When CR’s 1001 Nights’ fables equal your nightmares

Johannes Wessels
@johannesEOSA1

Instead of a State of the Nation Address brimming with details about the “extraordinary measures” required to realise Vision 2030 or the “difficult choices that will not please everyone” in order to get the economy growing again, president Cyril Ramaphosa’s SONA 2019 Mark 2 was more like a story in the tradition of One Thousand and One Nights.

It was a missed opportunity.

Not as disastrous as PW Botha’s Rubicon speech of August 1985, but akin to it in the sense that the President doesn’t appear to grasp the dire economic circumstances and the drastic policy and execution mode changes required to address these.

The stories of A Thousand and One Nights originate from the virgin bride Scheherazade who staved off execution the morning after (a fate that befell numerous one night brides preceding her) by enthralling the Persian Shah-ryar through story-telling without divulging the conclusions. Shah-ryar then kept her alive in order to hear the conclusion the next night, just to be enthralled by another story that would not be concluded. SONA 2019 Mark 2 tried to work magic on South Africans, foreign investors and rating agencies by fable after fable without a hint of how this would be fulfilled.

Bullet trains or magic carpets?

Instead of Sulaiman’s Magic Flying Carpet that sailed through the air so quickly that he breakfasted at Damascus and supped in Media, the delayed travellers of the neglected and sabotaged Metrorail can be inspired by Cyril’s Bullet Trains zipping “through Johannesburg from Musina to Cape Town, stopping in Buffalo City on their way from Ethekwini back here”.

SONA regurgitated fables about:

  • Aladdin and the Treasurer’s Magic Lamp: Tito Mboweni will (again) be asked to rub the Treasurer’s Lamp to release the SOE bail-out genie for Eskom. This time for R230 billion, a cool 53% more than was envisaged in the Budget a mere 4 months ago…
  • Ali Zupta and the 40 State Capturers 
  • The First Old Man’s Tale dealing with magical transformation was transformed into the First Man’s Old Tale about the metamorphosis of a dysfunctional civil service into a capable developmental state directing and leading economic growth.

Not a crossing of the Rubicon

SONA June 2019 was a major missed opportunity: the third in three weeks, following closely on:

  • the feeble attempt of rationalizing state departments by keeping a slightly trimmed Cabinet (do we really need more than 20 ministries?) and a Gupta-wedding like following of deputy ministers, and
  • preferring (again) ANC unity rather than effective governance by accepting Faith Muthambi, Mosebenzi Zwane, Supra Mahumapelo, Sifiso Buthelezi and Tina Joemat-Pettersson as chairpersons of key parliamentary select committees.

One can only conclude the President and his advisors are still convinced that – apart from addressing State Capture – nothing material has to change and that just more of the same is required, especially grand sounding summits. There was neither an urgency to further policy certainty, nor an inspiring announcement of a package of measures to stimulate growth.

From an economic growth perspective, SONA will be remembered for its lack of detail and an abundance of vagueness.

Key economic messages in SONA

Concerning the economy, the following key messages emerged:

Eskom is terminal, but we will pretend it can be revived

The Eskom that is “too vital for our economy to be allowed to fail. Further details will be provided by the Minister of Finance in due course” implies tax-blood transfusions will continue indefinitely.  Government has not made any assessment as yet about the opportunity cost of the continued bailing out an inefficient utility. The inability of the President to tell Cosatu and the populists on the ANC benches that (some components of) Eskom can only be rescued if there are massive job losses at the overstaffed monstrosity with simultaneously a substantial increase in productive efficiency, indicates he values the interests of the three-party alliance as more important than those of the country.

What Zuma had openly stated (the interests of the ANC are paramount), Ramaphosa is practising. Every bail-out of an inefficient SOE is shoving a big fat middle finger at not only the tax payers, but also the poor who are denied proper service delivery.

The investment drive struggles uphill in first gear

The Investment Initiative to secure FDI worth US $ 100 billion by March 2023 (driven by Ramaphosa’s special envoys including Trevor Manuel) is not making the expected progress.  The following sentence says it all: “At a time of uncertainty, the investment envoys has built important bridges between government and the business community. From their feedback, it is clear that much more needs to be done to improve the investment climate.”

In plain language:  investors have a different perspective than Government about what constitutes an environment worth investing in. The figures tell it as well: the R300 billion pledged at Investment Summit 2018 (of which the bulk were commitments to projects already in the pipeline) is less than 4.5% of the target set by the President and that after 23% of the timeframe has passed.

IPAP requires a rethink, but we’ll continue doing the same

SONA repeated the focal areas of the Industrial Policy Action Plan (IPAP) indicating there will be continued focus on these areas.  That whilst the decade of IPAP under Bill Davies registered massive contraction in the manufacturing sector.  Coupled with the more of the same (no new ideas have emerged) was the acknowledgement of strategy failure: “(t)his requires us to reimagine our industrial strategy to unleash private investment and energise the state to boost economic inclusion.”

We are going to select your pension fund investments…

According to SONA, pension funds “are enthusiastic about participating in the Infrastructure Fund”. In plain language, Government considers the consultation process has been concluded sufficiently to proceed with prescribed asset investments.  Those who believe this Infrastructure Fund will outperform the investments handled by Hendrik du Toit of Investec or Kokkie Kooyman of Denker Capital will applaud, the rest should worry.

Do unto others as we are not willing to do unto them

The President considered it “vital to bring down the cost of data” since that was essential for economic development and unleashing opportunities for the young. He called upon the telecommunications industry to ensure “the cost of data is in line with other countries in the world”. Whilst he mentioned the need of a reduction in port export tariffs and that government was working on “lowering the cost of compliance”, there was no commitment to bring those rapidly in line with international norms.  

A difficult choice and even more difficult to implement

The closest resemblance in SONA to “difficult choices that will not please everyone” was the comment that the days of “boycotting payments (for Eskom)” was something of the past. Again, however, there was no action plan on how to achieve that or what the consequences would be for those refusing to pay or who tap illegally into the power network.

The Freedom Charter and the story of Creation

Is the lack of an action or implementation plan part of the institutional DNA of the ANC?  Already in the 30s Sol Plaatjie lamented the inaction and lack of drive within the ANC. Has nothing changed?

And consider the wording of the Freedom Charter. It echoes those of Genesis 1: “there shall be…”   Unlike Genesis 1, however, the “and it was so…” is largely absent.

In similar vein SONA announced the time for urgent action with no action plan on the table. There are only two explanations:  either there is no grasp of how deeply in trouble the South African economy is, or the blinkers of the National Democratic Revolution are blinding those in its tradition to see that there are viable alternatives…

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