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Ramaphosa can no longer disguise the awful truth

The world of enterprise in South Africa is in a critical condition.

President Cyril Ramaphosa’s pledge to revitalise the economy reminds one almost of president Zuma’s commitment to combat corruption: spraying air freshener to divert attention from a really, really bad smell.

The person who, in his New Dawn manifesto, promised a growth rate of 3% in 2018 through “an unrelenting focus on economic growth” has, after 18 months, delivered a growth rate of 1.3% in 2018 and negative growth to date for 2019. Some people would say “low growth is still growth”, however economic growth below the population growth rate is negative.

Ramaphosa presides over an economy in worse shape than when he assumed power, one characterised by:

  • A growing mass of unemployed
  • An Eskom-saving strategy akin to rearranging the deck chairs on the Titanic
  • State-owned enterprises that can hardly meet salary commitments
  • A widening budget deficit due to increasing company losses and liquidations, and
  • An acceleration of the exodus of productive knowledge.

Sipho Pityana, chair of AngloGold Ashanti and convenor of the Save South Africa campaign, who congratulated Ramaphosa on his election as ANC president in December 2017 by open letter, recently criticised the president for his reluctance to take “the hard decisions required to stabilise public finances and create conditions that are more conducive to economic growth”.

Several incidences in the last 18 months point to this reluctance. Rather than using the time to tackle the hard decisions required to stave off a Moody’s downgrade that hangs over us like the Sword of Damocles, government persisted with an approach and activities that effectively boil down to taunting Moody’s.

Some examples suffice:

  • Above-inflation salary increases were introduced for the civil service (shortly after Moody’s had warned that state expenditure spiralling out of control posed a high risk).
  • Pravin Gordhan overriding Eskom’s management decision not to offer an increase to the already overpaid and underperforming employees at the bankrupt state-owned enterprise (SOE), resulting in an on average 9% salary adjustment. Apart from a poor intervention, it underlines the fact that the state as shareholder is interfering in internal operational matters of SOEs.
  • Despite no indication where the funding would be sourced, government persists in pursuing a National Health Insurance scheme that would increase the budget deficit.

Read: How taxpayers will cough up for the new NHI

  • Rather than the incoming ANC president rejecting Zuma’s announcement in December 2017 of free tertiary education as contrary to the commission’s recommendations, and without a proper assessment of the funding implications thereof, Ramaphosa embraced it knowing the state would have to increase its borrowing.
  • Persistence with SOE bailouts, believing the next set of directors and CEOs would improve matters. (There has been no hesitation or even an indication that the model of government-led economic development may, if not wrong, be at least ineffective and inappropriate).
  • A bankrupt SAA and SA Express are allowed to continue operating at losses while private airlines are bleeding due to this unfair competition. 

Rather than an “unrelenting focus on economic growth” these examples indicate a more-of-the-same-approach that underpins the anti-business sentiment of the ANC.

Nedbank CEO Mike Brown in a recent Sunday Times article refers to “hostility towards business in government circles”. Brown had expected fast action after the May elections, especially since government has run out of taxpayers’ money. However, the rhetoric of those purporting to support growth “remains anti-business”. Brown is not the only business leader disappointed by the lack of urgency to introduce reforms.

Pityana says that unless government itself acts to cut spending, it will be forced into an austerity programme by the International Monetary Fund (IMF) when private lenders turn their backs on the country. Taking a different approach are Ramaphosa apologists like Tiso Blackstar editor at large Peter Bruce, who argues that Ramaphosa is playing a long strategic game and will over time introduce his business-friendly policies by outfoxing the anti-business grouping. 

Bruce’s line of argument, even if correct, is not one of comfort: it rather emphasises the fact that the anti-business sentiment in the ANC as governing party is so entrenched that its “business-friendly leader” is ensnared by it.

Even less comfortable? The assumption that a business-friendly Ramaphosa is in fact rooted in reality.

How business-friendly is Ramaphosa, really?

Employee rather than employer rights. He is on record with his preference for protecting labour interests, rather than balancing these with business interests.

