PETER ATTARD MONTALTO: It is perilous to relax amid social and political risks

Holidays in pretty places are a funny thing.

Sitting here tapping this in Plettenberg Bay looking out to the mountains in the distance everything seems fine with SA. Tourism has rebounded and there is a buzz. I’ve had rather too much nice SA food and wine in the past two weeks and everyone is thinking about winding down for the year (well South Africans at least — the rest of the world of course doesn’t quite take Christmas off like SA does).

Parliament is breaking next week and won’t be back from their slumbers till after the state of the nation address in February. The government is closing down already for Christmas but also for the ANC’s elective conference (which has already been a distraction since the ANC’s policy conference a few months ago).

One would think there is no work to be done. Indeed, for the upper crust perhaps there isn’t, the downside risks are too far away and too remote to see through the holiday period. Load-shedding, after all, is now only less than 60 seconds long while the generator kicks in.

Yet sitting here with the view, there is a gnawing problem that cannot be wished away. Spending some days recently on the Cape Flats in some of the poorest communities drove this home to me. More prosaically, the pot holes in Johannesburg have also become meaningfully worse (even in the northern suburbs) in the past few months.

The new year may well bring a number of themes home to roost as we sit between two elections. The ANC’s internal battles are likely to show a messy top six already clambering for 2027 and realignments of power even if ignoring the radical economic transformation (RET) faction; and the national elections which are likely to be similarly messy with coalitions required and no obviously good outcome.

First, we are likely to see the inequality between provinces widen. Internal migration as well as emigration are accelerating based on the latest Stats SA data and forecasts, as well as anecdotally, and will create a shift in productive skills availability between provinces. At a country level this may not really show up — growth and other data might be unaffected if some areas are growing faster and others slower as a result. Yet the widening inequality will create increasingly challenging social and political risks that we perhaps are only dimly aware of — though the July riots last year provide a clear warning. We should not forget the problems of those areas, in particular the need for more rapid house building and urban planning.

The triumph of infrastructure spin over actual infrastructure momentum that is cognisant to shifting demographics, climate adaptation and security risks will perhaps finally become apparent and spark a turning point — or not. Several years have been wasted on the promotion of infrastructure PR over reality. Budget allocations will have to be rethought in this environment, as will how the private sector can work with and fund increasingly dysfunctional municipalities and provinces. If answers aren’t found to these problems in 2023 then areas of the country will start to become uninvestable.

Second, linked to this, is the rise of corrupt “business forums” and mafias. The inability of the state to battle these is getting worse and will require tough choices in 2023. Some in the private sector are making things worse by paying them off with 30% cuts. Yet doing this simply forces new mafia interests into the system, with the government playing little role in trying to combat these.

KwaZulu-Natal, crucial not just in terms of size but also routes to export, in particular needs to be watched and is increasingly concerning to international and local investors as well as insurance companies and funders. Some tough choices will be required in the new year unless parts of the country are to become no-go areas, further increasing social unrest risk.

Political change

Third, we will see political change around spending and the budget in a way we haven’t seen in the past. It is tempting to jump in with extra money in this period between elections to paper over cracks, yet the case for an ability to effectively do expansionary fiscal policy — in other words to actually be able to spend the money productively through line departments and programmes to have an impact on the economy — has not been made with a dysfunctional state.

The easy way out then is a pathway towards a basic income grant. Until now the ANC has failed to link the bluster of conferences to government action on spending, but has not had the existential electoral threat it now faces before. Next year will be key to see if the conservative line holds.

Fourth, we will have to break things to move forward. Great steps have been made on the reform front in the past year, but many will not actually fully affect the economy or the business environment until beyond 2023 (such as energy investment to end load-shedding or private sector participation in logistics). Things may be politically, as well as practically — let alone in terms of stamina, difficult in 2023 to keep momentum going. This will be a year where old thinking and status quo can be thrown in the way and must be bust through to keep momentum, even if short-term payoffs are less clear.

Energy policy as usual will be key here. A new Integrated Resources Plan (IRP) will be circulating and open to buffeting by vested interests and stuck-in-the mud status quo ideologues. It is an amazing opportunity to reset but might be lost.

Next year could be a lost year if not seized by the scruff of the neck. It will throw up a range of challenges that are not normally well dealt with in such a politically hot year — indeed they would have probably been more easily dealt with this year than before, but that is always the case. It will be no time for relaxing.

 Attard Montalto leads on markets, political economy and the just energy transition at Intellidex, an SA research-led consulting company. This article first appeared in Business Day.