It has been warned by fiscal experts that abundant evidence has shown that government spending has been inefficient. Much of this is to do with how state funds are managed in nature by the Executive Branch. Much of the misuse of scarce resources is planted in cadre deployment and the break down of systems of accountability. Executive director of the Centre for Development and Enterprise (CDE), Ann Bernstein, has made the case for a policy of agenda that is substantially different from what the public has seen over the past 15 years.
It is drawn from Agenda 2024: Priorities for South Africa’s new government, which is based on CDE’s extensive policy work and recent collaboration with experts, business leaders, former public servants and others across our society. The project sets out to answer the most important question facing South Africa: what can a new government do to get the country back on track after 15 years of stagnation and decline? The fourth article in the series recommends ways to strengthen government’s commitment to fixing the crisis in our public finances. The formation of the Government of National Unity (GNU) is a step towards the potential realignment of politics into two competing camps around which parties committed to the Constitution, and those who oppose the rule of law, coalesce. And all the signs are that – at least for now – the constitutionalists in government have won out against the extremists in opposition.
Much of the current crisis concerning how public funds were distributed or spent stems from State Capture from the administration of former president Jacob Zuma. Incumbent President Cyril Ramaphosa is still having trouble clearing up the wreckage well into his second term. He had been very despondent to launch a full-scale reform of the African National Congress (ANC). For now, the Government of National Unity (GNU) appears to be focused on bringing much needed coordination to state business. It is not a happy union where everyone sees eye to eye but a marriage of convenience. The ANC lost its last strongest majority in thirty years, but still had the most significant number of seats in the National Assembly. The ANC then went into a coalition with the Democratic Alliance (DA) and other minority parties which it called a “government of national unity”.
The DA is the second most significant party in the GNU.
His (President Cyril Ramaphosa’s) address at the opening of Parliament offered every indication that President Ramaphosa is feeling bullish about reform. In the face of (somewhat muted) howls from the opposition benches, he promised to “place inclusive economic growth at the top of the national agenda” and to “manage public finances with a view to stabilising debt”. Of course, we have heard these pronouncements before. But this time, in a new political context, there is renewed hope that he will make good on his promises. If South Africa is to survive – and one day thrive – it is imperative that he does. Years of large structural gaps between government’s revenues and its spending have wiped out the fiscal progress achieved in the first 15 years of democracy, and the country is now in a much worse position than at the start of the democratic era.
Ramaphosa needs to do what he can to sustain not just the government’s fiscal revenue and spending but also the nation’s economy. He needs to introduce the necessary reforms to regenerate wealth and grow the economy so that businesses can create jobs. Ramaphosa needs to take the hard decisions that are needed to strengthen South Africa’s reforms. The economy is like a pie that must be kept growing to sustain an increasing population. Everyone who lives in this country wants it to thrive. Even Ramaphosa being at the helm of the presidency wants it to thrive. The powerbrokers in the governing coalition from the DA to the ANC MPs to the minority parties all expect the President to show some decisiveness. Ramaphosa has to take charge now if wants to not only survive but leave a lasting legacy. He should start would how the nation budget is organized.
South Africa’s debt to GDP ratio declined from 50% in 1994 to 24% in 2008, but has now risen to 74%. South Africa’s position is much closer to that of a business that is insolvent than one that is merely experiencing cash flow problems. While there are no magic bullets for resolving the fiscal crisis, the GNU can make meaningful progress along two dimensions that would help enormously: pursue faster economic growth and improve the quality of spending. Importantly, these two priorities interact with and reinforce each other. There is abundant evidence that government spending is deeply inefficient. Such evidence includes the poor performance of critical institutions from our schools and hospitals to our police and courts; from the inefficiency and disarray in our Home Affairs’ offices to the lack of maintenance of railway and power stations.
The government is in a hard pickle concerning the looting of assets from the treasury during the era of state capture. The blunder this caused has led to a depletion in state resources and equipment needed to run hospitals, schools and other facilities managed by the state. There is definitely no magic cure or single solution to resolving the situation. Ramaphosa could lighten the load by reviving independent investigative police similar to the Scorpions Directorate of Special Operations under the National Prosecuting Authority (NPA). This could be a check on corruption in the higher places of power. To resolve some of the fiscal irregularities the government could put more effort into driving up the growth of the economy. This could be done through lowering tariffs and encouraging small businesses and the self-employed. The revival of an independent crime and investigation unit could limit the culture of corruption that has crept up under the guise of state capture.
Its only a matter of time that can tell what route the president and the ruling coalition will take. The DA could persuade Ramaphosa to revive the Scorpions Directorate or put its successor the Hawks under the NPA. Its all a matter of who makes the first attempt.
Article written by:
Yacoob Cassim
Journalist at Radio Al Ansaar
