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04 March 2020 | Story Jean-Pierre Geldenhuys | Photo Supplied
geldenhuysJP
Jean-Pierre Geldenhuys.
As has been the case for the past five years, the latest (2020) budget paints another sobering picture of South Africa’s public finances and short-term economic outlook. Of particular concern is that this budget does not project that the government debt ratio will stabilise in the medium term (by 2022/23), which means that the current fiscal policy trajectory is unsustainable (which National Treasury acknowledges in the Budget Review). This makes a rating downgrade by Moody’s in March all but inevitable. 

In the budget that was tabled on Wednesday, the budget deficit is projected to be 6,3% in 2019/2020, while increasing to 6,8% the following year, before gradually declining to a still unsustainable 5,7% of the GDP by 2022/23. These large budget deficits contributed to large projected increases in the government debt-to-GDP ratio: this ratio is projected to increase from about 62% in 2019/20 to about 72% by 2022/23. To understand the extent of the deterioration of South Africa’s public finances over the past 12 months, it should be noted that this ratio was projected in the 2019 budget to increase to about 60% by 2022/23.

Burger and Calitz (2020) show that the government debt-to-GDP ratio can be stabilised (and fiscal sustainability can be restored) if: the gap between real interest rates and real GDP growth is reduced, and/or if the primary balance (government revenues minus non-interest government spending) is adequate to avoid an increase in the debt ratio. They then show that the debt ratio has increased over the past decade because the (implied) real interest rate on government debt has increased and the real growth rate has decreased and government ran large primary deficits, at a time when large primary surpluses were required to avoid increases in the debt ratio. 

Between 1998 and 2007, the debt ratio was reduced from just under 50% to just under 30%. This period (especially from 2002 onwards) was characterised by (relatively) high economic growth. Fast economic growth is crucial to stabilising the debt ratio and restoring fiscal sustainability. National Treasury (NT) has proposed structural reforms (aimed at reducing regulatory burdens and backlogs and increasing competitiveness in the economy) to stimulate private sector investment and growth. Given the constraints that continued load shedding will put on South African growth in the near future, as well as projected slower growth in the economies of our main trading partners, and the uncertainties associated with disruptions wrought by the coronavirus outbreak, it remains to be seen if private sector investment will increase and stimulate growth (available evidence in any event suggests that private sector investment tends to follow, not lead, economic growth). 

With growth likely to remain slow, lower real interest rates and lower budget deficits are required to reduce the debt ratio and restore fiscal sustainability. These interest rates will more than likely increase if Moody’s decides to (finally) downgrade its rating of South African government debt.

With low economic growth and high real interest rates, stabilisation of the public debt ratio means that the budget deficit must be reduced. To reduce the budget deficit, government can: (i) increase taxes, (ii) decrease spending and (iii) increase taxes and reduce spending. Given that fiscal policy is unsustainable in South Africa, it is surprising that NT decided against increasing taxes (other than customary annual increases in the fuel levy and excise taxes) in this budget – many analysts were expecting some combination of higher personal income tax, VAT, and company taxes. As reasons for not raising taxes, it cites low expected economic growth, and that most of the efforts to reduce the budget deficit in the past five years have been centred on using tax increases. Even more puzzling, the budget granted real tax relief to taxpayers, as income tax scales were adjusted by more than expected inflation. 

All efforts to rein in the budget deficit therefore rely on government spending reductions. To this end, NT is proposing to reduce government spending by about R260 billion over the next three years. This reduction in spending is comprised of a R160 billion reduction in the wage bill, and a further R100 billion reduction in programme baseline reductions. At the same time, as a proposal for wage cuts, government is allocating even more money to prop up the balance sheets of many SoCs, with R60 billion allocated to Eskom and SAA (while the Minister referred to the Sword of Damocles when referring to SAA in his speech, a more apt analogy for government’s response to the financial crises facing many of its SoCs might rather be the paradox of Buridan’s ass). While government has announced plans for the restructuring of Eskom and has placed SAA in business rescue, so far there is no feasible consensus plan to address Eskom’s mounting debts and dire financial situation, which poses a systemic risk to the South African economy. 

Regarding the proposed reductions to the wage bill, NT believes that its target can be achieved through downward adjustments to cost-of-living adjustments, pay progression and other benefits. Furthermore, the Budget Review also states that pay scales at public entities and state-owned companies (SOCs) will be aligned with those in the public service to curtail wage bill growth and ‘excessive’ salaries at these entities. We are also told that government will discuss the options for achieving its desired wage bill reduction with unions. Given the precariousness of the public finances, and the understandable objections of workers and unions, one must ask why these discussions were not already in full swing by the time that the budget was tabled? 

