Trade unions have rejected austerity measures proposed by Finance Minister Enoch Godongwana. Picture: Ayanda Ndamane/African News Agency(ANA)
Ashraf Patel and Phaphano Phasha
On September 4, Finance Minister Enoch Godongwana made a startling claim that “South Africa has run out of money”. While National Treasury data showed that the Budget moved to a deficit of R143.8 billion for July, the largest since at least 2004 and wider than the R115.5bn forecast by economists.
However, we believe this is disingenuous and flawed. It is critical that South Africans demand accountability, responsibility and transparency from the National Treasury which is solely blaming the surge in debt to government overspending and not the concrete objective reality that Treasury is simply implementing the International Monetary Fund (IMF) mandated structural adjustments due to its reckless lending compounded by corruption and secrecy.
Just recently, the Gauteng High Court, Pretoria ruled in favour of the Health Justice Initiative (HJI) which took the national Department of Health to court to compel it to provide the public and South Africans access to the Covid-19 vaccine procurement contracts that were taken on the back of the R500 billion IMF bailout of June 2020, under the cover of the Covid pandemic and national disaster act.
The court made damning findings on the Covid-19 vaccine contracts relating to public funds between the Department of Health and pharmaceutical giants Johnson & Johnson, Pfizer, the Serum Institute of India, and the Global Alliance for Vaccines and Immunisations.
“South Africa paid $734 million (R3bn) for the 67 million vaccine doses it received from the four pharmaceutical organisations central to the contracts, $94m of which was not fully refundable. The contracts, which were clouded in secrecy and which required litigation to understand the extent of their corruption, also revealed that. The government procured vaccines at differential, comparatively inflated prices, and that the agreements may contain onerous and inequitable terms including broad indemnification clauses, export restrictions and non-refundability clauses,” said the HJI.
The HJI’s court victory Initiative exposed why South Africans should no longer trust a state clouded in “Covid disaster secrecy”, is non-consultative and accountable to, if only itself, then to multinationals such as the powerful pharmaceutical companies.
The court judgment also revealed that the national Health Department also “agreed not to take any action to override the intellectual property rights of this vaccines or even sell, divert or donate vaccines it has already paid for,” said the HJI.
The judgment simply unmasked how the Covid era was the biggest corporate heists, facilitated by global pharmaceutical corporations, in concert with high-level government officials, under the darkness of the hard Covid pandemic lockdown. Half of all the vaccines were disposed. Today, the government has had to cut costs, retrench in the public sector and privatise as a result of the IMF bailout loan it took to pay for the vaccines that were, ultimately, disposed. This is after many front-line public servants were duped in being the praise poets and promoting vaccines in the workplace. Now they are front line in being retrenched, and South Africans have IMF Covid bailouts to pay for.
And then there was the mega PPE scandals across the nation that saw a major national tendepreneur Olympic contest that witnessed large-scale looting, all under the cover of Covid, with the Public Finance Management Act suspended to facilitate the mass-scale looting, aided and abetted by the IMF. In the heady, hazy Covid-fuelled cash injections, it was as if the Covid tenderprenuer and pharmaceutical orgy of corruption and looting would never end.
But like all binges, the “babalaas” of the IMF Covid bailouts is hitting South African hard in this 2023 budget period and beyond. Only this time round, South Africa faces more economic headwinds – high energy and food prices and high fuel inflation.
Hence, the IMF bailout model has been criticised as “shock therapy”. It is destructive and extractive. However, any government worth its salt would have had a sense of national destiny and sovereignty. But the Cabinet wilfully chose and signed detailed agreements that has come back to haunt the national fiscus and the poorest of the poor.
Above that, the destructive and extractive loans of IMF bailouts always translate into two destructive policy prescriptions: austerity and privatisation.
Austerity means reducing public expenditure, a freeze on public sector wages or delaying the National Health Insurance. A most concerning feature is the head long push towards the privatisation of state-owned entities, as we have seen with the shameful SAA privatisation debacle, the Independent Communications Authority of SA’s spectrum auctions, the decay of the Post Office, Eskom’s proposed break up and the Transnet sale of ports and rail.
All the decisions being taken by a government is essentially in order to fulfil its erroneous and IMF debt obligations to reduce national debt. This means there will be less resources to upgrade state capacity or build new capacity to expand the democratic developmental state and NDP 2023, which is South Africa’s lynchpin economic framework.
The issues, compounded by the Ukraine-Russia conflict and its energy-food inflationary cycle, can only partly explain rising costs. This cannot justify the shenanigans and deceit spewed by the National Treasury whose intention is to sell only the lucrative parts of SOEs, thus clearly showing the agenda is a narrow private sector one.
The National Treasury’s underlying logic of “fiscal consolidation” (used in this context as a euphemism for austerity) is economically flawed and will have ramifications for the economy.
Most importantly, their impact will be felt by the most vulnerable groups in South Africa. The assumption that cutting government spending has relatively little adverse effect on aggregate demand has been discredited.
In fact, the effect of government spending cuts on output has proved to be larger than anticipated during recessionary times.
It is indeed a case of Back to the Future 2.0 as South Africa finds itself in a dangerous phase of high debt, currency devaluation and large scale privatisations last seen in the late 1990s, whose core beneficiaries again will be global corporations, merchant banks and their advisory divisions – a narrow elite that will gain in the new privatisation bonanza.
Many nations are taking the developmental state approach, with expanded public sector capabilities.
Again, little, if any, lessons have been learnt, which is even more tragic as the ANC administration has been one to brag about a new capable state using the Fourth Industrial Revolution to improve policy making for good governance and social development – the holy grail of the ANCs “Democratic Developmental State”.
It is evident that IMF loans and mega Covid mismanagement have led to the multitude of crisis, and policymakers are perusing a neo-liberal agenda which is extractive and destructive, and which cloaks itself as “fighting corruption” or anti-corruption while its genesis and logic of privatisation will mean utility costs will rocket – only to entrench poverty and create a system of cronyism.
The economic trajectory is neither democratic nor developmental but littered with corruption and greed and opportunism, with the authoritarian tendency of the Covid years the hallmark of the current epoch of the state.
The economic tragedy that has befallen South Africa and which is affecting millions of South Africans, especially the post-1994 black middle class who have fallen back into poverty, takes place under the custodianship of Minister Enoch Godongwana and President Cyril Ramaphosa, the world-renowned trade unionists and beneficiaries of BEE deals over the years. The irony. No surprises here. Three decades into democracy, the more things change, the more they remain the same. What is to be done?
Ashraf Patel is a senior associate at the Institute for Global Dialogue and Phaphano Phasha is an independent economic, energy and social policy analyst
The views expressed do not necessarily reflect the views of Independent Media or
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