Business Unity South Africa (Busa) president Sipho Pityana, whose prescient warning, “Wake up, the cows are being stolen,” when the state capture crowd were in the ascendancy, has given President Cyril Ramaphosa a list of what has to be fixed — and soon.
Pityana, who has met Ramaphosa twice in the past couple of weeks, says runaway government debt poses the risk of “taking us all down”.
Busa says the bailouts of state-owned entities, inflation-beating public sector wage increases, low growth and disappointing tax revenues are a toxic concoction, which, if not addressed through measures such as cutting spending and partial privatisation, would inevitably force the country into an International Monetary Fund (IMF) type of austerity programme.
This would not have been news to Ramaphosa, who at a meeting at Nedlac last week described the economy as being in a “deep and serious crisis”.
It would be nice at this time for the global economy to be purring along, but United States President Donald Trump, when not stoking the flames of white nationalism on Twitter, has been playing chicken in a trade war with the Chinese. Trump’s tariffs, which have had the effect of making Americans pay $100-billion more for Chinese goods, are an effective tax on these consumers.
This is a war that he has not been winning. Americans have been sourcing goods from elsewhere in Asia while US exports such as soybeans have had difficulty getting into the Chinese market.
Trump should sensibly back down but, true to form, has upped the ante, tweeting last week that as of September 1 the US will put an additional 10% tariff on the remaining $300-billion of Chinese imports. “This does not include the $250-billion already tariffed at 25%,” he added.
The Chinese currency fell to below seven to the dollar for the first time since 2008, putting markets globally into a tailspin amid fears of a currency war between two of the world’s largest economies. The rand traded at a smidgen below R15 to the dollar in the ensuing maelstrom.
The US treasury claimed China had deliberately devalued its currency, but the former chief economist at the IMF, Olivier Blanchard, tweeted that the US administration had “come up with a new and creative definition of currency manipulation: not intervening to prevent market movement”.
China fixed the yuan to the dollar at below seven on Tuesday and the markets reclaimed some of the losses, the rand trading on Tuesday afternoon at R14.84.
An unpredictable president with twitchy Twitter fingers is single-handedly making the global economy a difficult place to navigate.
Former US treasury secretary Larry Summers blogged that the trade conflict is a possible prelude to a larger conflict between the two nations. “When it appears less likely that a conflict over well-defined and ultimately not-that-difficult commercial issues can be resolved, rational observers conclude that it is also less likely the United States and China can manage issues ranging from 5G wireless technology to North Korea, from the future of Taiwan to global climate change, and from the management of globalisation to the security architecture of the Pacific region.”
Back home, economic reform is clearly urgent. But Trump will not make this job any easier.