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A guest post from my friend and colleague Sandra Gordon. Sandra is a respected financial market economist and we increasingly present work as a team in what is often called “a dog and pony show” … although in our case there is some disagreement over who will be the dog and who will be the pony. Sandra is an excellent market commentator and I have known and respected her views since she was my client on the “buy side” at Nedcor Investment Bank Asset Management (Nibam) in the mid-90s.

My friend, colleague and author of this post on the National Budget, Sandra Gordon

Over to Sandra:

If there was one message from this year’s budget it is that, despite all the hype that economic transformation has finally arrived (the dreaded “shift to the left” which tends to give the financial market types sleepless nights), it’s actually probably more of a case of business as usual.

In the wake of the global financial crisis, there was serious debate worldwide about the merits of various economic growth models. In the 2010/11 Budget, Minister Gordhan noted: “The recent crisis and its aftermath have led to a serious introspection and rethinking of what were thought to be robust and superior economic models.” With the Washington Consensus in disgrace, South Africa was able to signal its intention of shifting towards a “developmental state” (essentially a more active role for government in the economy).

So it seemed South Africa was headed for a developmental state and real economic transformation. The new model was finally outlined by the New Growth Path (NGP), which was released by Minister Patel late last year. The primary aim of the NGP was the creation of five million new jobs by 2020.

This theme was echoed in the recent State of the Nation address, in which President Zuma announced a range of measures to encourage job creation.

Yet, despite all the talk of economic transformation – and the ongoing tsunami of change in the global environment – this year’s budget is essentially unchanged from the previous. The critical issues facing our economy were again identified as the twin evils of unemployment and poverty, while the best way to address them is to focus on job creation and encouraging growth in those sectors most likely to generate employment.

Admittedly this year’s budget had a greater focus on jobs than last year – with a grocery list of programmes and measures totalling R150 billion over the next three years. A key difference was also the absence of any mention of the “developmental state” – with government’s role limited to the provision of incentives and the creation of an environment conducive to growth – such as the easing of transport and logistic bottlenecks etc. Other than that, the key measures were familiar – more social spending to support the poor, huge sums for investment in infrastructure and a focus on skills development and training.

Essentially the budget delivered on the priorities laid out by the NGP – with one glaring exception: demands for a weaker rand. Minister Gordhan neatly sidestepped this particularly contentious issue by noting that government had already responded to excessive rand strength by easing exchange controls and accelerating the accumulation of foreign exchange reserves in October last year. Beyond those measures, Treasury will be “monitoring” the measures adopted by other countries – including Brazil and Thailand – which have had similar struggles with massive capital inflows and excessive currency strength. So effectively, “we’re looking into it.”

The other political hot potato that was neatly avoided in the budget was the issue of the National Health Insurance. This year’s budget included measures which “lay the foundations” for NHI. The implementation progress is going to take time – but things are undoubtedly going to get more interesting when the debate shifts to how the NHI is to be funded. Gordhan listed a range of possible funding sources including a VAT hike, a surcharge on personal income or a payroll tax. None of those options are likely to be particularly well received.

Essentially then, Gordhan was able to address all the priorities outlined in the NGP (barring rand weakness), while maintaining an element of fiscal discipline. With the deficit remaining at 5.3% of GDP in the new fiscal year – in line with the previous fiscal year but above expectations – debt servicing is now the fastest growing spending category.

While we are in a far better position than countries like America, the UK and various European economies which are slashing government spending and raising taxes, it could well be that this is our last chance to really get the economy moving. If the measures in this year’s budget deliver growth, tax revenues will ultimately rise and fiscal discipline will be maintained.

If, however, growth stagnates – perhaps due to a deterioration in the external environment – the state may find its finances stressed, providing less scope for social spending and job creation initiatives. As one analyst put it in the press this morning, this could be “the last throw of the dice”.

And it is on this front that the news is a little less reassuring.

It is positive that – amidst the global turmoil – the centre is holding and our basic economic policies remain on course. But our key weakness has always been not our policies but our inability to implement those measures. So for all the good news in this year’s budget regarding measures to encourage job creation and infrastructure investment, there have been no developments which would lead one to think that there is going to be any significant improvement in implementation and delivery.

