• South Africa's key loan from the IMF places the way the state conducts its business under a new level of scrutiny, says Daniel Silke. 
• However, he adds, the government has largely opted for a default response, rather than taking political risks that could be better for economic development in the long run. 
• The president has condemned corruption, but this may not be enough. 

There are many disturbing and discordant aspects of South Africa's Covid-19 response. But last week's televised update from President Cyril Ramaphosa highlighted this.

The president spent an inordinate length of time bemoaning allegations of corruption in the management and procurement process of relief funds aimed at assisting South Africans in the biggest public health and humanitarian crisis of our time.

And in a week when the country has received its first-ever request for an IMF loan worth around R70 billion, the ways in which the state conducts its business, provides necessary oversight and makes strategic decisions now injects additional fuel for scrutiny into key lending agencies too.

With claims and counter-claims emanating from the Eastern Cape's health department to – astonishingly – the very Office of President Ramaphosa himself, the rot of corruption apparently runs deep.

Frankly, it is my belief that if you can brazenly defraud not only the state but the people of South Africa in their real hour of need, you fear little sanction – and have little in the way of a moral compass as well.

In addition, internal checks and balances are apparently so absent, that the state is woefully exposed in its oversight and managerial capacity.

The upshot of this suggests that the South African state is not ready to manage its own developmental state projects and massive financial outlays intended to kickstart an infrastructure-led recovery.

With billions of rands being earmarked for water, transport, power and related projects, the temptation for similar graft-related opportunities will be huge. If you are capable of defrauding the state during Covid-19, you surely are capable of defrauding it even more rigorously on roads, dams and railroads.

This is not to mention the heavy financial centralisation under any National Healthcare Insurance which may simply flounder if checks and balances remain elusive and cause the country to be left highly vulnerable – just as Eskom has proven in the energy sector.

Despite lessons delivered on state capture, it seems not enough has been learned, and that the default position for nefarious players remains the seeking out of looting opportunities.

Unfortunately, despite this, it appears that under pressure, the president's fall-back position is to secure his power block rather than take political risks. The closure of schools and the capricious regulatory approach to the taxi industry are examples of this.

A strategy of espousing reform is underway, but within the strict "default" boundaries of securing power and maintaining patronage networks.

Political safety

Sadly, this is not unfamiliar in many governments across the world. Maintaining power within the context of an unfolding crisis suggests a rather predictable route of a return to political "safety" rather than experimentation with something new, reformist and ultimately risky.

The conditions for structural reform – in theory – should be exacerbated by Covid-19. But the reality is that they indeed may be delayed or retarded as the immediate (and more populist) political power plays take centre stage.

The real problem here is that the flight to "safety" for the ANC undermines the very recovery many seek.

In securing patronage, the ability to kickstart the economy falters at a time when pragmatic reformist policies are required the most. Given the approach from the ANC's upper echelons (with some seemingly notable exceptions like Finance Minister Mboweni and Treasury), this period of extreme uncertainty now seems less conducive to a reform agenda.

The one area of broad agreement – and expected progress – is in an infrastructure-led recovery. It's politically safe for all – from the centralist ideologues to the Communists to the Labour federations and to the private sector.

But, if the default is to continue to promote a "central planning agenda" combined with the hitherto anti-corporatist agenda, the critical co-operation in both funding and skills from the private sector will be seriously diluted.

Defective default positions are evident across the ANC during this period. Committing billions to a new national carrier smacks of ideological 'nationalistic' imperatives.

Heavy-handed police action against restaurant owners smacks of an overt (and unnecessary) show of force against a sector deemed politically weak. Cabinet ministers dressed in revolutionary fatigue suggest a mind-set in which the liberation struggle trumps the struggle for modern economic growth.

Decimating the tourism (and leisure) sector smacks of a lack of understanding for the immense domino effect that extends to the tens of thousands of support staff and pipeline-related industries.

If anything, the default of this – and the broad application of highly problematic over-regulation – is at best a complete failure to understand the concept of 'cause and effect' on the South African economy or, at worst, an attempt to bring certain industries to their knees to re-draft ownership patterns in future.

Defective default positions

Across all these examples in recent months, President Ramaphosa and the governing ANC have chosen default positions that are defective. Instead of capitalising on the earlier goodwill in the aftermath of the Zuma years, the president is choosing certain constituencies over others and in so doing, is rapidly squandering the social compact he claims support for.

The default position in dealing with Covid-19 has been a sledgehammer approach when it could've been so much smarter. It remains true that – in the words of the president – that "[w]e have all the ingredients for an economic recovery", but if the mixer bowl remains toxic, no number of good ingredients will be able to offset the rot.

The default therefore signals a presidency still lacking confidence. A presidency still largely unable to take political risks. And a presidency still supportive of power over policy. An alternative "default" should be de-regulation, the curtailment of wasteful expenditure, embracing all skills and prioritising the opening up the economy within the safe parameters of Covid-19 caution. Instead, the current default is defective – and dangerous.

Perpetuating our defective default positions will not only likely cause a sovereign debt crisis in the medium-term, it would also make a lending institution like the IMF even more way of the country in future.

Not only would the borrowing rate for funds soar, but the conditionalities attached in future would be politically destabilising. The current IMF loan is, perhaps, a last chance to safeguard and ring-fence critical rehabilitation monies. But any corrupt misuse of these funds will condemn the country and its political leadership. Stark choices lie ahead.