Economic Thoughts: Revolt in Times of Flux

Discontent of all kinds simmers just below the surface, indicative that the nation’s managers aren’t quite managing to stay on top of things. This could get worse, if expectations keep expanding exponentially while delivery keeps failing to keep track. These are difficult years in an ever more difficult decade.


First there were taxi wars, followed by municipal delivery protests, trains got torched, there were electricity protests, buses were torched, municipal accounts weren’t paid (the non-payment culture), this became refined in a tax-revolt (etolling boycotts in Gauteng), and now we have inflation-led student revolt at high fee increases at universities leading to demands for free education.


Thus we find the public service side, the tax-paying proposition and the danger of high inflation (public sector wage bill) translating into civil protest.


Those with pricing power ruthlessly apply it. Those without get squeezed. In a stagnant situation in which real income growth is minimal, and many find their means reduced, this spills over into unrest.


If one can’t control expectations, indeed fire them up at every opportunity, the only way to ride this tsunami is to generate enough income & output growth to cater for it all. This reality keeps Chinese communists very focused. One does not gain the impression ours are as dedicatedly focused.


Instead, this chaotic Flux where daily civil protest mounts, miners demand doubling of entry wages, and public servants expect every year rich gains in real terms.


This is making life increasingly difficult for the Finance Minister & the SARB Governor. They operate rationing mechanisms while the real responsibility for the rot resides elsewhere.


This did not prevent Finance Minister Nene of hinting at elegant solutions in his medium-term budget framework yesterday. Impose a fiscal spending ceiling, sidestep higher taxes, assume debt levels to stop rising beyond this year short of 50% of GDP, allow the falling budget deficit trajectory to be somewhat higher at 3.8% of GDP this year, falling to 3% by 2018, and hope this is enough for rating agencies for now, keeping them at bay, while wanting to get beyond local elections 2016 before doing anything else.


A holding budget from Treasury. Will SARB be next in holding interest rates, with Fed liftoff & China’s transition looking less threatening in recent weeks, the Rand less pressured and inflation surprising yet again on the downside (headline flat at 4.6% and core flat at 5.3% in August, with little hint of Rand pass-through).


Everyone kicking cans down the road, except students seeking confrontation & breakthroughs in the present.