Workers rights are paramount. Ramaphosa, with his roots in the organised labour movement through his union days, has repeatedly pandered to the worker side. At the 2019 Workers’ Day rally, he said the government would “never betray the workers and sell them to private interests”. He pledged that his government would “ensure that workers’ interests come first at all times.

We’ll keep you employed, even if we can’t afford to. On Eskom, which government wants to divide into three entities, Ramaphosa promised there would be no job losses. This promise is indicative of his default position of regarding employee rights as more important than the wellbeing of the enterprise employing them. Making matters worse is that rating agencies Fitch and Moody’s have warned that government’s Eskom debt exposure aggravates the investment-grading concerns. And Ramaphosa cannot be shocked about the fact that Eskom is overstaffed and that this overstaffing is contributing enormously to its desperate financial position. In 2016 the World Bank found that Eskom, compared to other energy utilities in sub-Saharan Africa, was 66% overstaffed and that a benchmark employee total of 14 244 employees would suffice, rather than the 41 787 on the Eskom payroll.

Anti-business approaches. The anti-business and anti-growth policies and strategies with budgets aimed at increasing state control since the dumping of the Growth, Employment and Redistribution (Gear) macroeconomic strategy are at the root of low economic growth and high unemployment.

Startling perspective

The enterprise world of South Africa is in a critical condition.

Were the company tax returns of the 768 000 companies combined and submitted as that of a single entity – say, SA Amalgamated (Pty) Ltd – there would not have been any company income tax payable to Sars for three consecutive tax years due to assessed losses exceeding assessed taxable income. 

Despite increasing the value-added tax rate to 15%, the budget deficit is increasing. It is an inevitable outcome when government expenditure and population growth both exceed the rate of economic growth.

Read: We are getting poorer in SA

Picture a soccer field; here’s where we are …

The Enterprise Observatory of SA (Eosa) plotted the budget balance as well as the current account balance on a soccer field for the years 2002 to 2018.  Since the dumping of Gear in 2008/9, SA has been stuck not only in its own half, but mostly right in front of its own goal posts.

Every SOE bailout, every unfunded initiative like the NHI and the free tertiary education promise, every scarecrow policy like land expropriation without compensation, and every instance of productive skills flight due to anti-growth policies is effectively an own goal.

The budget deficit for 2020/21 may break through the 6% level. Considering GDP growth of 1.5%, playing right in front of the own goal posts is therefore likely to continue.

The Ramaphorian anti-corruption air freshener can no longer disguise the stench of a decaying economy. 

It is time to discard the ideal of a developmental state given the low quality and productivity levels in the public sector.

Former president FW de Klerk realised that one could not dismantle apartheid without dumping the Population Registration Act and the Group Areas Act.

Similarly, it is time for Ramaphosa to dump the anti-growth policies and practices and to unleash the (remaining) potential of the private sector.

Just three concrete steps would go much further than yet another investment conference or job summit:

  1. Downsize Eskom’s employees to 50% of the 2019 level within 30 months.
  2. Pull the plug on SAA and SA Express so that private airlines can fill the space.
  3. Place a moratorium on BEE.

Johannes Wessels is director of the Enterprise Observatory of SA (Eosa).

This article was originally published on the Eosa blog here.

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South Africa, a modern day tragedy. But wait until the masses get restless after realising their political masters have deceived them and have little or no money to feed the ‘everything for free’ mentality. I see unprecedented social unrest and a humanitarian crisis on the horizon. What should be clear to all is that for South Africa to live the ANC must die.

At last an article to tell it like it is. The unvarnished truth.

Sadly, there’s no time left to play a long game, we’re all out of time. Like the 75 days left to Brexit, we’re in the bottom of the 9th. There’s just the fascination of watching a slow motion train wreck.

The world is headed for a huge hard landing. And this time the crash doesn’t look survivable (unless you’re holding gold). This is no environment in which to launch an austerity program.

Ask Argentina. They’ve just hit the wall and are going to bounce off it with some more of the populism that got them into the mess in the first place. Of course it’s not going to work, but we’re rapidly getting past anything that ever could.

Sound familiar?

