Why is the state not helping farmers and miners?

When things go pear-shaped and certain critical sectors of our economy are likely to implode, the critical intervention of wise leadership is required. The role of government, even in countries like the US, which subscribe to laissez-faire policies, is to intervene when the market fails and when national interest is at risk.

Thus in 2008 the Emergency Economic Stabilisation Act, was enacted. This bailout of the US financial system, was enacted in response to the sub-prime mortgage crisis which authorised the US secretary of the Treasury to spend up to $700 billion to purchase distressed assets, especially mortgage-backed securities, and supply cash directly to banks. Likewise when critical industries like the motor industry was at risk of being wiped out, the state intervened to invest directly in General Motors and Chrysler to save them from almost certain bankruptcy.

Similarly, an $85 billion facility was provided to save American insurer AIG and mortgage providers Fannie Mae and Freddie Mac from bankruptcy. All these interventions have yielded positive results and all these entities have not only survived but thrived. The leadership of Ben Bernanke and Henry Paulson were seminal in saving these vital industries. Similar steps were taken in the UK to save its banks and with it the whole financial services industry which is so vital to the gross national product of England.

In South Africa, leaders of this ilk have been spectacularly absent. We have allowed critical areas of our economy, such as mining and manufacturing to implode with scarcely any reaction from any leadership. Conditions in agriculture have been slowly deteriorating and now with the drought this vital sector could follow suit. Let us examine the latter, as it is most pressing and current.

It has been brought on by a severe drought which is afflicting most of South Africa. Even putting aside the contention that a drought should have been foreseen and planned for, the preponderance of debate as far as it relates to agriculture is still about who should own the land. Other matters relate to crime against farmers and working conditions. But the new reality of drought, requires us to focus our minds on the mere survival of an industry and of food security.

The government should jump in to offer financial support for farmers to help them survive at least the severe strains of this season. Livestock farmers, should receive fodder to forestall them having to sell their herds in desperation and at low prices. The land ownership debate should be taken off the table, to encourage farmers, with state support to make investments in their farms. These investments should include irrigation systems that use water sparingly and reduce their complete dependency on rain. The state should extend insurance for crop failure to farmers, suffering from “misoeste” for drought-resistant crops.

The government should be investing on a much more intensive manner, in its own water infrastructure to reduce the loss of water through leaking pipes, broken sewerage plants and trying to curb evaporation. For coastal cities like Durban, which has already been muddling along under drought conditions for a full season, it should already have commenced building desalination plants, which utilise sustainable off-the-grid power.

In mining the government should play a far more proactive role in mediating between workers and the mines. It should be funding mines to keep workers in employment and it should encourage unions to mitigate their wage demands, until a time when mines are profitable again. It should scrap its policy of “use it or lose it” with regard to mining rights, as this has helped contribute to more supply, which adds to the oversupply of commodities and reduces prices. The suspicion with which the government views mining owners is counterproductive and merely piles more pressure on an already severely strained sector. The government needs to review its hostile stance to mine owners and work with them instead of against them. A new compact between employers and employees mediated by the government is the way forward.

It is an imperative of government to show a willingness to put its hands in its pockets, to rescue viable and critical industries and sustain them through downturns that could not have been foreseen. This role in South Africa has been blighted and tarnished by past state interventions into badly run and unsustainable state-owned enterprises, like SAA, which have been in need of chronic injections of capital and state interference.

Even though funds are scarce and budgets stretched, the money to prop up these productive sectors must be found and applied without racial quotas. Failure to do so will result in further job losses on a massive scale and merely add additional strain on the fiscus in the long run as these essential foods and grains will need to be imported. This will further aggravate our trade deficit, weaken our currency and add imported inflation to our already over-indebted consumers.