Now is the time of monsters

(John McCann/M&G)

(John McCann/M&G)

COMMENT

Water cannons and stun grenades were used outside of the World Economic Forum Africa (WEFAfrica) meeting in Cape Town this week against womxn protesters, after the brutal rape and murder of University of Cape Town student Uyinene Mrwetyana.

This came after days of xenophobic marauding and looting, with foreign and South African shopowners having their livelihoods erased in the Johannesburg and Pretoria CBDs, Tembisa and Alexandra.

In Nigeria protesters responded by targeting South African-owned businesses, Shoprite and MTN, the army reportedly preventing the destruction of one Shoprite store.

Eskom, in a state of the system briefing on Wednesday, reported that its turnaround plan has stabilised the system, but that it has not been able to improve power station performance, meaning the risk of further power cuts remains, especially in the coming period when it takes more plant out of operation for maintenance.

An alleged organised crime boss, as per evidence to the Zondo commission from a former crony, was feted at his funeral service in central Port Elizabeth, with a former head of state and other political dignitaries in attendance.

Speaking at WEFAfrica before the water cannons were turned on, President Cyril Ramaphosa quoted Antonio Gramsci: “The old world is dying, and the new world struggles to be born: now is the time of monsters.”

Indeed.

Treasury, in these monstrous times, has been trying to keep Eskom (and with it the rest of the economy) afloat while tax revenues — chiefly VAT and corporate taxes — fall, and credit downgrades loom with an attendant higher cost of borrowing, while investor disquiet — much of it centred around an unpredictable, mad United States president — stalks the global markets.

It would be impressive — perhaps miraculous — under these conditions if treasury could both cut back spending and spur growth, somehow pulling off these contradictory demands simultaneously.

Last month, on August 22, Business Day reported that treasury had called for government departments to make expenditure cuts of 5%, 6% and 7% over the next three years, the total savings amounting to as much as R300-billion.

Finance Minister Tito Mboweni earlier, in his February budget, signalled he was looking at cutting R25-billion from the civil service wage bill over the next three years, Bloomberg reported. This would be done by encouraging early retirement. State workers’ salaries account for about 35% of the R1.8-trillion budget for the fiscal year that ends in March.

But you can’t take this much money out of government spending — now R1,8-trillion a year — and expect growth.
This would have to come another way, from a plan of some kind to lift our lacklustre levels of growth, which would distress developed economies with their high levels of employment and impressive welfare safety nets.

But with the widespread poverty and high unemployment that characterises South Africa, the somnolent growth of recent times will just not do.

Mboweni last week tabled a plan intended to promote economic transformation, inclusive growth and competitiveness. The plan has been enthusiastically received by business and some commentators who see the mooted reforms to be largely a list of relatively easily implementable ideas to free small business from the dominance of large, entrenched players.

Intellidex’s Peter Attard Montalto liked the fact, in particular, that the reforms are not pie in the sky, but “evidence-based”.

But the 77 pages of proposals, which have been circulated to Cabinet ministers, and which were released for public comment, immediately ran into a wall of protest from sections of the ANC and its union allies.

Mboweni was accused of pursuing a right-wing agenda and of having gone rogue. It should be hardly surprising that Mboweni wanted to expedite debate on the way forward, given the parlous state of the country’s finances. Government revenue figures for the end of Julyshow that there could be as much as a R50-billion shortfall this year thanks to lower VAT and corporate tax collections.

Treasury, which has already had to find R128-billion to bail out Eskom over the next three years, clearly sees urgent action is needed to steer us clear of a credit rating downgrade in the first instance and, assuming that dramatic corrective action is not taken, possibly into discussions with the International Monetary Fund which may end up helping us do what we cannot do ourselves.

But organised labour is seeing the document as no more than peddling failed ideologies, with Zwelinzima Vavi of the South African Federation of Trade Unions, for instance, saying the report identifies exports as a key driver of growth.

He says this is based on a 2014 World Bank report, but “South Africa is, in reality, extremely vulnerable to export-led decline, just as we were in 1998 and 2008, because of the ongoing run on emerging markets which just crashed the South African rand from R13 to R15.30 to the dollar in recent weeks; the imminent world recession and a potential fully-fledged global capitalist crisis; pre-existing processes in which globalisation has been in “retreat” since 2007, which the Economist magazine terms “slowbalisation”; the ongoing Chinese economic slowdown to the lowest GDP growth since 1993; the shrinkage of global value chains from 28% to 22.5% of exports; the likelihood of increasing costs for faraway trading transactions because of shipping and airline carbon taxation; Africa’s worsening debt crisis which makes regional export growth far less feasible; Trump’s chaotic trade war, with not only China but many other countries, including South Africa; and the adverse impact of Brexit on South African exports which is anticipated in late 2019.”[Is this all one quote?? from Vavi? Ask Kevin]

Whereas Mboweni wants reforms to swing the balance of power away from big to small business, Vavi sees this the other way round. He says the monopolised capitalist classes, which are still largely owned and run by the white male elite who ruled under apartheid, are trying, like Mboweni, to pretend that the biggest problems are faced by small enterprises, when in fact the biggest problem small businesses face are monopoly big business which conspire to exclude them from the mainstream economy.

“Far from labour rights being the main obstacle to SMME [small, medium and micro-sized enterprises] growth, the biggest problems they confront are lack of access to affordable credit and to markets because of the stranglehold of the monopolies,” Vavi says.

He says Mboweni uses the “plight” of SMMEs to justify policies, which are in fact demanded by the big monopoly employers.

He says the most alarming passage in the paper is: “rigidities in labour market institutions and regulations raise costs for SMMEs. This includes the extension of collective bargaining wage agreements to SMMEs”.

“If these wage agreements raise labour costs without concomitant increases in productivity, it reduces the global competitiveness of South African workers and may inhibit the long-term sustainability of SMMEs and contribute to rising youth unemployment.

“In addition, the introduction of the National Minimum Wage could potentially have an adverse effect on small businesses who cannot afford the increase. While there is an exemption available for small and micro enterprises, there are concerns that having to apply for this exemption introduces additional red tape.”

Business, watching from the sidelines as economic conditions deteriorate and the social fabric unravels, appears to be unnerved. Business Leadership SA’s Busi Mavuso, for instance, wrote in Business Day that Cabinet must forget its squabbles and back Mboweni’s plan. 

“What we need is for the Cabinet to fully support and stand behind the policy document, while working on smoothing out its wrinkles. Clear targets need to be set, with even clearer time frames. We need to look at the policy statement and ask ourselves what can be done now, with least resistance — the low-hanging fruit. We need to move now. The time for grandstanding and demanding perfection is past. This is not about supporting Mboweni. It is about standing behind SA Inc.”

Ramaphosa is yet to declare where he stands on Mboweni’s document, but when he wasn’t quoting Gramsci’s monsters at WEFAfrica, he said improving the ease of doing business, a key driver of the treasury document, will be a major focus of his government.

Kevin Davie

Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote. Read more from Kevin Davie

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