Afraid so. We are going to find the keys to the reserve Bank and money printing, as well as the joys of prescribed investments. Maybe we’ll even draw up plans for that smart city.

And we’re going to double down on all the rubbish policies that got us here in the first place. And Cyril will be about as effective as the rabbit in the headlights. And your financial advisor is going to tell you to hang onto the crashing market for dear life cause that’s what worked in the last century when everything was completely different.

There’s no fun here for anyone.

Call it a fancifull conspiracy theory if you like, but my take on this is that CR is dragging his heals on the implementation of any meaningful policy because he is simply an interim President. CR will soon be recalled, to be replaced by Mabuza and he knows this. He does not want to, or has been instructed not to, leave his successor with a baptism of fire. OMO

We should outsource the running of Government to that most communistic nation, China. They seem to get it right … something to do with a lack of human rights?

R20 ph minimimum wage is destroying employment.

No it isn’t. It should have been higher. Any one who pays less is an exploiter. Take Europe for instance. Minimum wage ranges from 600 euros p.m. (Portugal) to 2709 in Switzerland. in South Africa it is a mere 200 Euros with an undeveloped public transport and no safety net. The average (black) worker spends three to four hours a day getting to work and on average spend between 15% to 30% on transport daily.

You should try to live on R20 p.h. per day or R160.00 per day and then come and tell us how you managed.

Nope, wrong, wrong, wrong. Compared to SA, Switzerland’s unemployment is, practically speaking, zero. SA’s is 40%. Therefore the true minimum wage in SA is nil, niks, nada, zero, because that is what 40% of the working age population is earning. A minimum wage is a fanciful idea, grossly and utterly inapplicable to a country where almost half the working age population cannot find anything to do.

I would agree in theory that the minimum wage should be higher because nobody can really live off R20/h, let alone less than that, so yes, it should be higher, but in practice it is clearly not working if one looks at the latest unemployment figures.

As estimated and published in November 2016…

“Estimates from the University of Cape Town show that there could be 500,000 job losses as a result of the NMW – while National Treasury has estimated that 715,000 jobs could be lost.”

And it seems we’re heading straight towards the estimates both UCT and National Treasury warned about.

“The number of unemployed persons increased by 455,000 in Q2,” Stats SA noted, the highest increase in the number of unemployed persons in the second quarter since 2013. So the economy shed close to 500,000 jobs in that period, with the number of unemployed swelling to 6.7 million from close to 6.2 million.

@Quidditas – your numbers are a bit wrong… or “misleading” rather. Switzerland (and only, what, 2 or 3 cannons, have a minimum wage) has a “minimum wage” of 2709 FRANKS, not Euro.

So…
Switzerland – Min Wage = 3,34% of per capital GDP
Portugal – Min Wage = 2,86% of per capita GDP
S A – Min Wage = 3,61% of per capita GDP

That makes SA’s figures look pretty good. Considering the other countries have far lower unemployment & crime and more viable companies not hamstrung by high corporate taxes, theft, destruction of property, disease, sabotage, raysist policies, corruption, etc etc.

What you’re also forgetting is that a large portion of those people earning minimum wage are also getting water and 60-100kwh/month electricity for free (what’s not stolen anyway). Plus housing is given to them, also for free. Medical care is covered too. School fees are next to nothing or free. R200 a year the last I paid for a few people (earnings dependant).

And let’s face it, if there wasn’t so much government “interference”, fuel would cost significantly less (we all know, dodgy rand, high taxes, high wages = absurd fuel price). Which would also lower food costs. Why punish the companies, layman AND workers?

The beauty of a free market and capitalist society, consumers decide what companies produce, companies set the prices on what consumers are willing to pay, companies set the wages on what workers are willing to accept. Governments job? Ensuring there isn’t crime & war and maintaining public infrastructure.

@Quidditas ….god you are so sanctimonious

Like you pay your domestic above legislative minimum

You think the avg joe/jane gets R20.00/ph in Calcutta or Kinshasa?

Yes please – you must first have a working economy before you can even think of a minimum wage. All it is doing now is preventing a market-related employment option to some.

