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A need for democratic capitalism

“When Zuma came into office, we had a budget surplus of R20 billion. He left us with a budget deficit of R50 billion and debt of R2,3 trillion. The national budget announced by Finance Minister Malusi Gigaba suggests it will take three years to get us back to where we were. This is provided the looting doesn’t continue; and I don’t see why it shouldn’t, because Zuma left behind on this administration a brigade of looters, which Cyril Ramaphosa has still not felt any urgency to rectify.” Mphuthumi Ntabeni argues that this year's speech showed no imagination, except in the way that it insulted the poor. What we need now, more than ever, he says, is a complete shift in thinking.”

It was always going difficult for minister Gigaba to choose between placating the citizens or the markets. Gigaba, having been part of the Zuma looting brigade, chose to placate the markets and in the process put the citizens out to hang. He went for the low hanging fruits – the easiest and surest way to raise quick money is by value added taxes. Unfortunately this will hit the poor the hardest who have no option of the VAT vendor financial tricks the rich will use to avoid this hike.

The irritating part is how this Ramaphosa administration, through Gigaba, lies by saying it has cushioned the poor from this VAT hike because a few zero-rated items are not affected. In fact this is an insult to our intelligence; it is a showing of the middle finger to the poor and our middle class who would be hit hardest by inflation through this. The insult is also in supposing the poor only purchase the 19 zero-rated items. The minister, were he on the side of the poor, could have at least added more items to this list and could have included white meats, books, sanitary towels, fruit and vegetables.

Instead, he also raised the fuel levy, which will further cause high inflation. It would appear this administration is basically punishing the poor in order to recover from spending profligacy and corruption. The poor must pay for their looting and the bailouts of state owned Eskom, SAA, Passenger Rail Agency of South Africa (PRASA) and the incompetence and corruption that was introduced at SARS by bankrupting it of proper management skills. There is no guarantee this will cease. I am sure the poor have received the message, loud and clear, and shall make their reply on the 2019 national and provincial elections.

I would advise the minister to disabuse himself from thinking the poor are only those getting social grants, to which he has gifted another measly R10. “Poor” does not only refer to those on social grants, but the 54% of population who live on about R22 per day. Where the minister thinks they’re going to get transportation money to get to their menial jobs is anyone’s guess. The government corruption on SOEs has made life impossible for them: PRASA is falling apart because of corruption – just ask commuters on the central line in Cape Town who have been without trains for close to three months. Life is about to get harder as the already more expensive commute is about to skyrocket.

Dangerous cuts

Departmental budgets have been reduced by R85.7-billion over the medium term. I agree with national and provincial departments budget cuts, to stem the spending profligacy, especially reducing their spending on administration. I also agree with cutting the transfers to the South African National Roads Agency Limited (SANRAL), SARS, PRASA and four water boards. What I don’t understand is cutting provincial conditional grants including the school infrastructure grant, the human settlements development grant and the provincial roads maintenance grant. This is totally contradictory to the need for investing on our infrastructure. Worse still, similar cuts are made to local government grants, including the municipal infrastructure grant, the integrated national electrification programme grant, the urban settlements development grant and the public transport network grant. Even Treasury admits that these cuts would delay the completion of a number of infrastructure projects.

Money has to come from somewhere

We’re not simpletons. We know the R52 billion for free education had to come from somewhere. What I object to most is the lack of innovation to come up with less regressive ways of taxation. I hope it is now clear to South Africans that it is not just the incompetence and corruption of the ruling party that is the problem, but rather a dearth of vision that makes them unfit to govern. They’ve run out of ideas, and are now busy chasing their tails, making us dizzy in the process because we keep entertaining their rubbish. We keep ploughing resources into basic education and health with meagre returns. Arguably, these are becoming more dysfunctional, yet nothing much is done about this.

This budget was clearly written to boost business confidence and avoid a further rating downgrade. Where the misconception of the minister and the president lies is in supposing investors can be a weapon of stimulating a stagnant national economy. The investors would rather go to conflict-ridden countries, like Ethiopia and Somalia, so long as those economies are growing at high rates (which they are!) And that high economic growth is government driven and based on infrastructure development. Instead of announcing ways of stimulating our stagnant economy Gigaba just kicked the can further down the road, crossing fingers that the investors would soon come.

They won’t come until they see real economic growth in the country and the stimulus at this stage can only be made by the government, hence it seems ludicrous to cut back on infrastructure investment.

The minister says R40bn worth of state-owned assets will be “better utilise or dispose of”. For a time the process of privitisation might patch the fiscal holes – provided we avoid corrupt practices that have previously stifled opportunities. Indeed, these may even help resuscitate the ailing and stagnant economy by injecting capital. But the process of privatisation of public assets leads to job losses and the spiralling of income and wealth inequalities.

We’re not averse to taxation per se, just the regressive kinds, and how the taxpayer’s money is spent. Experience demonstrates that the only people who ever benefit from the demands of rating agencies are the banks and the financial sector. The function of these agencies is to retain an economic system that benefits the industrialised north at all costs. When your politicians start running off to become regulars at Davos and the World Economic Forum, know that your country is being sold out.

An ideal situation

The appropriate national economic system is fairly easy to imagine, in fact democratic capitalism of Catholic Social Teaching (CST) has spelt it out. Our economic system must be an organic, participatory democracy, with considerable elements of embedded community and national based economic autonomy (syndicalism).

CST is concerned with the relationship between man, society and the state, particularly the pre-eminence of human dignity over politics and economics. The democratic capitalism the CST propagates depends on the culture that’s rooted in transcendent truth whose political-economic system must, by necessity, challenge socio-economic injustices.

Blessed John Paul, in his seminal encyclical, Centesimus Annus, observed that socialism collapsed precisely because of what he called an “anthropological error”. He also called it the “socialisation of man” and the “nationalisation of the person”. More pertinent for our era and Budget 2018 in particular, is his warning against the finacialisation of human values. He says: “It is possible for the financial accounts to be in order, and yet for the people – who make up the firm’s most valuable asset – to be humiliated and their dignity offended. Besides being morally inadmissible, this will eventually have negative repercussions on the firm’s economic efficiency.”

Substitute ‘firm’ with ‘national,’ and you’ll understand why South Africans feel offended by this budget. Succumbing to liberal culture and the unregulated demands of the markets as a system of political economy is what is destroying democratic capitalism.

Unfortunately, I have come to the sad conclusion that Ramaphosa is not the leader we need to make the decisive shift from the neoliberal economic direction. It should also be clear by now, with every passing year, that the ANC is not the vehicle that’ll get us where we need to be. It keeps churning different sides of the same coin leadership. In Xhosa: Sixhentsa ndowon' Inge – we're chasing our own tails.

* The opinions expressed here by Spotlight.Africa contributors and editors are their own and not official statements of the Society of Jesus in South Africa or of the Catholic Church unless explicitly stated.