One word or two? So, which is the correct option for South Africa’s State-owned enterprises (SOEs)? Hint: a bailout is the act of giving financial assistance to a failing business or economy to save it from collapse, while to bail out is to abandon a position or situation.
As I contemplated what to write this week, I found myself thinking about the word ‘bailout’, which I consider to be a demand-side matter, while I it should rather be ‘bail out’, which I consider to be a supply-side matter. I will return to these two economic terms.
All this was due to the week that was. If you are young at heart, you might recall the opening lyrics of the satirical television programme That was the week that was, which features this line: “That was the week that was; it’s over, let it go . . .”
But it is not over; it is just the beginning. Well, truth be told, it feels like we are in a time loop or temporal loop. It feels like a period of time that is repeated and, in this repetition, we are re-experiencing the all too familiar but, deep down, we have hope, although it is only limited hope, of breaking out of this cycle of repetition. But, alas, without political will, this is an improbability.
The Sunday Times of August 12 reported that “Cabinet moves were afoot to give government guarantees to struggling State-owned entities to the tune of R59-billion, [which] would leave the country staring sovereign credit rating downgrades in the face”. According to the report, consideration was being given to bailouts for ‘distressed’ SOEs such as the South African National Road Agency, South African Airways, the South African Post Office and the South Africa Broadcasting Corporation.
So, are these entities ‘struggling’ or ‘distressed’? To struggle is to achieve or attain something in the face of difficulty or resistance, while distress is the state of being in great trouble. If anything, South Africa’s SOEs, without exception, are in some form of distress, financial or otherwise, or both. SOEs are not struggling – they are in distress.
To what or to whom is the distress attributed? Is it, or has it been, self- inflicted? If it is internal, rather than external, why then is the remedy that is proposed external, and not internal? Why is the remedy proposed a demand-side measure, and not a supply-side measure? Allow me to explain: in economics, a demand-side measure is concerned with output, unlike a supply-side measure, which is concerned with input. In government’s proposed SOE bailout, the focus is not on addressing the input but rather on addressing the output. So, instead of addressing that which is causing the distress, what is happening is simply ignoring it instead of acknowledging it and subsequently addressing it and rectifying it.
The bailout will, at best, be a temporary fix. On second thoughts, it will not be a fix at all. It will simply be a reprieve. How so? There could be no lasting solution. It is merely a case of kicking the can down the road, which means putting off confronting a difficult issue or making an important decision, typically on a continuing basis.
So, why is government not addressing the core symptoms of the distress?
A simple test to assess government’s actions regarding the SOEs is to contemplate these anonymous wise words: “Ask yourself if what you’re doing today is getting you closer to where you want to be tomorrow.”
While I was contemplating the week that was, I was also reminded of the latest Renault Megane advertisement, in which the driver looks at someone outside his window, sitting in despair, and says: “There is always next week.” And tragically also for SOEs, but for how long?