In an increasingly unstable global environment, it is becoming ever more important that we finally start making significant progress on reducing our unemployment rate and pervasive poverty. We have the money, for now, but the ability to implement and deliver is becoming ever more critical.

With so much at stake, it looks set to be another interesting year.

Cosatu has released its long awaited document in which it provides the facts (as it sees them) and theoretical underpinnings for “A Growth Path Towards Full Employment” – and in doing so attempts to align its views with those emanating from Minister Ebrahim Patel’s Department of Economic Planning (the Two Year Strategic Plan) as well as Minister Rob Davies of DTI’s (IPAP2).

Stephen Grootes at the Daily Maverick has done an exemplary quick analysis (catch that here). I am not quite certain I am as gung-ho capitalist as the guys down at the the DM are … although I am as clear as Grootes is that Cosatu’s main planks of policy would turn us into a wasteland in two flicks of a lamb’s tail – as not even my old Granny was prissy enough to say.

I saved a copy of Cosatu’s full document here and hope to give it a more thorough treatment than the cursory skim I gave it in the middle of last night. Whatever I conclude will be faithfully reported on these pages.

Here is the summary of South Africa’s performance in the Global Competitiveness Report 2010 – 2011. The highlights are mine and the seriousness of the problems is obvious..

While we quite rightly bemoan health, education and labour market failures it is interesting to note we were top ranked – in the whole world! – in two categories: in auditing and reporting standards as well as in the regulations that govern our securities (financial instruments) exchanges.

But on with the bad news: part of the process of the construction of the report involves asking the opinion of “business leaders” (see note below about methodology) about their concerns. The top four concerns they had about South Africa are not a huge surprise:

From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.

Methodology note from the press release: “The rankings are calculated from both publicly available data and the Executive Opinion Survey, comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the study. This year, over 13,500 business leaders were polled in 139 economies.”

Click here for a link to the full report.

The news media is full of toyi-toying fat people in red T-shirts blockading hospital gates interspersed with pictures of dead and dying babies.

Alternatively the coverage is of other fat people in red T-shirts clutching sticks and whips trundling around, with their fat bottoms swaying, looking for pupils (bravely trying to uplift themselves by continuing their studies during the public sector wide strike) to beat and otherwise disrupt.

There is a degree of truth in the story… I mean, turn on your television, they’re everywhere, with their megaphones and coffee flasks (and clearly a lot of biscuits and sandwiches), belligerent and unattractive as it is possible to be.

But I suspect that we should treat the picture and the solutions that seem obvious (and are being offered by every newspaper and television station in the country – with unusual unanimity) with more than a degree of caution.

It’s impossible to realistically analyse the strike here – and anyway that is work I have to try to sell to a paying client – but there are some questions I would urge us all to bear in mind.

I lay some of them out here as bullet points:

