View from the Peninsula: Don’t let the dream be deferred

What happens to a dream deferred? Does it dry up, like a raisin in the sun? Or fester like a sore – and then run? Does it stink like rotten meat? Or crust and sugar over – like a syrupy sweet? Maybe it just sags like a heavy load. Or does it explode?

These words were written by Langston Hughes, a US poet, novelist, and social activist who was writing about the African-American experience in his book-length poem Harlem in 1951. But they seem particularly apt in the context of South Africa circa 2020. 

The poem offers no solutions, but Hughes, in his pithy fashion, presents his readers with alternatives that don’t leave much to the imagination. 

The majority of South Africans, 26 years into democracy, could be forgiven for believing that their dream born in 1994 has been deferred.

If it wasn’t already blindingly obvious, Finance Minister Tito Mboweni in his Budget speech last week left nothing to the imagination: 

“Debt is our weakness. We have accumulated far too much debt; this downturn will add more. This year, out of every rand that we pay in tax, 21 cents goes to paying the interest on our past debts.” 

South Africa is at the crossroads of a full-blown fiscal crisis. Failure to act to curb debt will trigger a debt default, plunging the local financial system into crisis and sending the country into the arms of the IMF, whether the ANC or anyone else likes it or not. Our children and their children will bear this burden. 

It has taken 10 short years to get here. 

In the 2000s, come Budget day Finance Minister Trevor Manuel would hand out trees and succulent plums to highlight the prosperous times the country had found itself in.

Shrewd fiscal management and good growth saw the democratic government reduce debt from 49% of GDP in the 1990s to 26% of GDP in the mid-2000s. Debt service costs fell from over 20% of the Budget in 1998/99 to 5%, freeing up billions each year to spend on services and infrastructure.

With its finances under control, spending on social infrastructure and services ramped up. At the same time, the tax system was reformed, personal and company taxes reduced; exchange controls were liberalised, resulting in huge capital inflows, and incentives were introduced to stimulate SMEs and strategic industrial projects. 

In those days the Budget embodied the best of what Austrian economist Joseph Schumpeter meant when he said “the spirit of a people, its cultural level, its social structure, the deeds its policy may prepare – all this and more is written in its fiscal history, stripped of all phrases… The public finances are one of the best starting points for an investigation of society, especially though not exclusively of its political life.”

In particular, Schumpeter said, the Budget is a powerful index of a society’s values, not merely in its language and numbers, but in the lived experience of its impact on people, families, workers, businesses and organisations.

And indeed, at that time, social services – education, health and welfare – accounted for 58% of the consolidated national and provincial non-interest allocations. Today this is closer to 45%, crowded out by debt repayment costs and the public sector wage bill.  

Real income per person over that decade increased by 15% and at least 1.5 million new jobs were created.

The dream, it seemed, was not to be deferred. 

This didn’t last for long, however. The succulent plums quickly shrivelled under the strain of internal and external factors, including the 2008-2009 global financial crisis.

Since then, the government has consistently spent more than it earned and a new tone began to creep into Budget speeches. “Service delivery”, “quality of spending”, and “value for money” were heard frequently.

Don’t forget that we are still borrowing like crazy people. Since February 2020, SA’s borrowing requirement for the current year has increased by R344.2-billion to R776.9-billion.