South Africa is in an extremely vulnerable situation. A “heavy and devastating storm” – to quote Health Minister Zweli Mkhize on the pandemic – is approaching and, simultaneously, our economy is collapsing.
It has been dealt a triple blow recently, with the massive run on our bonds, our country going into lockdown, and our credit rating being junked.
The immediate result of these will be a sudden drop in tax revenue coupled with a steep rise in the cost of borrowing. Having managed our economy extraordinarily badly over the past twelve years, dithering over the reforms we know we need to implement, we now find our cupboard bare at precisely the time when we need to ramp up spending considerably to save lives and livelihoods during and after this pandemic.
This is not just a problem in the short-term. The risk of long-term economic decline – a shrinking economy and runaway debt – and massive social instability has also intensified strongly. That puts lives at risk from threats other than the Coronavirus – threats such as falling healthcare and social grant budgets, malnutrition, starvation, growing unemployment and increased violent crime.
Minister Mkhize this week prevailed on provincial health departments to use this short grace period – the calm before the storm – to “move with speed” to prepare for the coming onslaught of cases of infection.
Similarly, there can be no dithering on the economic side. We need swift action to assist households and businesses in distress. This should be through existing mechanisms such as the social grant, VAT repayment and banking systems. SARB, the Treasury, and banks need to play a leading role. The government must put ideology aside and seek as much financial assistance as possible from the International Monetary Fund (IMF).
This must be coupled with swift, bold reform focused on implementation – both to mitigate the damage during this pandemic, and to enable our society and economy to recover as fast as possible once it has passed.
Economic reform has always been a matter of life and death. But this Coronavirus has amplified the trade-offs involved. Trade union bosses will find it much harder to justify putting their vested interests ahead of the common good. Statists will find it harder to justify propping up failing state-owned entities.
The cost of above-inflation pay increases to non-frontline public servants is the lives and livelihoods that will be lost by not directing the billions saved to the healthcare, social welfare and small business sectors instead.
Not only that, but it could also cost us a loan from the IMF, since that institution will be reluctant to assist a country so drunk on patronage, especially when the queue for loans is so long and clamouring.
For exactly the same reasons, SAA should be closed immediately and the assets sold off when possible. There is no justification for spending the budgeted R16 billion to keep it going (subsidising public transport for the wealthy) when this money could rather be spent on saving lives and livelihoods. Unbelievably, this budget decision was coupled with a reduction of R3.9 billion in the healthcare budget. This is simply untenable.
The rank unfairness and irrationality of this trade-off decision is now clear for all to see. In fact, we must put an immediate stop to all further bailouts of failing state-owned enterprises. To protect unproductive jobs at the expense of people’s lives and the productive, value-creating economy at a time like this is unconscionable.
Nor can we justify delaying opening our energy market to full competition from independent producers. This will make electricity cheaper and more reliable, taking considerable pressure off households and businesses in the coming months and years.
Likewise, reforms to our rigid labour legislation are now urgent. Small businesses need maximum flexibility and freedom to adapt and survive in rapidly changing circumstances. Otherwise they are left with a straight choice between breaking the law and going bankrupt. It is in no-one’s interest that successful small businesses die during or because of this sudden-stop economic period.
President Ramaphosa has acknowledged the urgency of reform, saying to Finance Minister Mboweni on Monday: “We now need to move boldly on the structural reforms programme.”
If he does not follow words with action, history will judge him harshly. He may not have the full support of this own party, but he has strong cross-party support to push reforms through parliament. Never has the need for a political realignment been more urgent.
Nor the need for a capable state move evident. Perhaps the most important reform of all is to start appointing people to positions of leadership based on their ability to get the job done in the best interest of the general public. It beggars belief that someone as incompetent as Fikile Mbalula is our Minister of Transport.
If this moment of heightened risk and danger gets us to appoint better leaders, fix the fundamentals, and make better trade-off decisions, some good may yet come from this terrible, deadly pandemic.
The most immediate and looming trade-off decision the President will have to make is between an extended lockdown and economic activity. This will require great political courage, since the easier political choice will be to err on the side of avoiding deaths due directly to Covid-19, even at the expense of many more deaths due indirectly to the measures taken to suppress it.
South Africa would have had more room for manoeuvre had we made better decisions in the past. But this is no time for looking backwards. Now is the time to accept current realities and act swiftly to save lives and livelihoods.
Warm regards,
DA Leader
John Steenhuisen
