Bailing out state-owned enterprises will come at the cost of social cohesion and protecting society’s marginalised

By Published On: 4th November 2020

As South Africa peers over the edge of a fiscal cliff, it is critical that resources be directed towards strengthening social cohesion and protecting those on the margins of society, rather than throwing billions at failed projects like South African Airways.

Material injustice continues to haunt South Africa’s pursuit of an inclusive, reconciled post-apartheid society. The results of the 2019 round of the South African Reconciliation Barometer, a national public opinion survey by the Institute for Justice and Reconciliation, confirms this in its finding that one in three South Africans believe the biggest disruption to social cohesion in South Africa is the gap between the rich and the poor.

The dire state of public finances, as reported last week in Finance Minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS), cannot be divorced from broader social implications for the creation of a more inclusive society.

The MTBPS confirmed that the government is retreating deeper into austerity, with political will geared towards bailing out state-owned enterprises and stabilising debt. The cost of these measures, it appears, will come at the expense of areas that are critical to the long-term viability of the state.

As the harsh impact of rapidly rising debt-service costs, another futile lifeline for South African Airways, a public sector wage freeze and the prospect of rising taxes sets in, trust levels in the state are set to weaken, exactly at a time when its leadership will be needed most.

In 2018, the Afrobarometer – a pan-African series of public opinion surveys on democracy, governance and society – found that only 30% of South Africans think the government is doing well at improving the lives of the poor.

In light of its current financial predicament, one can only speculate that these already low levels of confidence in government’s capacity are likely to drop even further.

The economic fallout from Covid-19 has worsened an already dire unemployment crisis, peaking at 42% in the second quarter of 2020. Fewer jobs undoubtedly mean more South Africans will be forced to rely on state support for which there are limited finances available.

The precipitous drop in employment will also be throttling the South African Revenue Service’s capacity to collect taxes in years to come.

Together, these forces serve to impede human development, thereby sowing seeds of discontent within society that fray social cohesion along South Africa’s historical fault line of race. This will not only manifest in terms of income inequality, but also in terms of access to key resources, such as health and safety.

The fluidity and uncertainty associated with the pandemic’s economic fallout render a speculative environment on matters of social cohesion and reconciliation. However, the most plausible scenarios will arguably have to factor in substantial declines in growth, resulting in increased contestation for resources, both in the political and the social domains.

These prospects amplify fracturing of social cohesion levels over the next decade and must be factored into considerations of austerity and administering scarce resources.

In 2019, against the backdrop of a less than 1% GDP growth rate, Armed Conflict Location and Event Data reported that South Africa had a record number of 1,554 incidences of civil unrest, including protests, riots and violence against civilians.

If regional migration and scarcity are to be consequences of the current economic predicament, then contestation over resources will intensify.

This underscores the importance of distribution of and access to resources. If fostering social cohesion means fair access to resources, then it is crucial that the country’s economically insecure do not bear the brunt of the fiscal crisis.

Improving channels through which communities can have their grievances addressed will be critical.

A strategy focused on cost-efficient but effective responses to grievances may be the way forward. Too often, development is conflated with expanded expenditure, but local grievances can be addressed in creative, sustainable and cost-efficient ways.

A greater emphasis on expenditure that yields tangible returns for communities may be one way of addressing material deprivation, subsequently facilitating social cohesion despite the economic fallout.

There is sufficient justification for stronger, more independent oversight with an increased budget and a broader power to be more punitive towards transgressions.

For example, if the relatively small National Prosecuting Authority budget is increased by a third, it would likely yield greater long-term returns in terms of combating corruption and general crime. Payoffs like these are also likely to facilitate development and social cohesion; more so than ploughing billions into an airline with a tenuous future.

The expanded role of the state to lead the charge on advancing human development may no longer be sustainable, but these ideals cannot be left by the wayside. It is high time that a more cohesive relationship between the state, labour unions and the private sector is solidified with a shared vision for South Africa’s development.

If social cohesion depends on the legitimacy of the state to support development, then perhaps a leaner, more efficient state may become the lasting legacy of this crisis.

If the state is to trim budgets on some of its most essential services, it is pertinent that it considers the medium- and long-term impacts these cuts will have on both human development and social cohesion, favouring programmes and partnerships that promote efficient and fair distribution of resources.

While all the answers may not be simple and the trade-offs harsh, our decisions must be informed by the protection of those on the economic margins who now constitute an ever-growing proportion of our society. DM

Illustrative image | sources: Leila Dougan | Getty Images// Bloomberg/Waldo Swiegers Oped-Patel-CohesionTW

Jaynisha Patel is a Project Officer at the Institute for Justice and Reconciliation, where she leads the Inclusive Economies Project.

Article first published on The Daily Maverick.

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