South Africa must break ANC taboos to lift growth

South Africa is emerging from one of the world’s strictest lockdowns. Not before time. Borders are still closed and the economy, which contracted 16 per cent in three months, is back to where it was in 2007. As the southern hemisphere moves into summer and infections fall sharply, South Africa should work to revive vital industries, including tourism, safely and quickly.

The lockdown has been painful. It has been sullied by corruption and state security violence. But it has been necessary. Cyril Ramaphosa, the president, was right to take stringent measures, shutting down much activity before a single death was recorded. So far, just over 15,000 people have died from 650,000 recorded infections. The toll, even if an underestimate, would have been worse had the government not acted decisively.

If the pandemic is coming under some sort of control, it is hard to say the same about the economy. This has been going backwards, in per capita terms, for years. Covid-19 has merely exacerbated a wrenching decade of corruption and incompetence under Jacob Zuma, the former president. Debt levels, at 60 per cent of output — and heading for 80 per cent — are unsustainable for a still developing economy. Rating agencies have downgraded sovereign debt to junk.

The ANC‘s policies have not been working on the ground either. Levels of economic inequality are as bad as during apartheid. Unemployment is at least 30 per cent and business fears it could rise to an alarming 50 per cent. Longstanding policies of income redistribution, social grants and black economic empowerment are not bad per se. But they have run out of road. South Africa now urgently needs to raise its potential growth rate, which has been stuck at a dismal 1.5 per cent for years.

That calls for an honest government and an economy that can attract private investment. Mr Ramaphosa has reversed some of the rot by rebuilding captured institutions, but he has done less well at tackling corruption within the ANC. He should now use public anger over Covid-19 procurement scandals to make examples of some senior officials. If he cannot clean house, the ANC will lose credibility as a vehicle of economic transformation.

Mr Ramaphosa also needs to address the bloated public sector. This absorbs too much of the state’s limited resources with too little impact. Many state-owned enterprises are borderline dysfunctional. If they can be resuscitated they should be privatised. The argument that they are a vehicle for transformation is wearing thin. Tens of thousands of state-funded jobs do not compensate for the massive loss in productivity. To show his intent, Mr Ramaphosa should scrap plans to bail out South African Airways. It can be restructured and run perfectly well by a private operator.

South Africa cannot spend more than it raises in taxes indefinitely. Nor can it fill the void with ever-increasing debt. The resulting macroeconomic instability has put off private investors, reducing economic activity still further. That risks condemning South African governments to the dismal task of slicing up an ever-shrinking economic pie.

Mr Ramaphosa is uniquely placed to stop the downward spiral. As an anti-apartheid leader, former union activist and successful businessman he has a foot in each of the country’s most important constituencies. The government needs to collaborate with business and labour to get the economy going again. Mr Ramaphosa has a tendency to caution, but this is the time to act. For the South African majority, rather than its vested interests, it is time for him to break some taboos.

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