Government’s ill-considered lockdown leaves South Africans stranded

 

South Africa: Government’s ill-considered lockdown leaves South Africans stranded

On 15 January during an interview on Radio 702, President Ramaphosa talked about relief packages saying “We do not have the money: that is the simple truth… The relief measures we announced last year amounted to about 10% of our GDP, which is quite big for a little economy like ours…”. 

It is striking to hear the President of a country using terms such as “little economy” – but it is perhaps the most apt description of South Africa at present.

That we are in this situation should not be blamed on the pandemic; the pandemic has exposed years of ill-considered government policies that have steadily eroded economic freedom and forced many to become state dependants. Now after the hard lockdown of 2020, many businesses have closed down or at the very brink. The same government that restricted economic freedoms and suspended civil liberties says it cannot support those affected by the lockdown. One can only try for so long to evade reality before the cracks start to appear.

South Africa is currently under lockdown level 3, with the sale of alcohol banned and a curfew in place. There has been no mention of when the country could move to a lower level. How is anyone to run a business in this kind of environment? 

With the arbitrariness of lockdown regulations (and with no end to the lockdown in sight) and the return of load shedding, it is a marvel that some businesses are still standing. A 2020 Finfind report found that, of those businesses it surveyed, 42.7% had closed. In the current climate, that number will increase – and more people will be forced to join the country’s more than 11 million unemployed.

South Africa’s ever-increasing debt-to-GDP ratio (it will hit 100% by 2023) severely constrains the steps the government can take in terms of economic stimulus. Moreover – and this is important – the government’s own policy and spending choices over the years have placed it in this no-win situation now. Decades of fiscal recklessness and misguided policies that steadily increased the control of the state over the citizen have been exposed and exacerbated by the lockdowns. 

Lukanyo Mnyanda, Business Day editor, writes “If, as Reserve Bank governor Lesetja Kganyago has stated in the past, SA had fixed the roof ahead of the rains, things might have been different. Borrowing costs might have been a lot lower and stayed there as markets presumed we could also roll over our debt comfortably. SA’s penchant  for own goals means it has relegated itself to the second division, where countries are standing in queues for debt relief or concessionary loans from multilateral organisations.”

Bailout after bailout for state-owned enterprises (SOEs) such as South African Airways, Eskom and the South African Broadcasting Corporation – companies that should have been allowed to succeed or fail on their own terms and not be saved by the beleaguered taxpayer – showcased the state’s spending priorities. 

And even then, throwing billions of rands at a problem does not guarantee success. Might the billions for bailouts not have been better spent improving education or sanitation in poorer communities? Protecting black South Africans’ hard-won property rights through a massive and systematic title deeds programme would have unlocked trillions in dead capital, allowing people to use their homes and property as engines of upliftment and transformation. But no, the money was instead spent on vanity projects.

Added to the billions spent on failed SOEs are the gratuitous amounts spent on political VIP protection services (just over R3 billion) and over R400 million for upgrades to homes and offices of Members of Parliament. Could at least some of these millions (or indeed, at least 10% of parliamentary salaries) been given to a support scheme for ailing small businesses? Perhaps for the businesswomen who sell all manner of goods on street corners (commonly referred to as ‘hawkers’)? After all, we are repeatedly told that ‘we are all in this together’ and ‘everyone needs to sacrifice’. It’s difficult to see the sacrifices being made by those who decided that lockdowns are the best method to combat Covid-19.

In the week of 11 January, South African Breweries (SAB) announced it would cancel another R2.5 billion in capital investment. The company cancelled the first R2.5 billion in August 2020. The latest announcement followed a few weeks after government’s third ban on the sale of alcohol. (At the time of writing, government had not indicated when the ban will be lifted). SAB’s announcement will not be the last by a large corporate. With each withdrawal of investment cancellation or move to invest in other countries, South Africa loses precious investment capital without which the grandest of government job-creation schemes are simply moot.

Wishful thinking and impressive political speeches ultimately mean very little. People’s lived experience on the ground – that is what matters to them. Promises or edicts will not magically improve a person’s quality of life. When we look around at the current state of the country, and a President who says the state cannot offer support to businesses – to say nothing of vulnerable citizens who are not receiving SASSA grant money anymore and who were ‘dispersed’ by a water cannon – we need to ask: What ideas guide the current government? Are policies premised on the notion of individual freedom, agency, the rule of law? Or are they premised on the notion that the state needs to be in control of every part of our lives, that might makes right, that citizens should pay their taxes and keep quiet? Ideas matter – and the effects of immoral ideas are playing out all around us.

Chris Hattingh is Project Manager and a researcher, at the Free Market Foundation. 

https://dailyfriend.co.za/2021/01/23/governments-ill-considered-lockdown-leaves-south-africans-stranded/