There is a modest Brunfelsia pauciflora ‘Eximia’ a few meters away from my lounge window. For the botanically disadvantaged, it is a “yesterday, today and tomorrow” and its fragrance often drifts through the open windows on the gentle caress of a light North Westerly breeze during these nights that are hesitantly heralding summer.
Some say the brush got its name from its flowers which at any moment reflect all three dimensions of time. I see it more romantically: its fragrance depicting nostalgia, joy and promise. But that romance disappears fast in the context of our South African life, which seems so irrevocably stuck in the legacy of the past, the world woes of the present, and some “Nostradamic” spectre of the future. That rhetoric is wearing extremely thin. It is trapping us in inertia and a cumbersome debate with little prospect of productive outcomes.
There were elements of it again in Pravin Gordhan’s latest medium-term budget. But to give the finance minister his due, there was also significant recognition of the extent to which we have only ourselves to blame for the economic troubles we face.
True, we have acclaimed with some justification our ability to avoid the full effects of the post 2007 financial meltdown, largely because of our banking and fiscal prudence.
There was also a mild boast on Gordhan’s part of the 3.5% growth we were able to achieve while many of the developed countries were struggling with job shedding rates of less than 2%. Of course, they mostly still have unemployment rates below 10% while our 30% is in a totally different category of anxiety. The real point though is that we should be comparing ourselves with other emerging economies where many, including our BRICS partners have been able to record growth rates of 7% to 10%. That discount falls squarely on our own shoulders and accountability must be fully divorced from the “goggas” of yesterday, today and tomorrow.
The most pressing is, and always has been, education, skills and experience. We do not need a better example of the severely debilitating effect of a lack of skills than our inability to spend productively and effectively, the money that has already been thrown at projects. A lot of it (25% by municipalities and 16% by provinces) simply gets thrown back – after a bit of skimming to line the pockets of cronies and tenderpreneurs. This puts a huge question mark not only on proposed fiscal measures to improve this performance, but on the ultimate value of the shift to spending on infra-structure.
But for all of that and at the very least, this shift is perhaps the most encouraging aspect of the “mini” budget. At last we are challenging labour’s voodoo economics that jobs must be created through wage driven growth and consumption expenditure. The penny seems to have dropped with a distinct clang that we need to shift priorities from welfare to jobs, from hand-outs to hands-on.
The pay-now-earn-later fallacy has been at least in part, the cause of a burgeoning and bloated civil service which now absorbs some 40% of government expenditure, where the average pay is between 40% and 50% higher than peers in the private sector and where the track record on service delivery, productivity and old fashioned customer care has been nothing short of appalling. I have always been totally mystified by this strange feature in our economy, where people in non-competitive and relatively secure jobs can be paid so much more than their peers in a much riskier and harsher environment.
Good luck to Pravin Gordhan and his intention to cap government pay hikes to 5% and reducing the payroll share of his budget. He has already been put on notice by Cosatu’s Zwelinzima Vavi, who questioned this approach against the light of “that fellow who last year walked away with some R600-million rand in pay, bonuses and share options.” Now, I wonder who that could be? Throwing pay disparity into this mix is not only disingenuous, but mischievous. It would have been far better if Vavi offered some further solutions on making our labour force more globally competitive.
My previous writings all attest to an aversion to debt, whether on a personal, company or government level. But few of us can build a home without a bond. There’s a distinct difference between borrowing money to acquire or build things that will last for many years, and maxing out on a credit card or using bond finance for daily and routine expenses. I for one, will not have much of a problem with saddling my children and grandchildren with repaying a debt the fruits of which will still be enjoyed by them and their offspring for generations to come.
So far from quivering at the thought of a 40% public debt to GDP, I would rather question the validity of that measurement itself. It really is a formula that mixes apples and pears. Public debt is owed by the government and accumulated over a long period. I fail to see the relevance in comparing it with GDP which is a one year measurement for the country as a whole and which can change from one year to the next . But then the fallacy becomes absurdity when it is benchmarked with other countries, where the underlying criteria could be totally different – such as the size of the government to GDP; the composition of the debt, its maturity, the lenders and terms. A simple example is the continued investor faith in a Tsunami ravaged Japan which for a number of years has had a public debt to GDP ratio of nearly 200% without them getting their kimonos in a knot. But when Greece approaches 100%, they break plates in more than dining rooms.
Far more relevant, I would have thought, is the cost of servicing that debt as a proportion of the overall budget. It is the same criterion that banks use in determining your bond entitlement – the size of the instalment in relation to your income. It used to be a maximum of 25%. Although we cannot compare this directly with the government budget, we could argue that debt servicing costs of some 15% of the total budget is reasonable. Expressed in money terms of roughly R150bn, it may seem like an unbearable burden, but the money borrowed has to be given a future value in terms of inflation, and must be seen against the economic benefits of the infra-structure established, and additional tax revenues through growth stimulus.
We are a young and growing country. It makes sense for us to have a relatively high debt to develop roads, bridges, railways and other infra-structure. Certainly a lot more sense than developed nations running up debt to bail out banks! This is a point that seems to have totally escaped that fellow in parliament with an Italian accent that lamented our road to the Parthenon. “Rubbish!” was Gordhan’s justified response.
But before we place our offspring in the hock for trillions, we do need an assurance from the Finance Minister on one of the most important issues of our time. It is the issue of accountability. The spenders have to be held fully accountable for the results.
There’s that famous Chinese adage that says: “Give a man a fish and you have fed him for a day. Teach him how to fish and you have fed him for life.” But there is a crucial element missing in this proverb. It is willingness. I may give someone the means and ability to catch fish, but without a willingness to do so, that someone will still prefer a hand-out of fish. The only way to ensure willingness is to hold him or her accountable for catching the fish. The culture of accountability has to be nurtured across all levels of our society, particularly staff in the public and private sectors.
Full empowerment happens only when we accept full accountability for our actions. No number of permutations of “B’s” and “E’s” can ensure that.
And again, our empowerment can only be ultimately measured by the extent to which we have made a meaningful difference to the lives of others.