The Guardian view on Jacob Zuma’s economics: not prudent, and a danger for the future
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Version 0 of 1. South Africa is a big country and in some ways a rich country. But, whether in colonial times, in the apartheid era, or during the years of rule by the African National Congress, the combination of volatile prices for the minerals that are its main asset, a constant need for investment from outside, and pressure for better wages and conditions has meant its economy is especially difficult to steer. When poor management at home combines with damaging changes in the world economy, trouble soon follows in South Africa. Unhappily that is very much the case today. President Jacob Zuma’s sacking of his respected finance minister Nhlanhla Nene this week represents another turn in the country’s downward economic spiral. After the news of Mr Nene’s departure, and his replacement by a virtually unknown MP from the ruling party who has little financial or economic experience, the currency tumbled. There was a chorus of complaint from banks and investment houses, and a collective sigh went up from the ANC’s well-wishers everywhere. This comes only a week after one major credit agency joined another in downgrading South Africa’s credit rating. Junk status, which would have disastrous consequences, is only a step or two away. There seems little reason to doubt that Mr Nene has been removed because he opposed spending proposals, like those for a new nuclear power station, for supporting a new aircraft leasing deal for South African Airways, and for pay increases for workers, which Mr Zuma wanted to push through. The minister’s view was that South Africa, already deep in debt, simply could not afford them, leaving aside other strong arguments against the proposals. The more fundamental problem is that Mr Zuma understands patronage very well, but seems to have no economic strategy at all. He has packed government departments, other state institutions, and the wholly or partly state-owned companies that have proliferated in South Africa, with people who owe him loyalty in return for the well-paid positions that have come their way. These people, his critics say, will protect him in the future, after he stands down as president in 2019, from the criminal charges that still hang over him, and enable him to remain a power in the land even after he loses formal office. Collectively this network of Mr Zuma’s people is a drag on the economy because their pay and benefits eat up a large share of revenue for the little most of them do, and because they are naturally inclined to place no obstacles in the way of the president’s fiscal imprudence. This is not the way to secure the economic growth that South Africa must achieve if it is to even begin to satisfy the needs, let alone the aspirations, of its people. Real unemployment stands at a dismal 35%, youth unemployment is even worse at 50%, and the squatter townships, which were supposed by now to have disappeared or been transformed, are still there. Ordinary South Africans feel they have been shortchanged. Many of the promises of 1994, especially of material progress, have been unfulfilled. They are in rebellious mood, with popular protests and strikes at unprecedented levels. When the government concedes, as it has done over student fees and the pay of some workers, it buys off protest for a while, but also adds to the strain on the indebted economy. The unfortunate truth is that the strong growth that should have come after the crash did not happen. The reasons are various, and not all of them are the government’s fault. But under a leader who seems to believe that there is an infinite amount of money in the government coffers, South Africa’s difficulties have been hugely compounded. As long ago as 2011, the National Planning Commission, established by Mr Zuma, concluded in its report that there was a danger that the progress made since the ANC took over could be reversed. Unfortunately that danger seems even closer today. |