“I hope and I pray so because otherwise, we will be facing the abyss.”
This was the bleak and characteristically honest response of Finance Minister Tito Mboweni this week, when asked in a live interview organised by Bloomberg whether there was sufficient political will and political capital in South Africa to get public sector workers and trade unions to sign up to the bitter-tasting medicine they are being confronted with, to save the economy.
It made for compelling, if somewhat chilling and sobering viewing.
Time and time again Mboweni was asked questions he must have faced more times than he can remember. Will public sectors accept pay cuts? What will happen to the debt of Eskom? Can we cut expenditure to SOEs? How long will it be before a full blown sovereign debt crisis?
On all these issues the Minister looked extremely, extremely concerned. He clearly knows the bleakness of the outlook better than anyone, he is after all a realist if nothing else. He also, however, recognises the intractability of South Africa’s political system, and the lack of actual power that he and the President has to force through the necessary but extremely unpalatable solutions.
No one likes being told they will be facing wage cuts, least of all those employees of the government. No one likes getting told they will have fewer benefits, or have to work longer hours for less.
‘If we do not contain expenditure in the light of [the economic slowdown and the pandemic] then we are not serious about running a middle-income country which requires an understanding of the complexity of the issue. Complex issues require complex solutions, not the lowest common multiplier solution’. He recognizes clearly that for too long South Africans have had to be happy with these lowest common multiplier solutions which end up doing nothing for anybody and simply prolong the inevitable.
The inability of the South African political system to accept the reality and push through the tough measures is the best way possible to ensure that we end up as a low income country.
Martin Kingston, the CEO of the South African office of the investment bank Rothschilds, was equally sanguine this week when discussing the experience of being centrally involved in developing the reform package put forward by Business for South Africa to Nedlac.
“South Africa has to choose what its priorities are. Priorities are exactly that, it is about choosing what you will do and what you will not, what you can do and what you cannot. We cannot continue promising everything to everyone, something will have to give,” he said.
The country, therefore, finds itself ‘between Scylla and Charybdis’ as Homer would have put it, forced to choose between the lesser of two evils. Either Tito Mboweni convinces his President that his package of zero increases to public sector employees, no more SOE bailouts and cuts to local administration budgets are the only way to save the long term economy, or the President does not (or simply cannot) get these measures through because they are too socially unpalatable and South Africa simply runs out of money.
There is no third way.
“The angle of decline is very steep… we are in the last chance saloon, and it will be extremely hard to pull the iron out of the fire,” Mboweni said.