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What recovery? The economy is already transformed into junk

Where is it taking us – this governing party that speaks left, acts right, rejects capitalism, but loves the wealth it has created for its members?
The ruling party’s main political objectives are not about reducing inequality and poverty, but maintaining them, says the author. Image: Shutterstock

President Cyril Ramaphosa in his ‘From the Desk Of The President’ statement on Monday (April 12) said:

“… our economic recovery plan is not about a return to what was, but about transformation to what is next.”

That is all good and well Mr President, but a plan doesn’t manifest simply because it is stated.

What is its implementation process? And what are the time frames – what part of the plan will be prioritised?

A cynic might ask what is left to transform if the economy has been decimated by (i) the pandemic, (ii) power supply shortages, (iii) subsequent load shedding, (iv) electricity price increases, and (v) not-so-friendly investor policies due to ideologies that are out of touch with the reality of the global economy.

If the dynamics of the economic wellbeing of the country are judged by its record, then the past five years have succeeded in transforming the economy into junk status.

Read: SA descends deeper into junk after two downgrades (Nov 2020)

It has made little difference in the short term that the administration of former president Jacob Zuma was replaced by Ramaphosa’s New Dawn, because the same political party is still governing.

Change without change

The changes in government have not translated into actual changes in government policies.

Yes, Ramaphosa recently denounced the Radical Economic Transformation (RET) rhetoric after his triumph in the party’s national executive committee meeting. However, in politics victories are rarely long-lasting – and in the ANC politics now characterised by the adage that an enemy of my enemy is my friend, victories are very short.

For all the talk about forging a new economy and placing it on growth trajectory that is distinct from the current one, our leaders still favour left-leaning socialist-sounding politics.

In their view this appeals to the people on the ground; in reality, however, their ways of thinking reveal a political class that is behind in the forward march of the world economy.

The battle between left and extreme left

For example, in his statement this week, Ramaphosa talks about harnessing the job-creating potential of the digital economy.

Yet in his party and within the alliance there remains this ideological contestation that makes policy formulation a battle between left and extreme left ground.

By that I mean that as the President of the Republic, Ramaphosa seems to be confined by the politics of the party that has deployed him, for the party’s policy concepts are determined to override the economic reality.

Missing from the patter about transforming the economy is the recognition that other states in the international system have an interest, and they are not inclined to wait for South Africa to refine its idealist approach to the state as put forth by the ANC and whoever it deploys as president.

Policy contradictions

In recent years South Africa’s policies have not lacked potential, but they have lacked good sense, good judgement, prudence, good leadership and foresight – all of which are important economic policy virtues.

The government’s consequent failure to act intelligently and responsibly can be seen in its three economic policy blueprints: the National Development Plan (NDP), the New Growth Path (NGP) and the Industrial Policy Action Plan (Ipap).

These blueprints all have recommendations or actions that, at times, are contradictory.

Of course now there is the Economic Recovery Plan (ERP), which has shown the fissures between government’s vision for the country and the ANC’s priorities, which are often inspired by the ideas of national democratic revolution.

Over the years this in turn has morphed into the quest for a developmental state.

Bewildering

These often-bewildering contradictions explain why the party’s leader, the president of country, can on the one hand recognise that globalisation characterised by technological advancement is reconfiguring the nature of work and economy. This is evident in his comment that to tackle the challenges afflicting the economy, South Africa must look to the digital economy as the way out of its constraints.

On the other hand, again in his statement on Monday, he lauded the ranking as “first in the world as a destination for global business services” bestowed on South Africa.

Yet virtually his entire party and its alliance partners constantly lament neoliberal policies because they see them as a hindrance to the socioeconomic challenges faced by the country.

Indeed, if the tripartite alliance had its way, a socialist-peppered-with-nationalist approach would frame the country’s future.

I guess, like many South Africans, I am trying to understand what the misadventures of the ANC, unfortunately for us, our governing party – a party that speaks left, acts right, rhetorically rejects capitalism, but loves the wealth it has created for its members – has brought for us?

It is clear that its main political objectives are not about reducing inequality and poverty, but maintaining them – a strategy that offers no answers to the country’s problems.

No matter how much we wish we could get on the digital economy bus and ride the high of that global business service prestige, our political elite will not let us.

They will not let us thrive.

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COMMENTS   39

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No bad or sarcastic comments from me. Sorry.
I agree with the writer.

