Explaining our economic crisis

Yesterday Tito Mboweni released his first medium term budget after he replaced Nhlahla Nene as finance minister.

He had something like two weeks to come up with a plan, and what he came up with was immediately greeted with the rand and bonds markets dropping according to EWN.

Okay here is the problem with the economy, I’ve gone through this before but it bears repeating.

Ever since 1994 we’ve had official unemployment of over 20% for all but one year – and by now we’ve hit a point where there are apparently fewer South Africans working than not according to economist Mike Schussler as per Times LIVE.

Over the past decade, South African debt to income has been dropping rapidly.


Mboweni has cut gross domestic product growth expectations for the year to 0.7%.

In February South Africa was listed as Bloomberg’s second most miserable economy on Earth, with a misery value of 33.1.

Misery value is basically what you get if you add inflation to unemployment – and this is in what is for the most part a positive world economy.

One of the biggest focuses of the speech was living within our means, well the thing is if consumers aren’t spending, and business isn’t spending, and the government isn’t spending, where do you get your economic growth?

This isn’t a mysterious function of the markets, this is simple accounting, in order to sell there has to be a buyer. The debits and credits must line up.

Our problem is that because of a decade of looting by the ANC under the leader of Jacob Zuma, we are a high credit risk. We allowed our country to be run by people who we knew to be corrupt, who we knew were going to rob us, simply out of historic animus.

And we still see a lot of that today. The whole “Stratcom” conspiracy that is being peddled nowadays, consider this, who did Stratcom work for? The government.

The biggest example of a “Statcom” style operation I can think of that we know about in recent years was the attempt to discredit SARS at the Sunday Times with the Rogue Unit report. The thing is – that wasn’t Johann Rupert, that was a a factional battle within the ANC.

We’ve got a sad case of time travelers from the 1980s on Twitter who think we still have the Nationalist government and the ANC are a resistance movement, not the ruling power.

They are still fighting a battle that was won over two decades ago, and wondering why progress has not been made on any of the issues that have cropped up since then. If we faced the problems we have, instead of the problems we had, we might actually get somewhere.

Anyway because of those time travelers voting for thieves in the mistaken belief that they were still part of a resistance movement fighting the government and not actually the government we do not have the degree of national savings required to easily spend our way out of the current economic crisis.

A lot of this current budget was formulated under Nhlahla Nene’s watch, and a lot of that watch was spent dealing with the inquiry into state capture, ending in his public shaming and sacking. Mboweni had two weeks to turn Nene’s work over that period into a workable plan, and the result is – we needed a revolution, we got tweaks.

Hopefully he does better in the next budget, and hopefully he lasts that long. We seem to have developed the same habit with finance ministers as we have with coaches – we don’t really give them enough time to really come to grips with the job and then wonder why we aren’t performing as well as we should.

Now I would go into more depth on this, but frankly one of my cats just died, so I’m going to spend the rest of the day trying very hard not to think very hard. Probably play some MTG: Arena or Pathfinder: Kingmaker.

  • Picture courtesy of GCIS via Flickr.

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