Alternative Economics in a Time of Crisis

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The Maurice Webb Race Relations Unit within the College of Humanities recently hosted a panel discussion titled: Alternative Economics in A Time of Crisis: South Africa Today.

Held at the UNITE building, the event was supported by the College Deputy Vice-Chancellor’s office and Oxfam South Africa.

The panellists were Dr Thabi Leoka, an economist recently appointed by President Cyril Ramaphosa to the Commission of Inquiry on the Public Investment Corporation; Chief Executive of Standard Bank, South Africa, Mr Lungisa Fuzile and Chairperson of the Board of Directors of SmartXchange, Ms Precious Lugayeni.

During the discussion, Leoka openly stated that the country is in a debt spiral with the threat of an International Monetary Fund (IMF) intervention. The on-going need to bailout Eskom and other state-owned enterprises has put tremendous strain on the Budget. ‘The threat of such an intervention is a scare tactic to make the government aware that if it doesn’t implement the necessary policies, it may be forced to turn to the IMF. South Africa’s problems are not insurmountable. We know what we need to do. Our problem is the lack of implementation and political will,’ she said.

Fuzile noted South Africa’s low level of economic growth. ‘President Ramaphosa ushered in renewed hope and reignited some confidence among consumers and business. This was not enough, though, as shown by continued low investment, low growth (a contraction of 3.2% in Quarter 1) and rising unemployment to about 30%,’ he remarked.

He added that institutional decline and decay characterised the period up to February 2018 and that key institutions need to be rebuilt. ‘The tools the government deployed in the 2000s to build buffers against external crises - a budget surplus, falling debt levels and policy certainty - are lacking today,’ said Fuzile.

According to Lugayeni, the debt to gross domestic product (GDP) ratio and unemployment are two of the major economic problems confronting the country, with Eskom posing the biggest threat. ‘South Africa’s foreign debt is already rated junk by S&P Global Ratings and Fitch Ratings. If the country can’t manage its spending and funding, our gross debt could deteriorate in February 2024,’ she argued. Lugayeni believes that this could lead to more unemployment and hardly any local or international investment prospects.

She suggested that if the African National Congress is not prepared to upset some of its allies (particularly the Congress of South African Trade Unions and the South African Communist Party), it will not be able to turn the economy around. ‘The economy should come before politics. The government should be focusing on how the fourth industrial revolution will help the 29% of the population that is unemployed. While the president encourages us to buy locally produced goods, how can we buy local when our shelves are full of cheaper imports? Is it not time to reconsider some of the agreements we have with foreign countries?’

Turning to alternatives, Leoka stated that, ‘The country can’t afford to lose its credit rating because of how reliant it is on portfolio inflows to help finance the current account and budget deficits.’ She believes that Treasury should be working to build and effectively market South Africa as an attractive investment destination.

Fuzile suggested that the nation’s collective energy and wisdom should be devoted to solving the growth challenge, ‘because if we fail as a country to achieve higher and more inclusive growth we will not succeed in stabilising the fiscal metrics with deleterious consequences for everyone.’

The National Health Insurance (NHI) Bill was also briefly discussed, with Lugayeni arguing that the country doesn’t have the infrastructure or the tax-base to implement it. Leoka questioned whether actuaries were consulted at any stage in conceptualising NHI and if there was a public feasibility study with scenarios or forecasts. ‘If economic growth remains below 2%, the shortfall from rolling out the NHI will be around R132 billion,’ she said.

Dean and Head of the School of Built Environment and Development Studies Professor Ernest Khalema said that the questions raised by the panellists are crucial issues. ‘This discussion comes at a time when we need to be having these critical and engaging conversations. There need to be alternative strategies to increase economic growth,’ he said.

Words: Melissa Mungroo

Photograph: Supplied