The cuts to ministers’ salaries is a PR move by President Ramaphosa and in poor taste. Our country is facing a financial crisis which threatens the future of our economy. Anyone who believes these problems arose only in the past few months is fooling themselves, says Herman Mashaba.
When we entered this lockdown, South Africa was the most unequal country in the world. Half of the people in our country lived below the poverty line and 40% of our economically-active aged population were without work.
Of all the economic analysis that I have seen, the one matter which is consistently put forward, is that we are facing an economic crisis in South Africa the likes of which we have never experienced before.
Recent forecasts by the World Bank have placed our economic growth rate for 2020 anywhere between -2% and -8%. The recent downgrade of our economy to junk status by Moody’s and the further change in our outlook to negative by Fitch threaten further economic suffering.
The truth is that we went into a lockdown with an economy that was weak and unable to withstand any further shock, arising from a decade of policy confusion, unabated levels of corruption, collapsing criminal justice system, unsustainable management of our fiscus and labour laws which favoured the employed at the expense of the unemployed.
What is likely to emerge from this lockdown is nothing short of terrifying. The Reserve Bank has forecast the loss of 370 000 jobs this year, a figure which has been widely interpreted to be conservative.
A survey published by City Press on Sunday found that 75% of small businesses do not believe they could survive a lockdown that lasts between 1 and 3 months. It is worth noting that the Small Business Institute puts the figure of 28% of all working people are employed by small and medium sized businesses in South Africa.
Of great personal frustration to me is the prevailing view amongst our commentariat that it is somehow insensitive to be focusing on the economy in the time of the present health crisis. Perplexingly, this view seems to believe that only one crisis can be focused on or prepared for at a time.
This thinking prevailed in the President’s address last week. While the decision of the extension of the lockdown was communicated, nothing of substance was said about measures to mitigate the economic impact.
Of personal aggravation to me, was the announcement of the salary cuts of cabinet members as a gesture to the private sector. The total generated by this move over 3 months, is a mere R13 million, not even enough to feed one street in Alexandra for a week, let alone the entire country.
This was nothing short of a PR move, but where the insult is generated is that it takes place in a country where our bloated civil service and cabinet are key factors for our economic woes going into the lockdown.
In 2018, the annual cost of cabinet salaries alone stood at R163 million, with political offices costing a further R1.09 billion. In the 2017/18 financial year, 236 million was spent on acquiring ministerial housing, nearly R300 million on travel and subsistence.
Cabinet members were entitled to private car not exceeding R600 000 and two official vehicles each not exceeding R1.68 million. In 2018/19, VIP protection was estimated to cost, is what was described as a deeply conservative estimate, R3 billion.
Our public sector wage bill in South Africa stands at 35% of our national spend, tripling from 2006/7 to 2018/19. Over these 10 years, government employees rose from 170 000 to 1.3 million. If public sector salary costs had been controlled to rise at the cost of inflation, it would only constitute 22% of our annual budget today – R270 billion less per year.
This is why I found the PR move by President Ramaphosa to be in poor taste. Our country is facing a financial crisis which threatens the future of our economy. Anyone who believes these problems arose only in the past few months is fooling themselves. Our economic challenges have arisen from years of unsustainable spending and weak economic policy.
What is needed is not cosmetic PR moves dreamt up by communications staffers. What is going to be needed is strong financial and economic reforms, enacted with the same kind of decisive leadership that has been demonstrated in the face of Covid-19.
The kind of decisive steps that should have been announced were:
1. An announcement of the immediate reduction of the cabinet, doing away with deputy ministers and reducing the number of ministerial posts.
2. A reduction in the public sector wage bill by 30%, saving R170 billion per year.
3. Addressing failing SOEs through selling-off of SAA, cancellation of the R16 billion bailout approved this year and the privatisation of Eskom.
Beyond this, there is a need for decisiveness in addressing our economic crisis that looms on the horizon post the Covid-19 pandemic. We cannot afford to be simplistic to think that preparation for such a crisis cannot begin while we are battling the virus, because the level of human suffering it will generate will strike deeper and longer.
Everyday, people die of poverty in South Africa. They die of illnesses that were avoidable if they could afford healthcare, they die from substance abuse because of their sense of hopelessness and they die from crime because, for many, this is the only source of income.
It is clear that the steps that need to be taken require less PR work and a more fundamental reform of our budget. It is obvious that this will put President Ramaphosa on a collision course with this tripartite alliance and some within his own party.
The only question, is whether the President is willing to put the people of our country before such internal considerations, and whether decisive leadership can take place on matters where it may be as unpopular as it is necessary?
** Herman Mashaba is the founder of the People’s Dialogue. He resigned as a member of the DA and mayor of Johannesburg in 2019 and is an accomplished businessman.