Mamokgethi Molopyane
5 minute read
12 Nov 2020
7:51 am

Misdiagnosing the cause of the country’s economic woes

Mamokgethi Molopyane

One implication is that the government is spending money it does not have, worsening its indebtedness to the point of implosion.

Finance Minister Tito Mboweni. Picture: ANA

I’ve had time to mull over the country’s Economic Reconstruction and Recovery Plan, along with the Medium-Term Budget Policy Statement tabled by National Treasury on October 28.

The road to recovery is paved with good intentions – framed by the current administration as “unleashing the potential of our economy”* by betting on employment stimulus intervention that will somehow generate 800 000 job opportunities and R1 trillion infrastructure investment that will make the New Dawn possible.

These intentions were however immediately thwarted by the grim truth clearly presented in the mid-term budget.

One implication is that the government is spending money it does not have, worsening its indebtedness to the point of implosion.

Another, and one that is rarely spoken of, is the possibility of the country not being able to service the incurred debt.

These worries are worsened by the fact that, as our finance minister said in his medium-term budget speech: “Right now, government is borrowing at a rate of R2.1 billion per day.”


President Cyril Ramaphosa and Finance Minister Tito Mboweni have both alluded to drastic measures being required to revive the economy. However, I could not help but pick up on the contradictions.

For example, the president talking about scaling up and expanding public employment at provincial and city level juxtaposes with Mboweni’s call for pay reductions for senior public servants, including management positions in local government and across state-owned entities.

Furthermore, in his speech Mboweni emphasises the need to rehabilitate public finances by, among other things, bringing debt and spending under control.

These are but glimpses of conspicuous differences in approaches from a team that is supposed to be aiming for the same thing.

If you are reducing public spending to bring debt under control, how is it that you want to scale up traditional employment in public service and expand it in provinces?

Perhaps I am nit-picking a non-issue, but I think not.

The proposed wage reductions would affect ordinary men and women – nurses, police officers, teachers, municipal workers and other public servants providing essential services – more than the fat cats in management positions.

This leads me to the next point: Mboweni’s focus on public sector employee compensation – while rightly assessing the sustainability of the above-inflation wage demands – is misleading in how it creates the impression that the government’s fiscal constraints stem from there.

To me, the public sector wage bill is a misdiagnosed cause.

Decade of decadence

The real problems can be traced back to the actions over the past 10 years of those who, through their political powers and pursuit of decadence, facilitated institutional decay that coincided with economic stagnation – or caused it.

This is a period characterised by the South African political system that has been worsened further by polarisation, increasing inequality and poverty.

Too far gone, the root of government’s decadence runs deep, as is evident in the recent episodes at the Zondo Commission of Inquiry.

These past few weeks have revealed how South African bureaucracy has declined, is ineffective, and deems accountability inapplicable to it.

It may thus be argued that, as far as the state is concerned, it had long lost the ability to deal with any exogenous challenges such as the impact of the global economic crisis on South Africa, because of a hollowed-out bureaucracy that has largely been replaced by front people who can play-act radical, polarising and loud politics.

Their incompetence and the institutional sclerosis has brought us to this moment.


Policies have not responded to the amelioration of the little gains made on wages by many South Africans, who have had to spend more to buy food, use public transport, and access health and other services that government is meant to provide but has not.

Moreover, instead of progressing in serving the people, there is a regression in service delivery.

The real threat to South Africa’s economic, social and political wellbeing is internal: the continuing rise of the trade-off between the future of the ruling party that has become inward-looking, versus boldly putting forth policies that will enable economic recovery and income growth that could potentially lead to greater opportunities for many.

Just to be clear, I do not say the public sector wage bill is not a problem. It is, and it should be revised – especially when the country is being crushed by debt.

However, it is the political class that has definitely failed.

The primacy of politics has always held up a whip hand over the economy by virtue of its power to destabilise perfectly functioning institutions to allow corrupt deeds and practices to flourish.

The pandemic has brought to the fore the longstanding problem with government’s deficient capacity to pull the economy (‘the people’, it can be said) out of the deep dark hole into the light.

South Africa is here, where it is forced to look to the International Monetary Fund (IMF) for assistance, because of problems stemming from individuals who chose to fill their own pockets, weakening institutions, playing on our collective insecurities and letting economic and institutional sclerosis set in.

In order to pull off their greatest heist, bear in mind that many are still in government and singing a ‘new dawn’ tune.

No wonder the real causes of the problems are misdiagnosed.

This article first appeared on Moneyweb and was republished with permission.

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