Regarding the proposed cuts to government programmes, NT notes that it tried to limit these to underperforming or underspending programmes, and that the largest cuts will be in the human settlement and transport sectors. But, as NT acknowledges, any cuts to government programmes will negatively affect the economy and social services; the budget speech also states that the number of government employees has declined since 2011/12, which also affects the provision of public and social services adversely (the Minister explicitly mentioned increased classroom sizes, full hospitals, and too few police officers during his speech). 

Apart from the proposed spending cuts, the proposed allocation of spending is unsurprising and reflects long-standing government priorities: spending on basic education, post-school education and training, health and social protection takes up 13,6%, 6,7%, 11,8% and 11,3%, respectively. Increases in social grants range between 4 and 4,7%, which means small real increases in most social grants (only if inflation remains subdued). Worryingly, debt service costs are expected to take up more than 11% of total government spending (and is projected to exceed health spending by 2022/23). These costs are projected to grow by more than 12% by 2022/23 (almost double the growth in the fastest growing non-interest expenditure category). These figures vividly illustrate how a high and increasing debt-to-GDP ratio limits the scope for increased spending on important public and social services. 

Unless fiscal sustainability and the  balance sheets of SoCs are restored, the scope for the government to increase spending to combat poverty, rising inequality, and unemployment will be severely limited – as would the scope for countercyclical fiscal policy, should the local economy again slide into recession. The stakes are high, and the cost of indecisiveness is increasing.

This article was written by Jean-Pierre Geldenhuys, lecturer in the Department of Economics and Finance in the Faculty of Economic and Management Sciences 

News Archive

Former top politician talks at UFS School of Management
2007-04-25

Dr Matthews Phosa, the non-executive chairman of EOH and former politician, presented a guest lecture to a group of MBA students at the University of the Free State's (UFS) School of Management. At the lecture were from the left: Mr Tate Makgoe (Free State MEC for Finance), Ms Nontobeko Scheppers (MBA student), Dr Phosa, Prof. Helena van Zyl (Director: UFS School of Management) and Mr Setjhaba Tlhatlogi (MBA student).
Photo: Stephen Collett

Exploring some of the myths and opportunities cyber space offers

Mathews Phosa

Introduction

It is no longer business as usual. Globalisation poses new challenges as well as opportunities to business, education and society in general. Many of these new opportunities are alive with paradoxes and tensions between local sustainability and global market opportunities. The growth in new communication technologies challenges us to critically explore some popular myths, opportunities and define possible responses.

Cyberspace is often described as the new frontier – not only in the race for newer and faster technologies, but also in education. Any user or provider of services who does not explore this new frontier will soon be considered using “outdated” and will be accused of using obsolete methodologies. Cyberspace, like the spaces embodied in continents, is something that should be claimed and conquered.

Cyberspace and specifically access to information, including online education is hailed as the great equaliser. It is now claimed that everyone will have equal access to “Knowledge”. Cyber education  for example is celebrated as “education-without-borders”, but as Bauman states, while it does change borders and access, it creates new “haves” and “have-nots”.

 

To put it in a nutshell:  rather than homogenizing the human     condition, the technological annulment of temporal/spatial distance tends to polarize it.  It emancipates certain humans from territorial constraints and renders certain community-generating meanings     exterritorial – while denuding the territory, to which other people go on being confined, of its meaning and its identity-endowing capacity.
(Bauman 1989:18; emphasis mine).

Virtual environments and the possibilities offered by the World Wide Web are new spaces that are being colonised and occupied by those who have capital (whether economic or academic) and who are looking for new labour or markets.  While the new mediums include and conquer new spaces, it also excludes and “otherises” communities and segments of society (Prinsloo 2005).  Cyberspace provides institutions and corporations with a space to operate without the responsibilities and obligations of locality – as long as you can afford the privilege of operating in cyberspace.

Cyberspace is therefore not neutral.  Spaces are occupied, reoccupied, abandoned, claimed, fortified, secured – contested.  Those with mobility define and map spaces continuously according to their claims.  Those without capital and the mobility it brings, contest these claims, contest the spaces and hack into the space.  Reclaim it.  Recolonise it.

