Insights

PETER ATTARD MONTALTO: New crises await as budget bungling nears end

We are at the beginning of the end of the budget crisis today (though given how the budget law works it was a process, political and reputational crisis — not a fiscal, credit or funding crisis).

We are also at the end of the beginning of the foreign policy crisis as things move out into the open, direct and face-to-face with the US. We shall see today if SA either falls into a huge expectations management crisis and if the naivety of much of the government’s pre-trip communications turned out to be at odds with how President Donald Trump works.

Or if, mysteriously, Trump didn’t want to talk at all about foreign policy issues but just do a trade deal because SA has so much to offer the US despite there being little meaningful progress at technical level before the meeting.

Attention therefore must turn to what the next crisis is, because SA can never spend too long in a “quiet” period without a crisis.

Efforts are advancing to remedy the logistics crisis, even if the complexity of reform takes time.

Regarding electricity, we are out of structural load-shedding and into more sporadic bouts as demand chases supply with no safety margin to protect us. The untold (or rather less understood) story there, is that far more limited quantities of new capacity have come on stream than were initially expected, partly given the failure of the Renewable Energy Independent Power Producer Procurement Programme to move at adequate pace a few years ago (given the lags in such things), as well as delays in grid access process reform especially affecting private sector projects too. The latter is being fixed; the former not yet.

The recent launch of the Operation Vulindlela 2.0 agenda was so important for its recognition of the work still outstanding on network industries from its first agenda, but also because it, unusually for the government, recognised a crisis to come: SA getting seriously left behind if it doesn’t speed up and digitalise government. GDP growth of the future and relative performance versus other countries is likely to see the ability to respond to the opportunities and threats a digital world provides being far more important than before.

Housing reforms and spatial inequality elements of the Operation Vulindlela agenda to improve the travesty of unreformed town planning and availability of effective demand and supply-side measures to stimulate the social housing market were interesting, but perplexingly little has been done about something so important in the past 30 years. There were enough “outputs” such as RDP houses to mean enough political capital was being generated without the outcomes of decent, affordable places to live in the right locations for the labour market and to reduce costs of transport.

Regarding the education crisis, the top-trimming of budgets pushed down from national level to provinces in the past few years, combined with poor planning in many provinces, have caused severe cutbacks and mounting arrears. Combine that with the large proportion of teachers due to retire by decade’s end not being replaced fast enough, and a train smash is unfolding. Coalition governments in Gauteng and KwaZulu-Natal are failing to show any meaningful turning point on the horizon and other provinces (outside the Western Cape) do not even bear thinking about.

The education crisis will not be solved with money flowing from the National Treasury soon and will instead rely on public-private partnerships to build more infrastructure faster, as well as better planning and teacher numbers prioritisation. Attempts to fund staff from the Unemployment Insurance Fund and other off-balance sheet means lack clarity and are unsustainable in the long term.

Concerning the healthcare crisis, regardless of your views on National Health Insurance (NHI), the policy (or any replacement) is not coming soon given a minister holding on for dear life regardless of whatever facts or evidence and mountains of impending court cases to block him (not to mention the impossibility of funding the thing anyway).

While it is glib to say that the NHI will never happen, that response misses the point that no alternative has yet been accepted as policy. We will end up with a state medical aid, greater provision of low-cost private medical aids and some greater regulation of competition and costs in the private sector as the only viable and funding end point, as proposed now by business, but it will take a long time — too long — to get there until a leadership decision is taken on it.

The health and education crises are complex and without immediate “new” negatives — they aren’t like load-shedding or the direct effect of logistics on growth. Both will possibly increase the share of the vote of whoever solves them (including the ANC) — unlike logistics or electricity, which are far too esoteric and detached to drive vote share except indirectly via unemployment. Indeed, the plummeting of the ANC’s vote share last year occurred while load-shedding had been (nominally) solved.

The new crisis only now emerging that will be likely to affect electoral outcomes in future, is the climate adaptation one. While it is fashionable to think climate issues have disappeared and we can all build new coal power stations suddenly, SA is still set to warm at twice the global average rate. Due to it, people in the east of the country will be increasingly affected by floods and washed-away communities and infrastructure, and those in the west by extremes and overall drier weather. While discussed in rarefied circles, the urgency on this crisis is lacking.

The Operation Vulindlela 2.0 agenda is correctly tightly defined and eschews trying to solve everything. Who then solves these other crises — not in terms of talk shops but in terms of real and programmatic actions in the style of Operation Vulindlela? The question is left hanging and more apparent than before by the successes of Operation Vulindlela and should be a cause for a concern.

Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.

This article first appeared in Business Day.