Engineering News — December 08, 2017

LO ENGINEERING NEWS | December 8–14, 2017 37

H

ave you seen junk? Ever touched

it, used it or sailed on it? No, not in

it, but on it? A few years ago, I was

fortunate enough to sail on a junk while

visiting Hong Kong. A junk, a Chinese

flat-bottomed sailing ship, came into use

in 220 BC and is still in use to this day.

You can no longer sail the seven seas on

it, but you can still sail in Chinese waters

on it. These were ships of not only

exploration but also trade, and were

sometimes even used as ships of war.

But then the word ‘junk’ has an array

of meanings, the most familiar of which

is, no doubt, “old or discarded articles

that are considered useless or of little

value”. The lesser known is that it is

slang for the drug heroin. A junkie is

someone who suffers from addiction.

There is another ironic meaning of

junk that contrasts with that of the flat-

bottomed sailing ship. A few days ago,

as I typed away, Standard & Poor’s, or

S&P, downgraded South Africa to ‘junk’,

while Moody’s placed the country on

review to be downgraded. The third of

the ‘big three’ – Fitch – affirmed South

Africa’s status as ‘junk’.

According to S&P, the downgrade

“reflects our opinion of further

deterioration of South Africa’s economic

outlook and its public finances”. It goes

on to state: “In our view, economic

decisions in recent years have largely

focused on the distribution – rather than

the growth – of national income. As a

consequence, South Africa’s economy has

stagnated and external competitiveness

has eroded... We expect that offsetting

fiscal measures will be proposed in the

forthcoming 2018 Budget, in February

next year, but these may be insufficient

to stabilise public finances in the

near term, contrary to our previous

expect at ions.”

Moody’s, in turn, said its decision

to place South Africa on review to be

downgraded was “due to a series of recent

developments”, adding that these would

seem to suggest that “the economic and

fiscal challenges facing South Africa

might be well more pronounced than

Moody’s had previously anticipated”.

Interestingly, the National Treasury

noted in a media statement: “‘Junk

status’ ratings have implications for the

economy, State debt costs, State-owned

companies and the ordinary man on the

street. Since April 2017, when Fitch

downgraded the country to ‘junk status’,

the country has seen a recession,

borrowing costs have increased, and

revenue has underperformed.” I am not

certain if Fitch could be credited with

triggering these events.

The National Treasury added that

the corrective action that government

intended undertaking was a “partnership

with business and labour [that] is also

crucial for restoring confidence”. It also

stated that “tangible progress [had] been

achieved on most of the 14 Confidence

Boosting Measures and is expected

to translate into improved investor

confidence”.

Just in case you are confused, the 14

Confidence Boosting Measures refer to

the 14-point action plan to revive the

economy that was announced by Finance

Minister Malusi Gigaba on July 13. A

rose by a different name, perhaps? At

the time, economist Azar Jammine

was quoted as describing the plan as

“another empty suit for the South

African economy”. Not much – rather,

nothing – has changed.

There have been plenty of plans. You

might recall that, in his 2016 State of

the Nation Address, in February 2016,

President Jacob Zuma announced a

nine-point plan to boost the economy.

Just to remind you, the priorities

were resolving the energy challenge;

upping the agricultural value chain;

beneficiation through adding value to

mineral resources; more effective

implementation of a higher-impact

industrial policy action plan; encouraging

private-sector investment; moderating

workplace conflict; unlocking the

potential of small, medium-sized and

microenterprises, cooperatives,

township and rural enterprises; reform

of State-owned enterprises, broadband

roll-out, water and sanitation and

transport infrastructure; and Operation

Phakisa, which aims to grow the ocean

economy through the shipping and

storage of energy

products.

You do not

need to be a

rocket scientist

• you merely
  have to have
  an interest, not
  even a keen
  interest, in
  South Africa
  to appreciate
  that politics is
  overshadowing government’s economic
  focus and policymaking.
  As a dose of South African economic
  reality, the country’s economic growth
  performance is among the weakest of
  emerging markets. Income inequality
  is among the highest in the world and,
  more worryingly, it has steadily
  worsened and this will, no doubt,
  continue. The country’s services-
  dominated economy is barely growing.
  Further, the private sector is investing
  less than the depreciation of the capital
  stock. Unsurprisingly, since 2015, the
  South African economy has not been
  creating jobs on a net basis.
  The South African economy is in
  deep trouble. Deep trouble. The trouble
  can be trivialised – it could even be
  underplayed – but it cannot be denied.
  Renaming an ‘empty suit’ 14-point
  action plan 14 Confidence Boosting
  Measures does nothing to alter or improve
  South Africa’s economic reality.
  The economic reality facing South
  Africa is the current political leadership’s
  culture of entitlement and obsessing
  with personal interest, rather than
  focusing on the improvement of the
  South African economy. This fosters
  economic policy uncertainty.
  As much as the South African
  economy is in need of structural change,
  this will only be possible if it is preceded
  by political structural change. This
  implies a change of political leadership.
  A real change of political leadership.
  And not the musical chairs variety that
  occurred in recent days north of the
  South African border.
  Without decisive change, both
  political and economic, South Africa
  will continue to cement its new-found
  economic status – junk, ironically,
  against a backdrop of handsomely
  rewarding those responsible for setting
  and maintaining South Africa’s economic
  course. Or should it be discourse?

TRADE@WORK

South Africa in

junk or high on it?

OPINION&ANALYSIS

Riaan de Lange

This economic and trade-focused column is prepared by

Riaan de Lange – [email protected]. The views

expressed in this column are the author’s personal views