  • Government has offered 7% with a R700 housing allowance (an offer that amounts, according to the employer, to between 9.4 percent and 8.5 percent, depending on grade) and unions are demanding 8.6 percent wage increase across the board and housing allowance of R1 000. This seems closer than it is – the difference between the offer and counter offer, when aggregated across the public sector, makes a huge difference to the fiscus and to the actual take home value of the workers’ pay packages. Both parties have something to fight for.
  • Workers strike at great cost to themselves – generally, by-and-large and when all the exceptions are smoothed out. Try for a moment and to imagine risking your job and deliberately deciding to take on being portrayed as greedy, callous and on a kind of stolen holiday. This is especially true in the public sector, where the customers you are involved in servicing are your neighbours, their children and the sick of your community.
  • We have the highest levels of inequality (measured by something called the Gini coefficient) of any country that keeps realistic figures in the world – and if not ‘in the world’ then we are in the company of only one or two others. In a public sector wage conflict the employer is government (with politicians representing the owners and the senior bureaucrats the managers). The differential between the earnings of public sector workers and their employers – both of whom take their pay package from the public purse – is a factor many times higher than in most countries in the world. When you add to this the public perception (and the strikers are part of that public) that the politicians are engaged in a nasty, sharp-toothed feeding frenzy at the aching teat of the public purse, ransacking the long built up assets of the public sector and using every mechanism possible to extort money from the private sector, is their any wonder that public sector workers see their lot as unfair?
  • Cosatu and its various member unions and the worker leadership “on the ground”, so to speak, is getting the kind of press it deserves. The behaviour of too many striking workers is so unacceptable that the unions are inviting a Maggie Thatcher to emerge from these battered streets to crush them and reformulate the South African economy to be a growth machine that will benefit merchant bankers and the rich … and no-one else. And the public will cheer that politician on, because the unions have not bothered to see the middle-ground as worth fighting for.
  • This strike –  as a culmination of other things but also in and of itself – is the death knell for the ruling alliance. It imposes upon the vague conflict between Nationalists and “Tenderpreneurs” on the one hand, and trade unions and communists on the other, a clear organisational character and a clear set of objectives and costs over which the contenders deeply disagree. Government might find more money. The unions might shift an inch to meet government’s next offer but I suspect this is the moment that South African politics has been circling ever since Mbeki slapped the unions and “the left” into a subservient position over ten years ago. I am not awaiting a formal announcement by Vavi that he is leading his cohorts into the wilderness. But I expect that in practice the unions and the communists will be out of government within the next few years (Perhaps even more than they were “out of government” under Mbeki … and I use “the next few years” to give myself a margin).

This week is going to be full of the strike and its consequences. It is, ultimately, not a hugely profound point,  but now, more than ever, we need to urge caution in seeing the world as a simple representation between good guys and bad. This impulse, to see things as if they were simple and easy to understand, is increasingly the direction of public discourse on radio, newspaper and television. We need a kind of private media tribunal in our heads.

A quick run through documents and press statement emanating from the Congress of South Africa Trade Unions and the South African Communist Party reveals the existence of a new ‘song sheet’ our crimson brethren have devised to help them sing in tune with each other.

This is something more than a coordinated set of slogans and something less than a recipe for creating socialism, socialised production and a workers’ republic out of the ingredients of the conjuncture.

If I had to try to construct a Ten Point Programme out of the bits and pieces in the press statements and discussion documents of the last few months, but particularly the last few weeks, it would look something like this:

A ten point (interim) programme for The Left

  1. Argue that macro-economic policy is increasingly in conflict with micro-economic policy.
  2. Argue that IPAP II (industrial policy) from Minister Rob Davies of the DTI in combination with Minister Ebrahim Patel’s Medium Term Strategic Plan (2010/11 – 2012/13) form the first pro-poor, employment creation oriented plan to put South Africa on a “new growth path” in which state intervention will lead to job-rich and equitable growth.
  3. Argue that the Rand is overvalued and wherever possible criticise inflation targeting and call for the nationalisation of the SARB as well as devaluation of the currency to effect a growth of valuable jobs in the export manufacturing sector.
  4. Link the Treasury under Pravin Gordhan to the economic tradition fostered by Thabo Mbeki and Trevor Manuel and keep pointing out that many of the senior bureaucrats in that department were trained and placed by the former president and former Minister of Finance; as part of this thrust attack labour brokers and the subsidy for first time youth workers as part of ongoing attempts to segregate the labour market.
  5. Co-ordinate calls for a national health insurance and free and universal education.
  6. Defend Gwede Mantashe (your man at the heart of the ANC leadership) and isolate the most hostile elements among the conservative nationalists, populists, tenderprenuers and anti-communists – Julius Malema and Fikile Mbalula (the proposed challenger to Mantashe) are perhaps seen as core elements of this “most dangerous friend” group, although Billy Masetlha and Tony Yengeni are in there somewhere.
  7. Start preparing a strategy linking this group with those attempting to buy their way into leadership of the alliance i.e. those who have inherited the Brett Kebble mantel. The general direction of the red finger of accusation appears to point at Tokyo Sexwale.
  8. Fight to stay in the alliance and fight for your views within alliance forums; make sure the ANC and government takes the results of those forums seriously.
  9. Prepare your cadres to influence the outcome of the National General Council later this year and the ANC’s elective National Conference in 2010 – and start preparing a set of policies and candidates to support. In the process continually cement relationships between SACP and Cosatu
  10. Always maintain a mass profile (through work amongst the masses) that is distinct, pro-poor, anti-corruption and principled; this strengthens your hand in Alliance forums but, more importantly, is your insurance policy if or when you are eventually forced out of the alliance.

