STRAIGHT TALK: Recession: now’s the time to flip the script

In a speech last month, Dennis Davis warned: “There can be little doubt that existing patterns of poverty and inequality threaten the possibility of continued democracy and the stability of the South African state.

We would do well to heed his warning.

This week StatsSA reported that SA’s economy grew at 0.2% in 2019. Compare this with the world and African average of around 3% and Ethiopia’s of around 9% and it’s clear we’re on the wrong track here in SA.

Our population is growing at around 1.4% each year. So, we’re are all getting poorer, and have been doing so for the past five years and will keep doing so until we change track.

Two years in, and South Africa has slipped into the second recession of Ramaphosa’s presidency, with our economy having contracted during the second half of last year.

Though “slipped” is the wrong word – more accurately, it was shoved into recession by a government committed to outdated command and control ideology.

We will never get out of our low-growth, high-debt trap by continuing to operate within the same paradigm that plunged us into it in the first place: ever-increasing state control. We need to change paradigms from concentrating power in the state to dispersing power to citizens.

Less state control means more private sector control. In other words, it means unleashing the real economy-builders and job-creators: entrepreneurs and investors.

It would be a mistake to shield Ramaphosa from blame for this recession by arguing that our economic collapse is the result of state capture and corruption during the Zuma era.

State capture and corruption are themselves the consequence of excessive state power. Cadre deployment and BEE are the key enablers. Ramaphosa directed the former and embraced the latter.

We didn’t just drift here. This is the ANC’s grand two-step plan – what they call the National Democratic Revolution – in which first the ANC takes control of all levers of power within the state and then the state takes control of every aspect of our economy – and, ultimately, of our lives, rendering us completely dependent on an all-powerful state.

This is the communist script and if it didn’t work in the 20th century it certainly won’t in the 21st against a technological tsunami driving diffusion, be it of the capacity to publish information, generate power, hail lifts or sell accommodation. It’s high time to flip the script and disperse power to the people.

Yet Ramaphosa’s policy response to our economic crisis has been to double down on more centralisation and control. This will only deepen and prolong the crisis.

SONA, the budget, and other ANC utterances show that the government is committed to an ever-increasing role for the state. More state ownership of land and companies through EWC and prescribed assets. More control of our health sector. Retaining control of our energy sector by pumping R230 billion into Eskom even though the best route to reliable, affordable electricity is to sell off power stations and open the energy market to full competition. Retained ownership of SAA, even at a cost of R16 billion which could have built over 200 brand new schools. More BEE and employment equity. More control and ownership via a state bank and a sovereign wealth fund, as if the country is awash with cash.

And it certainly isn’t. On the contrary, it’s going bankrupt, spending R1000 million more per day than it earns in tax revenue. Because here’s the thing. This outdated ideology of “more state” doesn’t just suffocate the private sector, it also kills the state itself.

Hence the state is now cutting back spending on essential services such as education and health. Only a state hellbent on ownership would pump R16 billion into public transport for the elite while cutting R3.9 billion from healthcare to the poor, as they did in this budget. This kind of trade-off only fuels inequality and instability.

Any real plan for reform, such as Treasury’s plan that Tito Mboweni published last year, is quickly shot down. To placate investors and ratings agencies, Ramaphosa is flirting with reform, promising to open power generation to more independent producers (IPPs), allowing municipalities to purchase direct from IPPs, and slowing the growth of the public sector wage bill.

But he’s being very timid in implementing these promises. SONA was a full three weeks ago and there are still no firm commitments around when bid window 5 will open for a new round of IPPs to sell power to Eskom, or when municipalities will get the go ahead to start purchasing direct from IPPs.

Tinkering at the edges will not solve our crisis. We need a wholesale paradigm change. The state must not own and direct the economy. Citizens must own and direct the economy. Real empowerment gives power to the people, not the state.

Power to the people underpins the DA’s vision of an open, opportunity society and our plan to fundamentally fix what is broken in our economy and roll back poverty, inequality and unemployment.

In South Africa, economic justice – of the sort that uplifts rather than immiserates the majority – can only come from a growing, people-driven economy. Last week, the DA released its draft Economic Justice Policy for public discussion ahead of our policy conference in April. It is our plan for tackling the injustices that exclude over 30 million South Africans from our economy. It is a plan to empower the majority. That’s what flipping the script is about.

Warm regards,

DA Leader

John Steenhuisen

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