 

Re-Appropriating Cyberspace

A number of authors explores such a re-appropriation of cyberspace.  Instead of seeing the Internet and related functions like online teaching as just accessing and transferring information, cyberspace is explored as political, social, personal and economic space.  Institutions across the spectrum including higher education institutions venturing into cyberspace often think that it offers them a space without the usual socio-cultural complexities. Gunn, McSporran, Macleod and French (2003:14) however indicate that online “interactions that take place through electronic channels lose none of the socio-cultural complexity or gender imbalance that exists within society”.

Instead of cyberspace being a new space where the differences and disparities of non-virtual life on earth cease to exist, “cyberspace is an imagined network layer sitting on top of the physical infrastructure of cities. Cyberspace is an imagined, continuous, worldwide, networked city; the global city that never sleeps, always experienced in real time” (Irvine 1999, Online). Cyberspace therefore not only sits on top of the physical infrastructure, but is also a mirror image of the power structures and disparities of non-virtual life on earth.

Cyberspace is also much more than just a replication of non-virtual reality. New subcultures and new self-defined communities are coming into existence (Irvine 1999, Online).  These new communities in cyberspace resemble communities in non-virtual format, but they are also vastly different.  For example, Grierson (Online) explores the similarities between cemeteries and the communities in cyberspace.  She finds that, although both “communities” are constituted in space, it is a “placeless place” which “links and mirrors society, with all its alter-egos and hidden desires … a virtual site holding up a mirror to physical reality where subjective presence is delineated in imaginary absence”.

The Internet as “sites for power and knowledge” is further explored by a number of authors, amongst othersNewman and Johnson (1999), Usher (2002), Walmsley (2000) and Borer (Online). Jordan (1999, Online) investigates culture and politics in cyberspace.  He explores three “intertwined levels”, namely cyberspace as “playground of the individual”, as “social space, a place where communities exist” and as “being a society or even a digital nation”.  In each of these three levels, power is played out and claimed in a “sociological, cultural, economic and political battle between the individual and a technopower elite”.

The so-called impact of the Internet on society is discounted by Bennet (2001:197).  He suggests rather that the Internet “should be regarded as a “form of life – whose evolving structure becomes embedded in human consciousness and social practice, and whose architecture embodies an inherent valence that is gradually shifting away from the assumptions of anonymity upon which the Internet was originally designed” (2001:197).

We started by stating that it is no longer business as usual. We can no longer afford epistemologies of ignorance and politeness. Cyberspace and the opportunities it offers for business, society and education in particular need to be interrogated using a hermeneutics of suspicion, confronting certain myths, exploring opportunities and defining appropriate responses.

It is evident that the impact of the cyberspace stretches across the total spectrum of the human experience and condition.  Due to the complexity of discussing the total spectrum of options this discussion focuses on Higher Education as one entity to demonstrate the implications and level of reflection required.
To come to terms with some of theses realities it is necessary to address some of the typical myths. The following aspects provide an indication of some of the myths:

  • Myth 1 - Access. The Internet and online education is not the great equaliser. Access to the Internet on a sustainable and affordable basis is still for the rich and the privileged. There is good reason to celebrate the widening access citizens have to the Internet. In the last number of years the so-called “digital-divide” has indeed decreased. It is however still disputable that having access to the World Wide Web changes lives for the better. For the World Wide Web to deliver on its promise of changing society into more just and compassionate communities, the other divides in society have to be addressed as well.
  • Myth 2 - Quality of information available. Even when/if sustainable and affordable access to the Internet would be available to all; the overwhelming quantity of information on the Internet would require participants to have critical information literacies. Such literacies will be crucial in allowing the “having access to more information” to really allow participants to live differently. Bauman (1989) and others warn of the increasing commodification and consumerisation of knowledge; the immense amounts of information available on the Web, results in information and knowledge becoming “cheap”, and un-validated.  
  • Myth 3 – The role of race and gender. Current research indicates that the unequal socio-economic gender relations are perpetuated in cyberspace. Females have less access and often less frequent access due to prescribed and patriarchally perpetuated life-roles. Research also indicates that males frequently dominate online discussions, often relegating female participants to roles of quiet observer. In this “neutrality” of cyberspace the assumption often is that gender should not matter in a space where identity is often just a name and a short introduction. There is however enough research to validate the role identity and specifically race and gender play in online learning environments.
  • Myth 4 – Guaranteed success as learning platform. International research indicates that very few students opt for fully online learning. Even in countries where access to online environments are either state-sponsored or very cheap, learners do not prefer online learning to more face-to-face learning environments. Students seem to prefer a range of blended learning experiences, rather than fully online. This has impacted on several world-class universities forcing them to cancel fully online offerings. Fully online learning and interaction require specific literacies and personality traits of participants. Online learning is not a “one size fits all”.

