I am by nature an optimist.
That being said, the continuing weakness in the economy and a political leadership that is shaky has dented my optimism.
It may be true that a president inherits the economy of their predecessor, however, I cannot believe that the country will become stable under the constant battering of any plan aimed at addressing the struggling economy.
The current economic plan by Finance Minister Tito Mboweni, for example, met with opposition the minute it was announced. The plan was received with some reservation even from within his own party, yet the ANC has made it clear that it will adopt some of its proposals.
There has not been any indication from President Cyril Ramaphosa whether his office supports Mboweni’s plan.
But don’t hold your breath – three things stand in the path of the economic recovery strategy outlined in the plan:
- Firstly, the ANC broad-church approach of collective consensus means that unless the plan finds great support internally, it will remain a discussion topic instead of actionable plan.
- Secondly, and based on the party’s latest national executive committee statement, further discussions regarding the plan are still going to be held with its alliance and social partners.
- Thirdly, the party’s track record of poor economic policy formulation and implementation is a reason for concern.
What does this tell us? Nothing we didn’t know before.
The real risk will always be a political leadership that converts a struggling economy into a real crisis.
Moreover, the lack of trust between key stakeholders (business, government and labour) has made any plans towards economic recovery a politically contested battle. You’d understand why the sense of pessimism is rising, not just in the business sphere but in ordinary citizens.
What this tells us is that in case of the economy getting worse, the South African government will be the driver of chaos more than the hand that steadies the ship.
This realisation can have even the most optimistic person wondering if we will ever get out of the trap we find ourselves in.
South Africa runs the risk of failing to self-correct at a time when the global economy is stammering.
Now is the time to fix the simple breakdowns, such as a policy that hinders investments. The long-term goal is to fix the persistent entrenched challenges that can deal a death blow to the country’s future.
Statistics SA has illustrated the warning signs coming from the labour market – on the one hand the formal sector declined in Q2, while youth graduate unemployment has risen. This means potential new entrants to the labour market are outside the economy and cannot find a way in.
A ruling party that is divided on which parts of Mboweni’s economic recovery plan to adopt could lead to further paralysis. And there is a distinct possibility that this is currently happening, considering the debates coming from the ANC itself as well as other political parties.
This couldn’t have come at a worse period for our economy and our societal wellbeing.
However, I choose to see a window of opportunity for the finance minister, provided he has the backing of the president.
By positioning the economic recovery plan as a commitment by government that it will use it as a tool to ensure that the economy stabilises and functions well, the actions of the finance minister will not come across as one-man show gone rogue.
However, it is important that the plan’s actions or measures be relevant to the conditions of most South Africans. An example would be to give consideration to ensuring that the 58% graduate unemployment crisis is addressed by the private sector spearheading job-creation through investment. This means government would have to remove the barriers to private investment.
Any action to be taken to spur economic recovery must reflect the solutions that can improve the everyday life of citizens, such as how does the state provide better healthcare without bankrupting itself.
A word of caution is always necessary. While plans geared towards fixing the economy in the short term are essential, linking them to the long-term goals of the country is necessary if government is to avoid any negative consequences.
The central logic of any plan must be to fix the economy in such a way that when it works it benefits the poor, unemployed and women more than any other demographic.
While South Africa is part of the global economy, it would be careless for any government plan to reimagine itself around global markets or the trends of emerging economies when many South African’s lives are defined by struggles arising from poor economic decisions taken by government leaders.
A concern is that a loss of optimism and confidence in the country’s leadership will catch on and soon turn to loss of confidence in the economy. Some might say it’s already happening.
Can South Africa get out this trap? Are you optimistic we can?
Personally, my optimism wanes day after day.