It seems logical that despite the vicious atmosphere in the ruling alliance Cosatu, the SACP and the ANC’s own left-wing are not about to abandon the field to the “proto-facists“, populists, tenderprenuers and powerful hangers-on from the “1996 class project“. Not so soon after their triumph at Polokwane. Not after “capturing” two key cabinet posts and finding themselves in a position to, perhaps, profoundly influence government policy for the first time since 1994.

Those hoping that the tension in the ruling alliance would lead to a blossoming of opposition politics in parliament will have to wait a little longer. For now the real prize is still within the ANC and the ruling alliance.

I have whipped through the State of the Nation address while Jacob Zuma is just getting started. My initial impression is good, maybe even very good …. but maybe there has just been so much bad news and poor performance that any detailed and thoughtful stuff from government is likely to impress me …

Here are some bits and pieces:

As always the address was long on the broad brush, leaving the details to ministerial budget votes over the next few weeks.

However, there were interesting bits:

First a claim that no-one appears to be believing …. I will have to check these figures and see how they arrived at them:

We are pleased to announce that by the end of December, we had created more than 480 000 public works job opportunities, which is 97% of the target we had set.

More money for public infrastructure – power and transport

Over the next three years government will spend R846 billion on public infrastructure.

One of the most favourable public expenditure/infrastructure statements was:

Among other things, this will look at the participation of independent power producers, and protecting the poor from rising electricity prices.

We will establish an independent system operator, separate from Eskom Holdings.

Money to subsidise the employment of first time young workers

Proposals will be tabled to subsidise the cost of hiring younger workers, to encourage firms to take on inexperienced staff.

He announced a plan to hold departments accountable:

The Ministers who are responsible for a particular outcome, will sign a detailed Delivery Agreement with the President.

It will outline what is to be done, how, by whom, within what time period and using what measurements and resources.

Very concrete education targets:

We aim to increase the pass rate for these tests from the current average of between 35 and 40% to at least 60% by 2014.

Results will be sent to parents to track progress.

In addition, each of our 27 000 schools will be assessed by officials from the Department of Basic Education.

This will be recorded in an auditable written report.

We aim to increase the number of matric students who are eligible for university admission to
175 000 a year by 2014.

Brutal admission on certain health failures:

We must confront the fact that life expectancy at birth, has dropped from 60 years in 1994 to just below 50 years today.

We are therefore making interventions to lower maternal mortality rates, to reduce new HIV infections and to effectively treat HIV and tuberculosis.

Policing:

We are implementing plans to increase the number of police men and women by 10% over the next three years.

Concrete stuff about housing and mobilising private sector funds:

We are working to upgrade well-located informal settlements and provide proper service and land tenure to at least 500 000 households by 2014.

We plan to set aside over 6 000 hectares of well-located public land for low income and affordable housing.

A key new initiative will be to accommodate people whose salaries are too high to get government subsidies, but who earn too little to qualify for a normal bank mortgage.

We will set up a guarantee fund of R1 billion to incentivise the private banking and housing sector, to develop new products to meet this housing demand.

That was going to be my headline for the story I was going to write about the appointment of Mo Shaik to head the secret service.

I decided not to write about it. I simply can’t.

I was going to point out that the South African Secret Service is responsible for all non-military foreign intelligence and counter-intelligence functions. I was going to say that in the post-9/11 globalized world that makes SASS scary powerful.

I was going to gently hint to possible readers about Mo’s recent history of scheming mediocrity, of his Stalinist grandiosity and his few weeks training with the Stasi in the GDR in the 80’s that supposedly qualifies him for the job – but I realised the adjectives were over-the-top –  and detracted from the general story.

I wanted to remind readers that Mo brought his friend Cyril Beeka to Polokwane as his bodyguard. I was going to leave that out there like a mysterious depth charge …

Then there was Trevor Manuel squashing Mo at Polokwane, when Mo said there may be a place in Zuma’s government for Trevor, if only he could break his habits of thought.