 

Research in South Africa indicates that many learners use computers at work to access their learning environments. Not only does this impact on productivity, but learners therefore do not have access to their online learning environments over weekends and when they prepare for the examination. Employers also increasingly block mass-generated electronic correspondence from universities and limit learners’ access to the Internet. This results in learners experiencing growing frustrations with “fire-walls” that do not allow an effective learning environment.

Very few learners are sufficiently prepared to engage and sustain their own learning in a fully online environment. Institutions offering online learning are often inundated with requests for more support, often face-to-face.

  • Myth 5 - Quality in an online learning environment. At present there are no quality indicators specifically focused on online learning environments in higher education. The quality of the current offerings  range from “drop-off and go” experiences where students carry the cost of printing materials with very little continued support and interaction from the side of the institution, to very intensive online teaching which overestimates the time and resources that students have for such learning.
  • Myth 6 - Accountability.  Many overseas institutions offer online qualifications in other countries without any guarantee that the qualifications will be accredited by local institutions of learning or employers. Many students wrongfully belief that because it is offered by an international provider using online, that the learning experience will be of a high quality and that it will be accredited by local education institutions and employers.
  • Myth 7 - Global is better. Though there is a legitimate trend to ensure internationalisation in education, the need for contextual, local and authentic learning remains equally important. The challenges learners face are often context-specific and international tutors in online environments often have very little understanding for the cultural and socio-economic specificities of local contexts. Some metaphors and examples often used in online environments exclude participants from non –western cultures to fully comprehend and apply the learning to their own contexts.
  • Myth 8 - Online teaching and learning is ideologically neutral. All curricula arise from context specific ideological and socio-economic relations and epistemologies. Very few institutions foreground their specific beliefs and assumptions about knowledge and learning. This is even more so applicable in online learning environments where the “designers” of the learning are often even more hidden than in face-to-face contexts.

Opportunities

The Internet does however offer scores of opportunities for institutions of higher learning to seriously consider. The following is but a few of the opportunities that await careful and critical consideration.

  • Opportunity 1 - Reaching the un-reached. Yes, online teaching and learning bring opportunities to many learners who have been previously excluded from training, development and higher education. The reach of higher education does not only entail those who were previously excluded, but also brings into reach qualifications at internationally renowned institutions.
  • Opportunity 2 - Access to information. With the Internet, students have access to the most recent, cutting-edge information. Students will increasingly be able to compile their own curricula and have it validated by institutions of higher learning. Students now have access to the international discourses in the different disciplines at the click of a mouse. While there is a real danger that not all students have (yet) the critical literacies required by the Information age and secondly that they may be overwhelmed and become lost in cyberspace.
  • Opportunity 3 - Communication. With the Internet and other mobile communication technologies, learners can increasingly be in touch with institutions of learning and educators and peers. Learning experiences can be enriched by synchronous and asynchronous communication, between the institution and tutors, tutors among themselves, between tutors and learners and among learners themselves. Online learning really open up a Habermasian “public sphere” for “communicative action”.
  • Opportunity 4 - Mode 3 knowledge-production. Traditionally knowledge production in higher education focused on discipline specific transfer of knowledge, called mode 1 knowledge production. Paulo Freire called this “banking education” (1989). Recent years saw the development of Mode 2 knowledge production where knowledge was applied and arose from practical application to appropriate problem-spaces. Online learning environments make it increasingly possible to move to Mode 3 knowledge production where learners address problem-space from the foundations of a specific discipline but then continue to explore contributions from a range of other disciplines Knowledge production has moved form “knowing-how” to “knowing-in-the-world”. Barnett refers to this change as an “ontological turn” (2005).

The changing role of higher education

It will be naïve and irresponsible for higher education not to interrogate popular notions and epistemologies of online education and the role of the Internet. We have explored a number of myths and (hopefully) created sufficient suspicion to invite further discourse. We have also explored a number of opportunities an online environment offers to business, higher education and society in general.

