There is a dark irony in this: in the very week that the government held a major investment conference, Fitch and Moody’s downgraded South Africa’s credit rating further into junk status. As the government was trying to sell South Africa as an attractive place to put money, the ratings agencies pointed to the country’s fiscal position and its policy orientation.

The practical implications of this are perhaps unlikely to be surprising, given that South Africa has already made the big fall into sub-investment grade with all that this signified for the country’s ability to borrow and for damage to its reputation.

Perhaps the current downgrade communicates something even more worrying, which is that the downgrades are an indictment not on the missteps that South Africa has taken to reach this point, but the fact that little improvement is envisaged. Both Fitch and Moody’s have South Africa on a negative outlook.

It’s worth reflecting on the downgrade by Standard and Poor’s earlier in the year. Coinciding with the pandemic, the loss of South Africa’s final investment grade ranking was a devastating blow. In a statement, the Treasury remarked: ‘Now, more than ever, structural reforms need to be urgently implemented in order to get the economy moving in the right direction. Tough decisions have to be made and collaboration between government, business, labour and civil society remains vital in order to contain the spread of Covid-19 and ensure sustainable economic recovery.’

Structural reforms of the type envisaged by the Treasury have, however, remained elusive – and this was central to the downgrade.

But perhaps it is untrue to say that no tough decisions have been taken. The Covid-19 crisis has inflicted enormous damage on the economy and on people’s livelihoods, expanding reliance on diminished (and diminishing) state resources. Against this background, the decision to retain and continue to finance South African Airways must have come as quite a revelation to many observers. Of all the country’s mismanaged state-owned enterprises, this was surely the most dispensable.

True enough, retaining SAA enables the government to avoid the immediate fallout of putting people out of work. But the choice to retain it comes at the cost of desperately needed social protection and of the services that the government is nominally committed to providing. It’s hard to believe that the manifest irrationality of this is not clear to the government.

‘Developmental state’

So why do it? One reason is the sheer pull of ideology. For well over a decade, the African National Congress has looked to the notion of a ‘developmental state’ as the elixir for South Africa’s progress. State-owned enterprises, following the Chinese example (at least in theory), are central to this. That they are, in South Africa’s reality, at best questionable propositions is largely irrelevant. To the ideologically inclined, SAA is a part of the architecture of reconstruction, growth and upliftment.

As the president has reminded the country, its recovery will be led by the state.

Ideology intrudes elsewhere too. Matching the imprudent choices made in relation to the use of the state’s resources is the direction of policy. Though the idea of a developmental state in South Africa is unconvincing, it is intimately linked to the deliberate politicisation of the administration. Until this is reversed, consciously, a capable state – let alone a developmental one – will be illusory.

Racial empowerment policy – so-called Broad-based Black Economic Empowerment – has long been a disincentive to business and investment. Even figures in the government have expressed concern about the effect it is having. Even as the Covid-19 pandemic bit, the government insisted on BEE considerations for some of its relief efforts. It has indicated that more restrictive, ministerially dictated racial quotas will be introduced. This will add to the burdens in business. But, once again, this is an ideological choice.

But perhaps the flagship policy in this respect is expropriation without compensation (EWC). As an assault on property rights, this degrades the foundations of any investment environment. South Africa cannot hope to attract the investment and business confidence it needs while it pursues this policy.

Yet this is precisely what the ANC and the government it leads intends to do.

This does not follow a dispassionate assessment of the failure of land reform (EWC will in any event not be limited to land). Nor is it predominantly about expanding patronage and grabbing assets, nor even about populism – though these are certainly factors.

Ideological commitment

EWC is a matter of ideological commitment. As ANC Secretary General Ace Magashule said recently: ‘If we don’t implement these two resolutions: nationalisation of the Reserve Bank and expropriation of land without compensation, you are not a liberation movement… we’re a liberation movement.’

Understand what this means: a liberation movement – with all the certainties of its role in history, and presumptions about its right to rule – rather than a political party entrusted with the stewardship of the state. It is a distinction that helps to explain why destructive policies endure and why reform is seemingly endlessly put off, for to take the necessary correctives would be to surrender a part of the very identity of the ANC.

Alongside the downgrade of South Africa’s credit rating, then, and the negative sentiments expressed about the country’s future, perhaps a broader problem is the overall failure of the country to upgrade the conduct of its politics and statecraft. To remain fixated on a dubious ideological project comes with real-world costs. South Africa can expect to endure them in the years to come. To emerge from this will not be a technical exercise in ‘reform’, but a more profound change in political thought and culture.

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Terence Corrigan
Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy.

12 COMMENTS

  1. Excellent. All this “government “ does is keep rearranging the deck chairs on the Titanic- and even that they don’t manage.

  2. Terence is 100% right and I’m afraid nothing will change with the ANC in power – and they will stay in power as the “sheep” will still keep voting them in! We have been overrun by morons!

    • Continually increasing numbers of such morons who are unrelentingly greedier and greedier. Dunning-Kruger Syndrome ‘Supreme’ thrives among them. The ‘sheep’ will continue to dominate the population. The country is doomed.

      • This country is more than doomed .It is on a final phase of self destruction and the sheep you refer to are not sheep , they are like ticks on sheep that transmit an incurable pestilence. I have never heard of ticks with the brains to know what the eventual outcome will be when the sheep finally dies. So be it , put your head between your legs and kiss your arse goodbye! RIP – RSA

  3. There is one benefit being a moron. You can still get up in the morning, look in the mirror and not be even slightly embarrassed about your IQ or the total absence of commonsense swirling about in the fuzzy world in your head!

    • Another benefit, probably unknown, is that you are apparently better than an imbecile and an idiot. To try and avoid the wrath of the woke-ists I prefer to refer to the whole lot as sub-seventies. But one day I might be caught out.

  4. Liberation Movement. Brilliant case of double speak, much like Developmental State. There can be no liberation or liberty when the state nationalises key resources with impunity. Nor has there ever been an African Developmental State.

  5. Is this happening around the world? Governments with an agenda that has little to do with the good of the country or the wellbeing of its people. It is hideously evil!

  6. The harsh reality is that next year the money will finally run out. The government will not be able to meet all its commitments, the huge cost of governance will sink SAS ANC. Patronage will no longer be possible and once the former docile voting sheep turns on the hand that no longer feeds them, the few remaining SAA planes will be necessary to fly the RATS (cadres) to safe haven where they have salted away their ill gotten loot.

    It is inevitable. In the USSR the failed ideology of Marx and Engels, Lenin and Stalin, could not be made to work, even when they had people with more innate potential and far more natural resources than we have. Seffrica will fold in the very near future and the ANC and its NDR will go the same way that it did in the USSR. Seffrica will also break up like the USSR did. And guess what, Verwoerd’s vision of independent nations states may come about without apartheid. Put that in your pipe and smoke it!

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