It would have been useful to put in the quote from Trevor when he snapped back:

Your conduct is certainly not something in the tradition of the ANC. It is obvious you have no intention of becoming part of any elected collective within the organisation, yet you arrogate to yourself the role of determinant

Hmm, I was going to say that Trevor underestimated Mo …. but maybe he overestimated Zuma. I was going to ask you to consider what Trevor Manuel must be feeling now.

It would have been interesting to talk about the Mandla Judson Kuzwayo Unit of the ANC underground and Operation Bible and Nkobi Holdings – and Mo’s central role in the Heffer Commission in 2003. But what could I say about these things that would stand up in court?

It would have been important to describe  Mo Shaik’s role in the struggle (by the now ruling ANC faction) to prevent Jacob Zuma facing corruption charges. Or his more general role in backing Zuma’s rise to the presidency.

And I would have liked to remind us of the damage done to our politics by a partisan security establishment – and by loyalist appointments.

Then I would have had to go into Mo Shaik’s tight relationship with brother’s Chippy and Shabir – I don’t really know much about Yunus.

It almost would not have been necessary to mention that Chippy headed SANDF defence procurements – the heart of the arms-deal scandal.

And of course the “dying”  convicted fraudster Shabir needs no introduction – not in his role in bribing Jacob Zuma and not in his preferential access to arms deal contracts through his relationship with Chippy and Zuma.

But then I realised I am just too discomforted to talk about this without drowning the criticism in hyperbole.

Would I be able to avoid words and phrases like “bombastic”, “mediocre”, “quasi-criminal”, “political bully” when talking about this and similar appointments?

Who cares if I think this is the first serious public sign of a deep and threatening  malaise in the ANC government?

So I decided I wouldn’t write anything about it until I had calmed down and taken a deep breath.

So I didn’t.

* See the incomparable Zapiro’s “Pirates of Polkwane”

(PS – added on October 5: the DA comment published on Politicsweb is unusually good. See it here.)

Bad indicators in the direction of  trends in South African education and health  last week.

Very briefly:

Two recent studies reveal a low and/or deteriorating quality of matriculant entering university.   The national benchmarking test (NBT) tested 13000 first years at major SA universities and found only 43% proficient in academic literacy, 25% in quantitative literacy and, astonishingly, only 8% in maths. More worryingly a major study done yearly for the last ten years at traditionally Afrikaans speaking/teaching universities indicates a clear deterioration in academic readiness. (Note that while the NBT found absolutely poor levels of readiness the test is too new to establish a trend).

Secondly, Lancet, a highly respected international journal on health , published a special series on South Africa that indicated public health and the public health system was in serious trouble:

with the collision of four excessive health burdens: communicable disease (especially HIV/AIDS), noncommunicable disease, maternal, neonatal and child deaths and deaths from injury and violence.

The journal points out that:

Since 1994 life expectancy has reduced by almost 20 years – mainly because of the rise in HIV-related mortality – the average life expectancy at birth is now 50 years for men and 54 years for woman.

Devastatingly, the journal points out that there has been an increase in poverty and hunger as well as in child mortality since 1994.

Good public education and health are the best predictors of a country’s success. Effective investments in public health and public education are probably the most any government can do to change future developmental outcomes. The fall of the Soviet Union in 1989 taught us that the state can do a lot less than we hoped. The debt crisis and market crash we are experiencing is teaching that the state needs to do a lot more than it is doing. The South African state seems to be a special case: in the long term it will have to do more, but for now what it is urgently required is that it does better.

Paul Krugman tilts at the USA citizen’s default hostility to government. He argues that on health care policy and on banking regulation it is more government, not less, that is needed. Does the same apply in the South African case? I think the issues are significantly different, with the first task in South Africa being to fix dysfunctional government. However, in the USA as in South Africa, it is clear that left to its own devices ‘the market’ is  neither going to regulate itself nor solve the problems of inequality and lack of access to health care.

This was published in the New York Times on August 23.