Higher education has to indeed decrease the “digital divide” not only in the form of broadening access, but also by seriously interrogating the accompanying epistemologies. From the above it would seem as if a responsible and robust response would entail the following:

  • Response 1 - Empower learners with critical literacies for the information age. having access to the information the Internet offers will challenge higher education institutions and learners alike to be able to critically evaluate information and its sources. While addressing access may in fact decrease the digital divide but it is worthless if the decrease in the digital divide does not and cannot result in students’ critical engagement with information and with one-another.
  • Response 2 - Increase access to the Internet through collaborative agreements. Higher education institutions have much more bargaining power than individual learners. It is almost unbelievable that with the “captive audiences” higher education institutions have, that they have not been successful to negotiate more affordable and sustainable access to online environments.
  • Response 3 – Develop quality online learning. Higher education should be very clear about the minimum standards for learning platforms, opportunities for peer and tutor interaction and the sustaining of a teacher presence in Virtual Learning Environments (VLEs).
  • Response 4 – Maintain scholarly online teaching. Higher education should encourage research, individual and collaborative projects to determine the indicators of success of online learning in specific contexts for specific audiences.
  • Response 5 – Higher education as critical praxis.  Higher education traditionally has validated all claims to knowledge and expertise. As Barnett (2000, 2005) has indicated, higher education is no longer the only “producers of knowledge”. However, higher education still has the mandate to validate knowledge, whether claimed or made available in cyberspace. Higher education has the unique opportunity to rise to the occasion and to interrogate knowledge claims. The opportunities should be considered in the context of the realities of cyberspace as discussed.  Fundamental to this is the fact that it requires higher education to increase the capacity of students for critical and compassionate action to assist in the formation and utilisation of the challenges and new opportunities.  Essentially the challenge is to create opportunities and empower students and the broader society to utilise the potential cyberspace towards a more just and equitable society.

In Conclusion

There are a number of myths surrounding online education and the impact of the Internet on business, education and development. Only once cyber space has been demythologised, it is then that our eyes open to the opportunities that it offers. Higher education is therefore called upon to reflexively exploit the opportunities online learning and the Internet offer to engaging one another in learning experiences. Higher education will do well to take both the myths and the opportunities seriously and courageously.

Cyberspace is a new frontier. As previously done with colonial frontiers, this frontier can be exploited ruthlessly. There is however also an opportunity for business and higher education to engage with cyberspace – and use cyberspace to create hospitable, nourishing environments for active learning and a more just and equitable society for all.

References

  • Barnett, R. 2000. University knowledge in an age of supercomplexity. Higher Education 40:409-422.
  • Barnett, R. 2005. Recapturing the universal in the university. Educational Philosophy and Theory, 37(6):785-797.
  • Bauman, Z.1998. Globalization. The human consequences. Cambridge: Polity Press.
  • Bennet, CJ. 2001. Cookies, web bugs, webcams and cue cats: patterns of surveillance on the World Wide Web. Ethics and Information Technology 3:197-210.
  • Borer, MI. The Cyborgian self: toward a critical social theory of cyberspace. Available URL:
  • http://reconstruction.eserver.org/023/borer.htm (accessed on 10/04/2007).
  • Freire, P. 1989. Learning to question: a pedagogy of liberation. Geneva: World Council of Churches.
  • Gunn, C, McSporran, M, Macleod, H & French, S. 2003. Dominant or different? Gender issues in computer support learning. JALN 7(1):14-30.
  • Grierson, EM. From cemeteries to cyberspace: identity and a globally technologised age. Available URL: Click here!
  • (accessed on 10/04/2007).
  • Irvine, M. 1999. Global cyber culture reconsidered: cyberspace, identity and the global informational city. Available URL: http://www.georgetown.edu/faculty/irvinem/articles/globalculture.html
  • (accessed on 10/04/2007).
  • Jordan, T. 1999. Cyberpower: the culture and politics of cyberspace. Available URL:
  • http://www.isoc.org/inet99/proceedings/3i/3i_1.htm (accessed on 10/04/2007).
  • Newman, R & Johnson, F. 1999. Sites of power and knowledge? Towards a critique of the virtual university. British Journal of Sociology of Education 20(1):79-88.
  • Prinsloo, P. 2005. Don Quixote in cyberspace – charging at the invisible. Open and Distance learning in Africa Number 1, 2006: 78-94.
  • Usher, R. 2002. Putting space back on the map: globalisation, place and identity. Educational Philosophy and Theory 43(1):2002.
  • Walmsley, DJ. 2000. Community, place and cyberspace. Australian Geographer 31(1):5-19.

 

 

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