“The average (black) worker spends three to four hours getting to work”.

Did you make up this average? Are we supposed to take you seriously when you have shown how flexible you are with the truth?

The single biggest problem of any government is ignorance of facts. FACT: Poverty will be part of any country, does not really matter official policies. FACT:The only driver for economic growth is free enterprise with creativity. FACT: Money does not argue, it just walk away. FACT: Disaster will strike any country if facts are ignored.

The following story proves the insanity of the South African labour situation: The labour unions form part of the tripartite alliance. The tripartite alliance forms the government. The government determines the size of the social grant and the subsidy to frail care centres for the aged on social grants.

The local labour union took some of the cleaning staff at the frail care centre on an unprotected strike and the demanded higher wages and higher bonuses. When I explained to them that it is in fact their own union does not want to increase their salaries and bonuses they stared at me with blank faces. So, I had to lay it out – tripartite alliance – government – determine social grants and subsidy – pays workers.

Then they looked at the leader of the union, who wore a white cowboy hat, and he started cursing and threatened to burn down the frail care centre. We fired them all and appointed new staff. Now we employ 50% fewer workers and we save a lot of money to the benefit of the patients. When we look back on this unfortunate episode we realise that the leader of that union actually did us a huge favour. He saved us a lot of money. We realised that, although it was not his intention, he is actually our biggest donor. The law of unintended consequences.

“ANC” = a party with “Absolutely Non-intended Consequences”

The author underestimates the cunning and guile of the long game.

There will soon be massive cuts in state expenditure due to the redundancy of the following departments: trade and industry, mines and energy, police, agriculture and so forth.

Education and justice exist only on paper and should have been scrapped ages ago.

All we actually need are finance, public enterprises and labour (to be renamed organised labour).

“Similarly, it is time for Ramaphosa to dump the anti-growth policies and practices and to unleash the (remaining) potential of the private sector.”

Except that he can’t because then the Zuma faction will have their feeding trough removed and he will be recalled. Surely the media understood that after they saw the new Cabinet and lists of Parliamentary chairs?

The honest truth is that the governing party has no capacity to build a nation, a country or an economy for that matter.

Boombang, 100 % correct, all the blah blah blah means zilch, the sooner the ruling Party and the vast majority of their voters realise their present capabilities(lack of) and situation because of it, the better, and only then can SA move forward!!!

But when you are in denial, it’s tough getting out of it!!

they eat,drink,live from an ideological past therefor yes, SA will NEVER move forward.

after CR SONA speech I wondered where the “dream” keystroke came from? Off course later on I realized from Martin Luther King’s I have a dream speech…point is as long as these people live in the past and not change their ideology we won’t make progress…….and 4 Place absolute moratorium on the land expropriation without compensation issue and 5 Please just LISTEN!

Or maybe Dreamland. Like in Lala Land where Peter Pan, Tinkerbell and Dumbo live.

Everything there is just peachy and everything is free. Sounds familiar?

I know the Dumbo bit is very familiar.

Just think …if SA has to go to the IMF, SA will effectively start to re-colonise. Bankers (from New York, Geneva, Frankfort, London) will arrive at O. Tambo airport and dictate terms to the ANC and insist on an austerity program. On the front line, the poor and the unemployed will be the first to suffer. So much for “liberation”.

well SA leadership brought this upon themselves I would welcome the IMF if that is what it takes for ruling party to vanish by all means. the rest of the problems can be fixed by ourselves

Ramaphosa needs to change his speech writer to one who tells the truth and calls a spade a spade.

The economy will only get up to speed once the split in the ANC has occurred.

Just as Mandela and De Klerck took major risks in the early nineties, which paid off handsomely, so should Ramaphosa, if he wants to leave a legacy.

However, if one looks at the composition of the new cabinet, the “unity project” of the ANC is still continuing.

A split in the ANC is what that R400m was for.

Divide and conquer.. Yet CR outwitted the before..

Unity in looting seems to be object. No evidence of deviation on that score that I have seen.

Jesus’ return is very overdue.
Only He can fix the mess the ANC has made of the country.