Very dom view. The rand would not get stronger if the economy wasn’t getting stronger.

Dad-ape you are the one who is dom, the rand is only stronger because the US$ is weaker.

Terrorists cannot govern.
They can merely destroy things — The destruction of South Africa and its infrastructure is nearly complete so well done to the ANC – Mission accomplished.

Yes, all we can debate about is how many months or years it will take before even the ‘rich’ people can not buy the food they actualy want.
I suppose a lot of people walk around with big regrets, in RSA it will be different then the rest of africa remember.

RET= Radical Economic Theft.

This man thinks his job is to give “free stuff” away. Its all he is about as his personal fortune is “free stuff”.

Giving “free stuff” away does not build an economy it destroys it. What he cares about is it buys him votes.

People are “educated” but not trained. “Transformation” to him is giving the economy away “For Free”?? Does nothing but destroy it.

You can be a communist / unionist but want a capitalist outcome.

Heish!! These people.

It is clear that its main political objectives are not about reducing inequality and poverty, but maintaining them – a strategy that offers no answers to the country’s problems.

Well said. Its hard to say whether the government is just stupid or malevolent. I think they’re both as the lockdowns have clearly illustrated. Corruption is another story because this is their pocket of excellence.

A very toxic mix. It’s a miracle there’s anything left standing.

The flip side is how the adoption of good and sensible policies could turn the country around in a heartbeat.

But the ANC will not allow this to happen

Nevertheless, five years ago today a dollar was worth R14.58 and today an investor owning the Rand over those five years could buy dollars back cheaper at R14.43. All the while also receiving an interest rate 3-5x what they could have earned in the US. Compare that to the experience of Turkey, Brazil, Argentina and others and it is hard to accept the definition of the economy as junk. Socioeconomically it might be true.

NR : good points, though in foreign equities that look-back won’t work when alternative was JSE.

My old strategy with predicting the peak of a runt crash : it correlates exactly with when most investment advisors are telling their SA clients to buy offshore investments, Mauritian golf properties or Maltese passports. Maltese poodle would have been better bet.

As a nation we are our own worst critics. Only jewish mommas wail and complain harder than we do.

Agree Johan_Buys. Quite a bit of analysis about SA is done in absolute terms rather than relative to other countries.

Oi!

The scoreboard does not look good for us. The Debt/GDP ratio combined with the fact that all the bankrupt SOEs and municipalities are dependent on explicit and implicit government guarantees, plus the ballooning budget deficit and unemployment figures paint a bleak picture.

Only economic growth can turn the ship around and we cannot have economic growth under ANC socialist/communist policies of Central Planning and central control of the economy.

The debt levels and government guarantees create an explosive situation in the basement at the Reserve Bank, and Luthuli House is the detonator. This situation is highly unstable unless we remove the detonator to defuse the bomb of economic destruction.

I hear you, but the junk status of the economy is not based on the exchange rate. It is determined by debt levels, our ability to repay loans, etc. I just don’t see us overcoming the problems the ANC created for the country (as pointed out by Mamokgethi). Add to that the corruption, looting, stealing, bribery, state capture, etc and we are definitely heading towards disaster. The Zim$ also held its head up, until it didn’t. Do not be fooled by the current ZAR/USD exchange rate. That is a result of the work the reserve bank is doing, rather than anything the ANC government is doing. In fact, I’d argue, the serious problems we do have, is actually somewhat masked by the ZAR’s current level.

If all people did was hold USD for the sake of not having ZAR that would be stupid. I personally emigrated the majority of my investments a couple of years ago, these I then put into equities and ETFs in the US, UK & EU. Even though the exchange rate may be flat over the last couple of years the returns I made overseas outperformed all my local investments by far, it was not even close.

Regarding the exchange rate the question each investor must ask is what the outlook is for SA’s fiscal position and what the government will do to address this problem. If you believe that the government will be able to stabilise its fiscal position and then be able to grow the economy to get out of the looming debt trap then by all means keep the majority of your portfolio in ZAR.

But if you believe that the fiscal position will not stabilise and that at some point (in my opinion 5-10 years from now) the fiscal situation will reach a point where the government will be forced to implement drastic intervention and that most likely this drastic intervention will include the SARB monetising the deficit leading to high inflation and currency devaluation. Another intervention can be limiting citizens’ ability to emigrate funds, currently we have the R1m and R10m allowances but these can be taken away. In this scenario there are a couple ways of mitigating the risks:

1. Move the majority of your portfolio into commodities that are priced in foreign currency, not the smart move in my opinion.

