Budget speech: Will govt back its promises?

By Jan Hofmeyr

Since it assumed office, the Zuma administration has been frequently faulted for not being able to forge a coherent vision for this country. Arguably the president’s recent State of the Nation address has been perceived by some to not alter this view. Workmanlike it was, and touching on the right issues it did, but the rhetoric and presentation fell short of being inspirational.

Given the pervasiveness of material insecurity in our country, it is legitimate of citizens to demand decisiveness and clarity on government’s plans to undo acute levels of poverty and inequality. The State of the Nation speech typically offers the president an appropriate platform to take the country into his confidence in this regard. Whether his words earlier this month did indeed resonate with the populace is difficult to say in the absence of proper snap opinion poll data. Yet, to appraise his speech and general performance properly at this stage, it is also important to take cognisance of the broader global context within which his government has to operate.

Currently the world finds itself in a precarious place. Politically and economically common wisdom is being challenged in various contexts and, ironically, despite unprecedented access to information, our world is becoming increasingly difficult to fathom. A confluence of factors like climate change, demographic transformations, the near collapse of the global finance system as we have come to know it, and the marked shift in economic power from Western economies towards newly industrialising ones, such as China, India and Brazil, has made our planet a less predictable place. It is not that we know too little, because each of these is to varying degrees quantifiable. It is rather that we are unable to connect the dots. We are able to measure, but in this period of profound reconfiguration, it is complicated to grasp the critical links, their meanings and broader implications. These are also inescapable realities that our government has to grapple with.

While this volatile context does not absolve it from of its key responsibilities and failures, it helps to create perspective. Pity, for example, the likes of Greek Prime Minister George Papandreou, whose government will have to implement a 30% pay cut to senior civil servants this year, and spare a thought for Irish Prime Minister Brian Cowen, whose economic austerity package, imposed from Brussels, is almost certain to remove his party from power in upcoming general elections. What vision and inspiration can they offer their demoralised citizenries at the beginning of 2011? Even the champion of change two years ago, Barack Obama, has seen his ambitious domestic US agenda being watered down by devastating mid-term elections, and on the international front recent events in North Africa have done much to further discredit US foreign policy in the wake of the WikiLeaks saga. These gentlemen and their peers would, no doubt, have been more than happy to enjoy our president’s approval rating of 62% (albeit down from 77%) that was recorded in a recent Ipsos Markinor survey.

Zuma, despite his ratings, will be aware that there is little room for comfort. He knows that despite consensus forecasts for growth, the cost of living, especially for the poorest of the poor, will rise significantly during this year. This will put pressure on social stability and cohesion, not only in this country, but also in the region with its porous borders. In other developing nations rising food prices have already resulted in instances of social unrest and his government will certainly want to counter such prospects here, especially in a local government election year. He will, however, be equally aware that opportunistic short-term measures to appease or placate communities may further exacerbate the already parlous state of local government finances.

With limited room to manoeuvre then, what should guide our government in its engagement with its domestic challenges?

It can be argued that volatile times, firstly, demand a pragmatic approach to decision-making in a rapidly changing environment. In this regard it has been encouraging to note that the New Growth Path document, released at the end of last year by Ebrahim Patel’s ministry for economic development, explicitly highlights a number of trade-offs that policy-makers will have to grapple with in raising the country’s developmental trajectory. Some of these choices, such as whether it is desirable to promote industries that have higher growth capacity, but lower transformative potential, will indeed be difficult and require compromise. The question is whether key social stakeholders will have the courage to concede on entrenched positions, because increasingly it will require of government, business, labour and civil society to abandon ideological reasoning in instances where these sectoral interests impede on the greater good of the country.

Emphasis should, secondly, be placed on curbing wasteful expenditure and eradicating practices that affect the most vulnerable disproportionately. In contexts of scarcity, corrupt practices and maladministration cannot be allowed to drain the fiscus even further. Rent-seeking by political elites, at the cost of development, is patently immoral. Equally so, is exploitative behaviour in the corporate sector, particularly in relation to price-fixing where the poor inevitably bear the heaviest burden. The point on ethical governance seems to be a superfluous one to make at a time when it is so frequently raised in the public sphere. Yet there often still seems to be a disconnect between words and action, both in the public and private sphere. As a result, such inconsistency not only depletes physical resources, but also the morale of those who are affected by the discrepancy between principle and practice. Events two weeks ago in Ermelo should have been a reminder that the price to be paid for SQUANDERED social capital is high and rising.

This leads to the final proposition, which argues that in times of uncertainty it is important to stick to the basics and focus on what is known. In our context, this would imply emphasis on fiscal discipline, shared growth, investment in human resources but particularly also job creation. Government’s track record in terms of the first too has been fairly solid under adverse circumstances. It has been less successful in regard of the latter two — a fact that the president once again conceded to in his speech. Particularly significant though is the degree to which the idea of a more integrated approach to job creation has found bearing in mainstream policy discourse. Arguably, the issue has never over the past 17 years enjoyed the prominence that it currently does. This was also highlighted in the State of the Nation speech where the president made a number of solid commitments relating to job creation.

Nevertheless, in the final instance tomorrow’s budget speech will give us a clearer idea of the extent to which government will back up its promises relating to jobs and other key State of the Nation commitments with the required resources. While analysts will test it against principles of economic prudence, most ordinary citizens will simply seek assurance from Pravin Gordhan at a time when uncertainty has become one of the few constants. Gordhan will be hard-pressed to satisfy all sectors of society, but arguably, most will at this stage settle for knowledge that the ship is on course, but importantly also, that it is able to alter its direction when so required. The president has in broad strokes given this assurance two weeks ago. Tomorrow we need to see the substance.

Jan Hofmeyr is the head of the political analysis programme at the Institute for Justice and Reconciliation.

The institute will launch the sixth edition of its Transformation Audit Publication, titled Vision or Vacuum?, in Cape Town on Thursday evening at an event to be addressed by Auditor-General Terence Nombembe.