The Covid-19 crisis in South Africa can be used in either of two ways – to push ahead with the market-friendly reforms needed to limit the costs of the pandemic and help the economy rebound in time, or to step up the implementation of the socialist National Democratic Revolution (NDR), as the SACP urges.
Says the SACP (in a forthcoming issue of its Umsebenzi Online journal): ‘We have been too timid in driving forward a comprehensive NHI [and] so allowed our public health system to be hugely overstretched long before the arrival of the coronavirus… If we can close many of our land ports and shut down schools temporarily,…then why have we been so timid about introducing prescribed assets on a financial sector awash with billions of rands?… And why have we been so timid with urban land reform, perpetuating apartheid spatial patterns that will now expose millions of South Africans to crowded and potentially highly infectious minibus commutes?’
SACP general secretary Blade Nzimande has since urged the government to ‘assert decisive public control over private hospitals and other private healthcare facilities’ in fighting the pandemic. In similar vein, the party’s Cosatu ally has called on the South African Reserve Bank (SARB) to ‘impose quantitative controls on commercial banks to ensure that a significant portion of their loans go to priority sectors’ – no doubt as identified by the state in line with NDR ideology.
Harder to counter
Yet it is largely the NDR and its statist interventions that have brought the economy to its knees and made it so much harder to counter the pandemic. A toxic mix of Black Economic Empowerment (BEE), cadre deployment, and pervasive looting has stripped the public service and many state-owned enterprises (SOEs) of much of their capacity and resources. NDR interventions have also tied up business in reams of red tape, often rendered still more destructive by gross inefficiency in their (mis)application.
At the same time, incremental NDR interventions have priced millions out of the labour market, dumbed down schooling to the point where many matriculants are functionally illiterate and innumerate, triggered mounting crises in electricity and water supply, deterred investment, driven down growth, and prompted major capital flight.
As regards this last factor, recent SARB data and other figures reveal a dismal picture. Well before the virus began to spread, foreign direct investment (FDI) into South Africa dropped sharply from R72.1bn in 2018 to a paltry R6.8bn in 2019.
As for portfolio investments into the country (purchases of bonds and stocks, primarily), fourth quarter figures for 2019 show a dramatic decline to R9.3bn from R40.2bn in the previous three months. Since then – and especially in the last fortnight or so – the rand has plunged more than 10%, bond yields have risen to all-time highs, and some R4 trillion (25% of its value) has been wiped off the JSE.
Market carnage
The recent market carnage – now diminishing as hopes of curbing the pandemic rise – is, of course, the direct consequence of the virus. But the deeper economic malaise in the country has little to do with Covid-19 and much to do with the NDR.
Negative trends are evident in a host of spheres and go back many years. Among the more obvious examples, in addition to capital flight, are declining growth rates, rising unemployment, escalating public debt, and collapsing business and consumer confidence.
The common denominator behind declining metrics is the ANC’s devotion to the NDR
Some less-commonly cited statistics are telling too. As Financial Mail assistant editor Claire Bisseker points out, ‘South Africa’s total factor productivity growth has declined every year since 2001 and turned negative from 2014’. Investment efficiency has fallen steadily as well, for it now ‘requires 12 units of investment to generate a unit of output’, which is well down on the 3.5 units of investment historically required. This in itself has probably ‘more than halved the country’s growth potential’.
The common denominator behind declining metrics is the ANC’s devotion to the NDR. This has given it the reverse of the Midas touch – for everything it touches turns not to gold but to dust.
The deterioration is evident in public healthcare too, for its quality has ‘plunged since 1994’, as health minister Dr Zweli Mkhize admitted ten years ago. Hence, it is not the country’s world-class system of private care that is at fault – as NDR ideology and the NHI proposal assume – but rather the dirigiste interventions that have broken and increasingly corrupted public healthcare system over two decades.
SACP agog
Instead of acknowledging the damage the NDR has caused in healthcare and elsewhere, the SACP is now agog to use the Covid-19 crisis to accelerate the revolution. If the party has its way, destructive state controls will burgeon and property rights will be further undermined, fatally eroding any realistic prospect of future economic resurgence.
However, it does not have to be this way. The one bright point in all the suffering that Covid-19 is bringing is that the crisis can also be used to confront the SACP and Cosatu on their indifference to the nation’s plight – and so help end the NDR.
Dawie Roodt, chief economist at the Efficient Group, gives some examples of how this could be done.
‘Trying to save a terminal SAA again while allowing viable private businesses to go under will be nothing short of idiotic. This is the opportunity to kill SAA and rather use the money to support well-run private airline businesses.’
Moreover, with electricity needs way down, the time has come to complete essential maintenance and right-size Eskom’s bloated workforce. ‘If everybody else is reducing their workforce and we must all carry this burden, why not Eskom too?’
‘Dead in the water’
In the past, as Roodt points out, attempts to reduce the Eskom payroll were likely to be stymied by ‘strikes and sabotage’. But that was then, and this is now. ‘The economy is dead in the water, so if the unions want to strike, bring it on!’
The crippling public service wage bill, which absorbs some 45% of tax revenues and makes up roughly 35% of government spending, can be tackled too. With schools closed and school meals no longer available to millions of pupils, the time is ripe to ‘launch a project to feed hungry children or give civil servants a reduction in their wages, an easy choice’.
What path, then, is the country to pursue? The SACP and Cosatu will keep pushing to accelerate the NDR. But the Covid-19 crisis is also showing up the enormous damage the NDR has done. Some good at least will come from the pandemic if it helps deflect the ANC from its current course – and puts the country on to a market-friendly path to widespread prosperity.
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