by those seeking to further undermine the private sector and their influence in the domestic economy.

And, if the state wants more control, it will have to allow more scrutiny of its management. In South Africa, the two have to go hand-in-hand.

Finally, the entire world will be paying for the Covid debt for years to come.

Part of our Mboweni-induced maturation in February was a pause on more taxes for individuals and a mooted drop in corporate taxes too. The question will be whether Covid changes this - as it may for many countries well beyond our borders.

There is a distinct danger that the erosion of business confidence can occur with higher taxes or wealth taxes or prescribed assets or any combination thereof. Withstanding these pressures have just become that bit tougher.

A new fragility

Covid-19 has therefore added a new fragility to the Ramaphosa Presidency. The policy terrain has been muddied further by reinforcing existing ideological cleavages within the context of a broader debate about growth mechanisms to offset poverty and inequality.

It may well be that these pressures will be tough to manage politically.

For President Ramaphosa, there is now also a potential 'new normal' to process. The time to pander to the purveyors of debilitating philosophies is over. Appeasement will not work in a South Africa urgently in need to real growth policies to run alongside inclusive social upliftment.

Our president has played it politically 'safe' for too long. Whilst it might buy time to hold his own party together, that time has now passed. The risk of just doing the 'same-old-same-old' is now too great.

Ramaphosa therefore needs his own reset. A reset that forges new alliances and compacts away from unworkable alternatives. A reset that can even alter the political landscape for the better.

A 'Ramaphosa re-imagined' is required - and should not be as elusive as it was prior to Covid-19 or else the end result will be a non-starter to the detriment of us all including himself.

Sure, there's a 'new normal'. And the president will have to choose sides as he navigates this tough yet necessary path.

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