2. Move the majority of your portfolio into locally rand denominated ETFs and ETNs that track international instruments. This can work, but even in this case your funds are technically still in SA and the government can through legislation / regulation close down such instruments.

3. Physically emigrate the majority of your portfolio into overseas banks and brokers. In this scenario your funds are physically emigrated and out of reach of changing regulation and even if the R1m and R10m allowances are removed your funds are already outside SA.

NR. Please note that in January 2015 MSCI USA was R18.77.
Today it is R56.80. So your Rands have trebled in value over 5 years.
Average 20% a year!

In what positive endeavor has the ANC ever succeeded after 1994 ? Thousands of unfulfilled promises , hundreds of dormant plans and Billions of Rand stolen and wasted. Only fools believe any uttering s that still comes from the ANC.

they absolutely plundered the country!

well that did’nt take long MW deleted my comment in under 30 minutes , not pc enough just like sars and zondo commission a farce

Why I will no longer be subscribing …

Excellent article, and well done on coining the phrase, “speaks left and acts right.” Just like the leader of BLM in the USA’s recent house buying spree.

Mamokgethi Molopyane journalistic opinion is always a refreshing jolt to current RSA affairs

The last three lines of this article is the definitive picture of the Government (ANC) now

I wonder if she has a podcast?

Socialism & Communism rule this country and we all KNOW the outcome. Sad

How to get the masses of moronic voters for vote for anything other than the ANC. (Or their EFF spawn for that matter)

I had the privilege of attending a presentation by eminent economists and asset managers in Sydney recently.

There was a long presentation and many references to the opportunities in ‘emerging markets’. Not once was Africa, never mind South Africa mentioned. In fact Asia was the focus, with a passing reference to South America.

Africa, Middle East , Russia – irrelevant. It’s really sad. The ANC and the others have no idea.

Russia is controlled by a dictator and a gang of oligarchs, The ME is obsessed with Islam and terror and Africa is, well, we all know the problem here: corrupt politicians who want to rule forever.

In Bangladesh they will make anything for you and deliver anywhere in the world.

The ANC knows that the better educated the population is, the less chance they will have of staying in power. This is a mere fact. They are only interested in perpetuating their position of power, that is all.

They couldn’t give a rat’s @ss about improving people’s lives, its only about keeping themselves in pole position so they can rip off public funds and abuse their power as much as possible.

If they did even the BARE MINIMUM in terms of governing things would improve overnight in SA but they can’t even be bothered to do that. They are government in name only!

What boggles my mind is the obsession Ramaphosa has with building a new “smart city” when his party has virtually destroyed almost all cities and towns in SA? How does he reason?

The brainless cannot reason !!

My father made me aware of an fact that I did not comprehend up until now: All cities/towns in SA were “created and named” pre-1994. Since then no new city or town…all are actually destroyed or just renamed! What are are we missing?

“A cynic might ask what is left to transform if the economy has been decimated by …” from this cynic, you should have started with ANC corruption instead of only bringing it in at one of the final paragraphs.

Everything is tainted by it.

what a sad state of affairs! I guess the only thing left to do is for the non-ANC voters to band together and rebuild this beautiful country.

Vicious article…but 100% accurate. This journalist has peeled the onion thoroughly and dissected the ANC in a manner that few can!

He has hit the nail on the head with the ANCs ideological baggage.

Lets have more form this chap!!

The only transformation one will see is BEE. Get rid of the whites and replace them with ANC cadres. But that is nothing new.

Well stated article.

Tells the truth.

Lets face it. The people of this country and nearly all African states will always remain poor with a smattering of rich politicians. There is no ambition to upgrade one’s life as it is easier to wait for hand outs (SASSA grants) , “free housing”, “free education”, free this and free that…
The vast majority in SA cannot budget, choose to remain ignorant, many still believe in witchcraft and have unrealistic expectations based on political promises.
This will not change for generations to come. Africa is alone, first world countries have long stopped giving aid as they have realised Africa is a bottomless pit.
It had makes any news in 1st world media anymore, they just dont care anymore.

Yep, recovery in South means recycling, South Africa except much of S a is still in the landfills, we need strong leaders and a luxury apartment prisons for corrupt politicians.

End of comments.

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