All the President’s Zombies

By PAUL KRUGMAN

The debate over the “public option” in health care has been dismaying in many ways. Perhaps the most depressing aspect for progressives, however, has been the extent to which opponents of greater choice in health care have gained traction — in Congress, if not with the broader public — simply by repeating, over and over again, that the public option would be, horrors, a government program.

Washington, it seems, is still ruled by Reaganism — by an ideology that says government intervention is always bad, and leaving the private sector to its own devices is always good.

Call me naïve, but I actually hoped that the failure of Reaganism in practice would kill it. It turns out, however, to be a zombie doctrine: even though it should be dead, it keeps on coming.

Let’s talk for a moment about why the age of Reagan should be over.

First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.

To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years.

Moreover, most of whatever gains ordinary Americans achieved came during the Clinton years. President George W. Bush, who had the distinction of being the first Reaganite president to also have a fully Republican Congress, also had the distinction of presiding over the first administration since Herbert Hoover in which the typical family failed to see any significant income gains.

And then there’s the small matter of the worst recession since the 1930s.

There’s a lot to be said about the financial disaster of the last two years, but the short version is simple: politicians in the thrall of Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis — and the crisis came.

“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.” And last year we learned that lesson all over again.

Or did we? The astonishing thing about the current political scene is the extent to which nothing has changed.

The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option — not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson — have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance — which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer.

But it’s much the same on other fronts. Efforts to strengthen bank regulation appear to be losing steam, as opponents of reform declare that more regulation would lead to less financial innovation — this just months after the wonders of innovation brought our financial system to the edge of collapse, a collapse that was averted only with huge infusions of taxpayer funds.

So why won’t these zombie ideas die?

Part of the answer is that there’s a lot of money behind them. “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, I would add, his campaign contributions — “depend upon his not understanding it.” In particular, vast amounts of insurance industry money have been flowing to obstructionist Democrats like Mr. Nelson and Senator Max Baucus, whose Gang of Six negotiations have been a crucial roadblock to legislation.

But some of the blame also must rest with President Obama, who famously praised Reagan during the Democratic primary, and hasn’t used the bully pulpit to confront government-is-bad fundamentalism. That’s ironic, in a way, since a large part of what made Reagan so effective, for better or for worse, was the fact that he sought to change America’s thinking as well as its tax code.

How will this all work out? I don’t know. But it’s hard to avoid the sense that a crucial opportunity is being missed, that we’re at what should be a turning point but are failing to make the turn

Is wealth the cause of poverty? Is everything in development a zero sum game?

Listening to how the ANC and the SACP motivate their proposed national health insurance scheme gives a disconcerting inkling of how they think about development.

Their proposal is for a compulsory national health insurance (NHI) to be the main solution to a number of  problems that beset the provision of health services. The main problem to be addressed by NHI is the low standard of care provided for the poor and the generally low standard of health indicators for the populace, especially in comparison to countries that are similar to South Africa in other ways (GDP, gini-coefficient, health expenditure). For example: South Africa’s life expectancy for men is 50 years  – compared to Brazil’s 68, Chile’s 75 and Mexico’s 72 and  South Africa’s infant mortality rate is 69, per 1000 live births compared to 20 in Brazil, 9 in Chile and 35 in Mexico.  

The assumption is that the main problem is one of funding. A compulsory system of health  insurance with a comprehensive benefits package and the public sector as the main provider of those benefits would allow government to get the rich to subsidise the provision for the poor – and divert rejuvenating funding from the private sector to the public.

But what if the problem is not primarily one of funding, but rather of, for example,  mismanagement of public funds and hospitals, failure of private health regulation and failure to compensate and motivate public sector health professionals? Then the problem is government failure. Proposing an NHI in this context might do something worse than creating a confusing diversion; it might exacerbate the problems precisely by giving government more money to waste and a bigger mandate to waste it.

Examining the terms in which the ruling alliance is motivating the NHI is instructive. The one leg of the argument is represented by Blade Nzimande (carrying his Secretary General of the SACP meat-cleaver, not wearing his Minister of Higher Education and Training mortarboard.)

