A full IMF bailout before the 2024 elections?

ANTHONY BUTLER: Predictions not rosy about SA in a post-Covid world

Economic crisis will weaken Cyril Ramaphosa’s position ahead of ANC 2022 elective conference


Predicting the future is a hazardous business at the best of times. However, a growing number of futurologists see the IMF playing a major role in SA in the years ahead.

The trajectory of the Covid-19 pandemic remains uncertain. The world economy has suffered a unique combination of supply and demand shocks, leading the IMF to anticipate a 3% global contraction over the course of the year.

Here at home, Covid-19 has accelerated SA’s previously leisurely journey towards the fiscal cliff. Heated debate about monetary policy options, and anger about the commitments made by the National Treasury and Reserve Bank to the IMF to secure a $4.2bn rapid finance instrument loan, reflect a lack of consensus about how the country should respond.

Can SA’s conflict-ridden political parties somehow steer the country towards a sustainable economic strategy through normal democratic processes?

Despite recent proposals, originating with the ANC and EFF, to postpone local elections, merge local with provincial and national elections and institute direct central rule over municipal governments, electoral politics will most likely continue normally over the next three years.

This means municipal polls in 2021, between August 4 and November 1. Devastating job losses in hospitality, fitness, tourism, beverages and other related industries will be directly traced to government interventions. Finance minister Tito Mboweni’s emergency Covid-19 budget anticipates sharp cuts to municipal expenditure, while revenues from business and residential rates are likely to be decimated.

The ANC vote will drop sharply in metropolitan areas. In the pivotal province of Gauteng, one surprise factor may be Herman Mashaba, whose new party will be well positioned to cash in on xenophobia and exploit the envy and resentment that hard times bring in their wake.

The new DA is not in a good space to contest these elections. “White business” will be condemned for shedding labour, “white banks” for hoarding capital, and “white households” for firing domestic workers.

A year after this ugly contest, the ANC will hold its 2022 elective conference. Cyril Ramaphosa’s position will be weakened by the economic crisis.

The policy proposals of the anti-incumbency faction are already clear. We must have money printing and prescribed assets, radical economic transformation and accelerated land reform. Public sector workers must be protected at all costs and a tiny basic income grant provided for the poor.

Ramaphosa has shirked responsibility for concrete policy choices, delegating these to his ministers. When these choices have been lockdown related, they have been the fault of ministers such as Nkosazana Dlamini-Zuma and Ebrahim Patel. When they have concerned fiscal or monetary policy, they have been the responsibility of the finance minister and the Reserve Bank governor. The cabinet, it seems, supports any and all policy choices, even when they are inconsistent with one another.

A Ramaphosa second term is almost inevitable but it will not come with a credible programme of reform. Unproductive public servants, tender abuses and politically linked parastatal supply chains are just too central to the ANC’s own operational survival.

Yet public hostility to the abuses of the party will become equally central to politics in a post-Covid world, in which jobs are scarce and improved living standards have been pushed back by a decade.

Predictions? It is possible to predict that we will have parastatals unable to pay salaries, strikes over public sector remuneration, and a crisis in issuance of new government debt — and that all this will occur before the national and provincial elections in 2024.

We can also anticipate that national debate will revolve not around how to remake the national economy, but rather around who is to blame for a fully conditional IMF structural reform programme that can no longer be avoided.

• Butler teaches public policy at the University of Cape Town.

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