Unfortunately a capitalistic leader of a socialist inspired country has very little leverage. CR is just trying to keep the ship afloat, he has nothing more to give than that. He should be commended for his stamina but sadly will have to admit defeat – and then we all sink with the ship.
In my opinion we have three choices
– encourage and help the captain to keep the ship afloat
– grab a life belt and save your own life
– accept that drowning is your fate.
Everyone must decide

Another article that just says blablablablabla. Because the more we blablabla the more the blablabla’s care. And the more the blablabla’s care the more blablabla they will do. So blablabla.

Moratorium on BEE to me seems like you stop it for a certain amount of time after which you continue.

Why should this ever continue? Its racist and the foundation of corruption. In addition also an insult to previously disadvantaged people that is by the very existence of a BEE law fingered as substandard employees and members of society that needs protection from a minority decades and generations after democracy.

Ramaphosa NEVER disguised. The Media did that!

Hahaha check this oke, he honestly believes you get honest politicians. BWAHAHAHAHAHA

The last straw can’t break the camel’s back because the camel has been stolen and eaten already

Johannes Wessels, you are playing into enemy hands with an article of this nature. This is not a “Rhamaphosa” issue. It is an ANC issue. No leader given the current factions will be able to effect change. 80% or more of Rhamaphosa’s time is spent fighting factional battles! ANC needs to go. Not Rhamaphosa!

Quick question. Does Patrick Cairns read the articles published by his employer?

I can probably but half a dozen here showing in what dire straits we are and he comes up with some puff piece, scolding us all for being too negative.

After. Can be change, disaster, or working life. Wise daring men speaking wisdom of hindsight. This country, from the new start, was mean to crumble. From a major world player in mining, with a semi self supporting local industrial and farming base, it was not fitting the African narrative of freedom of colonialism. Complete nonsense of course but believed by millions. Today this country is booming like all others on this continent. Ruled by happy rich men, seeing themselves as E.T send, like the last Russian Tsar. Judging by skin color, thanks to the lord, for ever out and forbidden. Millions, the working class, worldwide, are led by this freedom nose called democracy. country S.A, latecomer, never be more eager to be part of that. Proof ? Read again.

Bas, are you a Bot?

@Bipap…haha…I’ve often wondered that

Bas’s comments are the most bewildering gibberish to date

With Sensei representing one end of the comments scale, a ’10’, and Bas the other end [ ‘0’ ]

Hopefully its just a Google AI bot in training, and not an actual person LoL

We have the best man for the job, namely CR.

Give him time, he cannot sort out everything in one go?
It is task for task, one step at a time. Prioritize.

In the end South Africa will prosper.
Please be fair.

So long CR’s medical health lasts. I wouldn’t describe his physique as being super-fit, but good to see he overcame anorexia with distinction.

But I suspect, with the longterm terminal effects of NHI in subsequent years, he may likely visit a healthcare physician in places like Singapore (like ol’ Mad Bob)

S’Africans place too much reliance on a single person. A lot of variables in unstable Africa. Let’s not end up disappointed.

2000 skilled people ( Tax Payers ) leave SA every month. About 100 are high net worth individuals. That is a scary number.

No backbone here…just a wimp that wants power for power’s sake and will not take risks. Same way he got rich without taking any risks…

I think, many S’Africans (and the financial media in particular) loses sight of the fact that the FIRST & FOREMOST reason that CR was elected in 2017, was to SAVE THE ANC (as a crumbling party / voters abstain)….and secondary only, for SA as a country to benefit.

Now, the ANC has regained some faith against loyal ANC voters which returned to polls. So CR has accomplished (to a certain degree) his MAIN task of trying to mend the ANC.

The matter that the whole country/economy stands to benefit from CR’s leadership, seems purely co-incidental… My expectations are low.

When the money runs out, so do those who made the money – professionals in industry, academia and business services – leave also.

Which then leaves us, the middle class, with what was here before they created the wealth which government taxes. Huts and cattle …

As RW Johnson states, we can either have the ANC or a modern industrial economy, but we cannot have both.

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