As expected his main argument is to attack the capitalists:

The current system of funding health care in South Africa is a two-tier system which grossly discriminates against the working class and the poor in favour of the rich and propertied classes. From Politicsweb June 17 2009

and

The capitalist classes in the health sector, together with their lackeys and the media have already started a campaign to oppose the introduction of the NHI. The NHI aims to ensure universal access to affordable and quality health care for all, with the rich subsidizing the poor, and no up-front payment for health services. As part of this campaign to defend the NHI, the SACP further calls and will campaign for an end to the outsourcing of services in the public health system and for the return of all outsourced services into the hands of public health institutions. – Speech delivered by SACP General Secretary, Cde Blade Nzimande, on the occasion of the celebration of the 88th Anniversary of the SACP on 2 August 2009, Harmony Stadium, Virginia

Nzimande says:

the capitalist vultures in the private health care sector would leave no stone unturned to oppose the introduction of a National Health Insurance Scheme (NHI) for the benefit of the overwhelming majority of the workers and the poor of our country… Indeed in recent weeks, reels and reels of columns – written largely by beneficiaries, ideologues and parasites to the highly exploitative private health care and medical aid systems – are regularly appearing in some of the major newspapers of our country.

So instead of saying anything serious about how the NHI would work for the benefit of the poor, Nzimande asserts over and over again that the reason the poor get such poor health care is that the rich hog the limited resource. Further, that any criticism of the NHI is actually a defence of this obscenity and injustice.

Nzimande’s arguments are best compared to similar arguments from history by political elites blaming the suffering of the citizenary on a small and identifiable group and promising relief from that suffering by various forms of confiscation from and suppression of the identifiable group. We all know where that leads.

A better critique and a more carefully motivated argument for NHI – allthough still one that fails to convince me – comes from a less powerful player, Dr Olive Shisana (CEO of the HSRC, head of the ANC’s task team on the NHI and an ex-DG in Nkosazana Dlamini-Zuma’s department of health).

She says:

A National Health Insurance is a system of mandatory health insurance contributions, in which those who can afford contribute according to their ability and those who cannot afford are paid for through subsidies from government. The funds are pooled into one fund from which resources are drawn as people use services according to their need.

Her main issue is, again, inequality:

 The medical schemes expends more than 45% of resources to cater for a stagnant 7.4 million people whilst the public sector expends 40% on the rest of the population, … This cannot be right and needs to be corrected through transformative health policies such as National Health Insurance.

One might wonder what she means by the phrase “stagnant 7.4 million people” but that’s for some other time. Dr Shisana raises what for me would be one of the main objections to her own argument:

Concerns have been raised about the status of the public health system. It is true that the public sector has been facing major challenges in terms of both the quantity and quality of services it provides. Clearly, that cannot be explained by under-funding alone but by other health systems constraints such as shortages of human resources, management capacity constraints, sometimes cumbersome procurement processes and the ever increasing disease burden.

Frankly, this is an understatement. It is widely acknowledged that state capacity to provide public health care and its capacity to effectively regulate the bloated private sector has stumbled from disaster to disaster since 1994. The current situation is little less than a severe crisis.

So Nzimande, speaking from the central platform of the Zuma government is extending the call for “an activist developmental state” to the specific area of health provision. An active and assertive developmental state is CLEARLY what is needed, but not one that runs the assets and the capacity into the ground – by a combination and arrogance, incompetence and corruption. Incompetence and bullying arrogance is what has characterised much of public health policy in the past 10 years. One has to ask if the content and tone of Blade Nzimande proposals are a break with this past?

I will have to leave to another post a strong criticism of the private sector – hospitals, medical aids and professional organisations – for having failed to engage the government and the ANC in a realistic discussion about health care funding and instead behaved like pirates, taking every last cent of profit out of the system and then bleating for protection – in a country with one of the highest gini-coefficients in the world.

But for now, let it just be said that it is deeply unconvincing that the health care failure is primarily a question of skewed distribution of resources and public sector underfunding. From where I sit the problems appears to lie primarily with incompetence and capacity constraints and only secondarily with underfunding. We should not throw more money at the problem until we are sure that that money can be raised reasonably and spent effectively and honestly.

I am a political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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