South Africa has recently been affected by a cabinet reshuffle which is increasingly placing negative socio-economic concerns as an indicator of a possible future for our nation. Although the President was within his rights to action this reshuffle, the decision has brought scepticism from within the governing party and externally from civil society, corporate and the broader governmental structures.
While there are differing views, I believe that the reshuffle is designed to maintain power structures within the ruling political party, and in particular, within the key organs of state – a political move not uncommon by national coalitions under increasing pressure due to mounting concern regarding the direction taken by those entrusted with the well-being of the population. Given the pressure being placed on the President, the actions are actually not as surprising as many have thought.
The most significant result has been a downgrade of South Africa’s credit rating by two of the three major international ratings agencies (Standard and Poor’s and Fitch) resulting in an increased cost of borrowing. It should be noted that investor uncertainty in other parts of the globe, such as the UK and America, has resulted in a cushioning effect against a worst case scenario considering investors do not have many other avenues for their wealth generation at this point in time – coupled with estimated low growth outlooks for China; these considerations have helped soften the economic blow to South African markets.
As noted by Magda Wierzycka, Chief Executive Officer of Sygnia Group, “Lack of capital collapsed the National Party in South Africa. Sanctions (as experienced during Apartheid and now comparable to the limits to capital financing we will begin to experience) are exactly that – no capital investment in South Africa, and it brought down that government.” Proposed solutions such as increasing taxes are not compatible with decreasing economic growth; combined with a more liberal policy towards government spending, it is possible that we will experience stagflation with negative growth outlooks with the consequence of high inflation having a profound impact on the prospects of the poorest South African citizens. We need other innovative solutions.
We must better understand our inherent role in the futures of coming generations. Our government has made inroads into socio-economic growth through intentions such as our Constitution (which is a very progressive document considering the age of our democracy) and as well the National Development Plan (NDP) which focuses on the systematic eradication of poverty. These intentions, however well placed, struggle to meet the intended objective when the agents of the change equally struggle to deliver on the promise. This unattained promise has potentially stifled a large number of would-be entrepreneurs and other similar products of these noble intentions who could have been champions for improving the growth forecast of the Gross National Product.
But what can we do as active citizens who want to deliver on the promises made on our behalf? We need to bring about social cohesion within the population which is a cornerstone principle of the NDP. The plan focuses on the progressive eradication of poverty by reducing the number of households with a monthly income of R419 per person from 39% to zero. It further champions to increase employment from 13 million in 2010 to 24 million in 2030. Other key requirements for national cohesion is increasing literacy at pre-school levels and providing affordable access to healthcare and public transport. These end goals are motivations for the necessary willingness required of active citizens.
In achieving these aims, the plan puts emphasis on increasing the professionalism within public service and thereby strengthens the accountability of these structures. Through this, coordination of national objectives becomes easier and the population starts to gradually be motivated to start their own businesses; employ people in local communities to operate these enterprises and be innovative through making use of ever-improving technology – but this is only through the day to day decision making of agents for change who desire more of their own lives and equally the lives of the communities around them. A positive consequence of economic freedom through active citizenship is our independence from over-reliance on external aid but this aspiration seemingly exists amongst a few of us and so it becomes the responsibility of those few to be an example to the others. How can we cultivate this in the majority of us? By being active citizens and understanding that the growth of the individual is only achievable through the development of the greater community.
The fate of downgrading we share with countries such as Turkey and Indonesia. During a period of three decades, 15 countries have been downgraded to junk status but were able to claw their way back to investment grade over time. The process took on average seven years to become eligible for countries to achieve a decreased risk profile. Countries such as Colombia, Croatia, Ireland Thailand and Uruguay all followed this route. The Chief Currency dealer at TreasuryOne, Wichard Cilliers, noted South Africa was able to achieve investment grade a bit sooner due to the fact that he believes S&P are taking more of a concerned view rather than a structural one. This view, he states will be firmed up in December, when the ANC chooses its next leader of the party and the likely future president of the country. Thereafter, South Africa should be able to find some certainty regarding socio-economic and socio-political policy. So, it all doesn’t seem too much of a brick-wall to overcome should we begin to make some decisions based on good governance and a policy for inclusive growth.
I believe the downgrade from Standard and Poor’s (S&P) should cause us to think of innovation towards methods of alternative financing and economic restructure which supplements foreign investment. This is aimed to improve the social cohesion experienced by the greater population. S&P is the same ratings agency that gave the Lehman Brothers company a Triple A rating a day before they went bankrupt so what does that suggest or imply about the structures and consequential reliance on its measurement? It is definitely a necessary compliance function of debtors to be in line with international standards but it begs the question, should we be more progressive in our search for supplementary financing? The psychology of the imprisoned mind is thought of in terms of our diminished self-belief making us reliant on external aid, which in many cases overpowers our drive for progress through personal effort. We can blame the ratings agencies for years to come but when will be the day that we finally take our economic development into our own hands?
The downgrades do create the risk of government defaulting in terms of future debt repayments and corruption potential but similarly, does it not also represent an opportunity for the Africans to facilitate innovative methods of social cohesion through innovative market creation? Does this not represent a moment where Africa should collaborate and create an African marketplace able to uphold and finance a quality of living for all African people that all of us are proud of? I am of that opinion. The downgrade results in increased cost of borrowing and therefore increases the potential for defaulting on debt repayments – does it not compound our requirement for innovation? Let us take this responsibility and hold the futures of our generations in our hands and not in the hands of those who can so easily take it away from others.
It is time to mobilise, yes, but not through marches, rather through active citizenship – through an unfailing willingness to create a better future for our coming generations without historical dependence.