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The old saying desperate times call for desperate measures rings some bells in Cees Bruggemans latest piece. And despite Cees saying there is no need to push the button just yet, he does unpack nationalisation, exchange controls, fiscal and monetary policy and says despite the measures taken so far, none of them have reached a point of desperation. So the optimist’s blood points to a golden sunrise on the horizon but there’s a turbulent road ahead that needs navigating. – Stuart Lowman
By Cees Bruggemans*
For a country supposedly on its last legs, with collapse approaching rapidly, such an event would presumably be reflected in increasingly desperate measures, like some reflected light. Yet the evidence remains remarkably scarce, suggesting what (delusion, but of which kind)?
The highest shrillness of desperation I have noticed concerns nuclear energy, with supposedly much secrecy and great hullabaloo as we race towards the dread moment of contract inking and irreversibility.
Why the speed and secrecy? Perhaps because of corruption potential? To keep the competing suppliers guessing and not inflating the price? To prevent objections from non-government parties to a massive Russian dependency at ruinous cost?
At bottom, it may well be that it has sunk in at senior government levels that SA won’t build new power capacity fast enough to supplement the failing fleet and be ready to start displacing as soon as possible.
That would certainly reflect desperation of the first order, if true.
It would not explain why the Russians get the nod. The Chinese may be too grasping (and in any case held in reserve for the greater desperation?), while Western dependencies may give too much controlling power to the wrong governments, with too many long-term IMF-like conditionalities, with no short-term finders fee opportunities.
Russia might be different on all these scores, but not to everyone’s liking, especially long-suffering taxpayers of the future.
Then there has been great enthusiasm for the BRICS and their new financial institutions (NDB – New Development Bank and CRA – Currency Reserve Arrangement). These anti-Western alliances apparently fit well, snugly even, within the government’s political orientation. Abandoning the West across a broad front, there has been talk of being able to appeal to global compatriots and tap these two instruments for our many infrastructure needs and currency crisis occasions, also for Greater Africa (Think Big), but it may have started to dawn that this won’t be as easily forthcoming as perhaps initially envisaged. Not for Africa, not for us. Other, more critical priorities?
Call it a stillborn desperation?
Then again, we aren’t (yet) experiencing another currency crisis (like 1998 or 1985 or 2001 or 2008), the nuclear deal will presumably be self-financing and otherwise there should be unease about state and infrastructure financing long-term (but that is another day and doesn’t qualify for short-term desperation?).
Other stuff doesn’t yet even hint at anything tight?
The SARB remains independent and even raised interest rates lately, and this into a very weak economy, with talk of still more, entirely its call. The Rand may be weak, but is not weaker than usual in a tight spot (we have know a lot worse in real terms).
Indeed, nobody (yet) has told SARB to cut rates by 3% and start funding the budget (real desperation). Instead, we continue to have a gold-plated central bank (not even copper-plated).
Finance Minister Nhlanhla Nene has been making ominous noises about higher taxes next year, with the Davis Committee happily fingering VAT, aiming to ensure enough resources keep flowing to government even in tight times.
But desperation would be different, thinking VAT 23% from 14% now, corporate taxes near 50% and top marginal income tax rate over 70%. Yet we remain very far from that, instead wanting to do at most some tax tweaking only (but a bit of tweaking every year for a decade would add up…). So no tax desperation of note.
Exchange control is supposed to keep the prisoners in, but for the past 20 years there has been much reform allowing substantial internationalisation of SA capital, with as yet no indication of screwing that lid back on. Certainly a lot of hissing through clenched teeth from some political activists, akin to noise made by angry geese, but no real action on this wide front.
Tightening that up would be the first sign of real desperation, but so far no show.
As to nationalisation, thievery by another name, there has been an inordinate amount of wealth redistribution, but it has gone the way of participatory share ownership, sharing as between friends, kind of.
Aside of the mineral rights and water rights nationalisations I don’t think too much has happened (yet). There is of course a lot of talk, and lots of legislation has been happily adopted that may make things easier in future. But as yet there hasn’t been too much, even if a certain amount of land has changed owners.
Desperation to my mind are measures that suggest a tightness of cash requiring actions not normally seen. On that score, we may be on the brink of some real desperation, yet it hasn’t come fully into focus (yet).
So no sweat. There is no crisis (yet). Though optimists keep hoping.
* Cees Bruggemans is consulting economist at Bruggemans & Associates
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