Why SA isn’t going down

Not all may feel comfortable with the claim that SA isn’t going down. At a time that markets have penalised us for Zupta state capture, when rating agencies may shortly confirm the junk spreads dished out by markets, when agriculture, motor trade, electricity generation and non-residential building trade report shrinking output and sales, with too much of industry drifting in and out of coma, and far too many announcements of job cuts.

Though our growth pace has dwindled to near standstill, we are overall still expanding, and hanging together, often in remarkably stable ways. Blame it on the quality of human capital (in some respects), on the institutional architecture (in others), our natural resilience, and of course past investments, with ongoing renewal technologically.

We haven’t overborrowed internationally, as Treasury has kept a firm grip. Our businesses are well managed. Our rule of law in everyday life highly functional.

Our tax structure isn’t only efficient, its various arms (personal, VAT, other indirect, corporate, capital gains, property transfer fees, import duties) keep on generating the necessary revenue by and large as budgeted. Mostly because the underlying assets (us) keep generating. Partly a reflection of real economic activity, a modest inflation regime and a stealth approach to raising tax burdens. And ever greater administrative efficiency in collecting.

There may be some revenue undershooting (corporate, for instance) but then mining and agriculture have had bad output hits, by drought and reduced overseas demand. And operating surplus growth of producers is running real thin now.

The health of a tax system says a lot about the underlying economy. It keeps steadily going rather than completely running out of runway.

The labour force is another source of stability not acknowledged often enough, in two dimensions. Despite many job lay offs in many businesses across all sectors, the total number of formally employed labour according to registered employers has remained very stable.

Perhaps bad news for the one-third of the labour force being unemployed, or discouraged enough not to be even looking, but still very encouraging for those households so favoured with steady income, even if it is being eroded on the margin in real terms.

The other striking dimension about our labour force involves average wage settlements. The focus in recent years has fallen on major labour strikes, some of the astronomical union demands (if not a multiple of inflation, then sometimes a doubling of tripling of current earnings). But the bulk of our formal labour force tends to obtain the same kind of wage increases every year – some 7-8%, with bonuses and overtime creating a flexible income component. This inflation-plus practice of ours has brought far more labour peace than it has bought strikes. Ask how many days were lost in an average work year with 3.5 billion workdays.

The few could do much damage with their disruptive behaviour, but the many kept the show on the road.

So, too, government, with its tax and borrowing powers, generating resource streams that can keep millions in work, and welfare recipients supported, on a sustainable basis, countering any loss of private confidence, even if there are definite limits as to how many can be so accommodated and carried, even if that message often has difficulty in being heard and understood.

So among the public waste and corruption, where nearly every day brings some new grotesque tale of misappropriation, where much is destroyed at a whim (Nene gate costing us at least 120 Nkandlas over a full year in extra interest cost at 9.5% rather than 8%, and half a trillion wiped off equity and bond markets on the day), besides whole sectors or regions decimated by willful actions (and not forgetting the unholy partnership of a global commodity superbust and Mother Nature imposing severe drought), it is rather difficult to swallow the proposition that we are carrying on regardless, thank you.

But you are. Everyone of us is. That too is in the numbers. As taxpayers, savers, consumers, investors, producers, employees, entrepreneurs. Very little gets you under, apparently. Is that the mining camp breeding showing through? Or the old farm? Or just good old bloodymindedness that waits for nobody and simply gets on with what is needed, irrespective of the low grade material in charge?

Strong institutions, strong disciplines, much toughness. Nearly sounds like an advert for a bakkie. But it keeps body and soul together, within individuals, within families, within businesses and organisations. Irrespective of the slapstick playing out above our heads wanting to be taken seriously while fleecing us.

In any case, help seems to be on the way, going by so many stirrings, whether disciplining markets, withering constitutional court rulings, or growing pushback from inside the ANC. But certain things just take a little longer. But then we have oodles of time, don’t we?

Source: MoneyWeb