Our civil society should be calling for a new economic model given the challenges of our country. Instead, we are seeing a repeat of the old, writes WESLEY SEALE.
Church leaders commenting on current political occurrences is not unique to South Africa. Recently, the head of the worldwide Anglican communion, the Archbishop of Canterbury, Justin Welby, criticised the British government’s economic and fiscal policies.
The Guardian reported that the Archbishop was of the view that the United Kingdom’s ‘economic model’ was ‘broken’. In fact, the cleric went on to directly link the model, adopted by the Tory government since the days of the coalition government and headed by David Cameron and Nick Clegg, to inequality. Gains made by the economy, asserted the Archbishop, were going rather into the pockets of the rich as profits than into homes and communities of the poor as wages.
Welby, the report went on, was part of IPPR thinktank’s commission on economic justice and spoke on behalf of those who were appalled that the current economic model adopted in that country saw corporations benefit more than poor households. While the commission, comprised of other eminent persons, noted that levels of debt were increasing, they were eager to suggest strengthening trade unions as a mechanism to protect vulnerable workers.
The commission’s report went on to point out that while the average earnings per employee had fallen by 6% in the past seven years, the UK economy had grown by 12% in the same period. Commenting on the commission’s findings, opposition Labour member of parliament, John McDonnell, condemned the government’s austere fiscal policies which cut especially essential social services and failing to invest in education and skills development.
South Africa, it would seem, is not alone in demanding a new economic model. Some have called for radical economic transformation and while the theory on this is still to be developed, it is important to understand the change in socio-political and economic times that evoke such a demand for new economic models. The people want change and change for the better. This is the cry of those living in the United Kingdom, it is the cry of most South Africa and it is the cry of the people the world over.
Yet in its recent findings on South Africa, United States based credit rating agency, Moody’s suggested that South Africa’s structural reforms faced a ‘stalemate’. Fin24 reported that senior analyst, and sovereign analyst for South Africa, Zuzana Brixiova indicated that the proposals made in the run-up to the ANC’s national conference in December will do nothing to increase business confidence and fiscal discipline; an economic model frowned upon by Welby and his commission in the UK.
Unlike Welby, Brixiova is critical of government’s soft approach to fiscal consolidation given the recent reports that half of South Africans are living in poverty. Moody’s point to the high unemployment rate, of 27% this quarter as a contributing factor to this chronic situation of poverty. The rating agency, again unlike Welby and his colleagues, is critical of the new approach taken by some in the ANC of ‘radical economic transformation’. Instead, they propose more of the same, in pushing for reforms ‘promoting growth and consolidating government finances’.
In a move that seems to be clipping the wings of finance minister, Malusi Gigaba, and wanting to shift from the image that portrays him as a lackey of people outside of government, the minister in the presidency set the tone for the upcoming medium-term budget framework to be heard in October. Never before have South Africans heard from the minister in the presidency and chairperson of the national planning commission, Jeff Radebe, before the budget or medium-term framework is read.
However, he made it clear during a media conference, celebrating the fifth anniversary of the National Development Plan, that government could not increase its allocation, meaning increase support to the poor and small businesses, because economic growth was sluggish and revenues were low.
While Radebe placed emphasis on cutting contingency costs and litigation expenses, these being minuscule to what needs to be spent in order to pump more money into a sluggish economy. Hopefully, cost-cutting will not affect essential social security needed in order to ensure that more South Africans are fed daily and live in dignified conditions. What we do not need from Radebe and his planning commission, which his predecessor push hard, is austerity measures that only increase our inequality. After all South Africa remains one of the most unequal societies in the world. Inequality, as pointed out by Welby too.
What we can most certainly learn from countries such as the UK and the rest of the world is that poverty, unemployment, and inequality, as vast and chronic as they may be in South Africa, are not unique to our country. The Mbeki administration was able to see a rapid rise in economic growth not because of austere measures such as GEAR but simply because the global economy was yielding this rapid rise in growth as well. Barring the discovery of oil, the economy of Angola was growing at a rate of double to triple to that of the South African economy, in the same period before the global economic crash in 2008. The Zuma administration, therefore, landed itself with a sluggish economy as a pure coincidence of history.
Yet as the economy continues to recover from that recession, emerging at the last quarter with a growth rate of 2%, the question becomes what South Africa has to do in order to keep the momentum going. We cannot, as Welby suggests, persist with our current structural programmes such as fiscal austerity and growth targeted measures because, as cleric points out, growth targeted measures only grow the pockets of the wealthy and leave the poor, now half of the population of South Africa, behind.
What South Africa needs is a social security net that would see to the social security needs of all South Africans. As the ANC goes to its national conference, the rest of us must insist that they prioritise free higher education for the poor, the complete roll-out of the national health insurance and the establishment of food banks and community farms in order to ensure food security, among others. This will cost the fiscus more, no doubt, but even more so, it must cost the rich more and it is incumbent on the Radebes and the Gigibas to ensure that government revenues increase because the money is there.
Seale teaches politics at Rhodes University