Maimane's not so Big Moment

I am amazed, but not particularly surprised, that the Helen Zille tweet row has carried on for as long as it has, and that so few sensible voices have been prominent in the debate. I've had many thoughts on the issue since my post last week. These are a few.

First off, Zille needs berating for her own foolishness, not because what she said was wrong, but because someone with her experience in both politics and journalism should have foreseen the reaction to her tweets. She knows better than most how the racial propaganda war works in South Africa and has been a victim of it enough to have anticipated her moral lynching.

Zille's moment of naivety, however, by no means justifies the manufactured outrage from those who think only in terms of black and white. The dominant argument remains that Zille defended colonialism and thereby offended millions of South Africans who suffered because of it. It's even gotten to the point where the Black First Land First movement has decided to lay racism charges against her. I believe I sufficiently established the ridiculousness of these claims in my last article, but in case you were still in doubt I will further elaborate.

The now infamous tweet series started with a reference to how Singapore achieved major development by building off what the colonists left behind. The whole idea was how South Africa could emulate that, so the argument was never racial nor a defense of colonialism from the start, but merely about how to achieve development. One should not be surprised, however, at the racialist vultures who were hovering, waiting for any misrepresentable statement to cry racist over. Contrary to one popular argument, Zille did not say that there were good aspects of colonialism. She said that there were good aspects to the legacy of colonialism i.e. what we are left with because of colonialism. One can perfectly reasonably call colonialism abhorrent and evil and simultaneously suggest that there are consequences of colonialism that we can exploit to improve the lives of the people.

To sum it up in one question, Do you believe running water is a good thing, that written language is a good thing, democracy, electricity, modern travel? If yes, then you agree with Mrs Zille. The ANC agrees with her, the EFF, even Black First Land First agree with her. In fact, the ANC's own idea of the Developmental State is the same principle Zille was arguing.

Now, significantly, Zille's tweets are supposedly sufficient reason for her to be axed as premier of the Western Cape. We've already established why this is not the case, but let us try to convince Mmusi Maimane of this too. Apparently this is Maimane's chance to step out of Zille's shadow and show that he is the true leader of the DA by beheading his mentor and predecessor. Of course, this is a tempting opportunity, but it would cost him his integrity. Hopefully Mmusi will not fall into the trap baited by his enemies. So for many it is a question of whether Mmusi Maimane will man up and show that he is the true leader of the DA or stay in the shadow of Zille, but really the question is whether he will give up his integrity for cheap political points.

Assessing the Budget Speech

So I was pretty close with my predictions on the budget, though they weren't too hard to call for anyone. One thing that did surprise was the new tax bracket: 45% for those earning more than 1.5 million. We'll get back to that one though.

In the immediate aftermath of the budget speech there was nothing but praise for Gordhan for masterfully negotiating the political tightrope he had found before him. But I think there has been enough analysis on that. I want to focus on what the budget actually means for South Africa.

Perhaps the most notable point is how much emphasis Gordhan puts on reducing the deficit, but while doing almost nothing about it. There was no sign of spending cuts, not even the same admonition to end wastefulness that was given last year. Instead there were increases in social grants (which, as it stands, may not even make their intended destinations) and billions more thrown at education. Now I can sense the immediate protests of "But we need more money for these things!" I'm afraid though that if we keep raising the debt to finance welfare, we will get to the point where it will be impossible to pay for these things at all. Especially in an economy that is growing at hardly above 0%. As much as we want to be charitable, we need to be sustainable to survive. And a budget deficit, especially in our economic climate, is not sustainable.

The little that was done to address the deficit involved raising taxes. unfortunately this is a self-defeating method for such an aim. Having a balanced budget is simple. Income must equal expenses. So if expenses exceed income we can either reduce expenses, which Gordhan hasn't done, or we can increase income, which for the government is tax income. But this is where Gordhan went wrong: increasing the tax rate is not the same as increasing tax income. In fact, the very opposite is true. Often decreasing the tax rate leads to an increase in tax income in the long run. Why? Decreasing the tax rate attracts investment, investment brings economic growth and economic growth results in there being more money to tax.

This is where the new tax bracket comes in. Instant logic argues that 4% is not that big a difference, especially for people earning more than one and a half million a year. If someone can pay 41% surely they can pay 45%. Looking more deeply one may consider that for a lot of people that 4% could be the straw that breaks the camels back. There is only so many times you can take just a little bit more before all the little bits add up to a whole lot. And 41% is already a lot. So that 4% could well drive many people out of South Africa, to countries where they both earn more and keep more of what they earn. And you may say, "Oh, it's only 100 000 people that are affected, and only a fraction of them will leave anyway." But remember, these 100 000 are the people who contribute most to our economy. They are doctors, lawyers, engineers, and especially businessmen and entrepreneurs, the people who have the potential to grow the economy and create jobs. We have already been experiencing a mass exodus of these people and can't afford to lose any more. Marginalising the wealthy has a negative affect on all of society.

Unfortunately a budget that is good for our economy and for the people of South Africa is impossible in this political climate. So taking that into consideration, I too shall have to render my praise to Minister Gordhan for the budget he presented in such trying circumstances.

Preparing for the Budget Speech

It's a good thing that Pravin Gordhan is not one who is easily rattled. At least he doesn't show it if he is. Very few people in any job could be in a more stressful situation than our finance minister is in now. Multiple branches of the ANC are calling for his head, a rumoured potential replacement has been nominated for parliament, and he is preparing for the most important public event on his calendar, the budget speech, which needs to balance powerful conflicting interests.

With the ANC under pressure and policy tide turning toward populism as a release valve on the one hand, and an ailing economy in desperate need of some freedom therapy on the other, Gordhan has his work cut out. He is walking a tight rope. What we want him to say is this: "We are privatising the SOEs, phasing out state welfare and cutting taxes." This would catch the ears of the business world and spark a new era of economic growth. The rand would literally jump in value, but he would certainly lose his job. The ANC Youth League, Women's League and the MKTV would be joined by a host of more conservative ANC structures and members in calling for his head and Zuma would garner more than enough support to bring down the axe. But it's nice to fantacise about a budget that would actually help the economy.

To win back his detractors would require exactly the opposite of what we need. Increase taxes on the wealthy, more welfare and tons of investment in black business. However Gordhan is both intelligent and moral, at least when standing next to many of his ANC comrades, so there is no chance this will happen either. Besides, I doubt he could care less about what Collen Maine and company have to say. No exponents of this line of thinking have ever shown any understanding of economics, or even the ability to predict the consequences of ones actions. Unfortunately these people can say whatever they like, since they are not in a position to make the decisions and so will never be held accountable. No wonder Gordhan ignores them.

What is likely to happen is this: subtle tax increases attempting to raise tax income without driving away investment and subtle spending cuts in an attempt to reduce costs without sending the populists into a state of outrage. This is why he left big issues like income tax and SOEs alone last year and will probably do so again this year while focusing on things like sugar and sin taxes and cutting down on wasteful expenditure.

So I have pretty low expectations for this budget speech. I don't see anything radical happening, for better or worse. Gordhan, for the sake of keeping his job, without ruining the economy, will probably just deliver more of the same. But I hope I'm wrong.