JOHANNESBURG, SOUTH AFRICA
THE outcomes of the recent African National Congress national executive committee meeting presented by the notorious Ace Magashule this week were not surprising – dull and vague. It was a reminder that whenever the ANC and its partners, the Congress of South African Trade Unions and South African Communist Party, enter a room to deliberate on the country’s economy, one should prepare for a disappointing outcome.
The whole world, a world that includes the ANC and its affiliates, knows how lacklustre South Africa’s economy has been over the past ten years.
Last week, Bloomberg reported that South Africa’s economy entered the 70th month of a weakening cycle in September. Their report was based on the South African Reserve Bank’s (SARB) Quarterly Bulletin released in Pretoria.
For us who follow South Africa’s economy and occasionally write about it, there was nothing stunning about Bloomberg’s report. South Africa’s economy is under serious strain – a strain that ought to unnerve everyone in the country.
Economic growth remains very weak – projected to be less than 1% this year by the SARB. The state-owned enterprises (SOEs) are a complete financial mess and throttle our economy. Business confidence, a very critical measure of the health of the economy is in the doldrums. Even foreign investors have been ditching South Africa’s assets at staggering rates this year.
Attending Stellenbosch University’s Bureau for Economic Research’s (BER) morning briefing on the state of South Africa’s economy and politics in Johannesburg this past August, I came out of the briefing disillusioned about the country’s economic future. Hugo Pienaar, BER’s chief economist also projected less than 1% economic growth this year – along with a contraction in private and public sector investments. This, I thought, was very bad news for South Africa.
Cyril Ramaphosa and his governing party are still embroiled in factional battles. The factions don’t seem to be thinking the same way on how the party should move South Africa forward on reforms. At the morning briefing, Hugo said these battles were holding the potential for reform. He was right.
When Ramaphosa came to power in December 2017, some of us thought he’d be in full control of the party by now. I was among those pundits – and I was dead wrong. We are seeing no end to these factional battles – and Ramaphosa looks weak – which is worrisome.
In the midst of the unabating divisions in the party, one courageous man, heading the finance ministry, Tito Mboweni, seems to have a full understanding of the steps we should take to escape the economic mess we have gotten ourselves to.
Mboweni’s ideas on how to revamp this economy, presented in his recent paper, titled “Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa”, are what will get this country back on track.
One of the most important things about the paper, is that it explicitly acknowledges the mess the country is in. It proposes fundamental pro-growth policy reforms we need to undertake to reignite economic growth and create the needed employment opportunities.
We have seen the damage our state-owned electricity generator Eskom, and other state-owned enterprises have done to our economy. The amount of debt in these SOEs is at levels that have posed serious risk to the economy. Any rational public official determined to make a difference should know that these companies need to be privatised.
Government’s role is not to run businesses – it’s to create an environment conducive to a thriving private sector. Out of that thriving private sector will be the creation of sustainable jobs. It is unfortunate that Mboweni seems to be the only high-profile minister aware of the limits of government’s role in the economy in Ramaphosa’s lousy government.
He deserves praises for standing for his ideas at the ANC’s recent NEC meeting. According to News24, he was blunt on his ideas and the state of the country’s economy. His courage is what most of our ministers must possess.
The NEC should have backed Mboweni’s recovery plan – instead of coming up with the so-called “package of economic interventions“. A radical pro-market shift is needed – not these destructive economic interventions that get us nowhere.
At BER’s morning briefing, I learned from one of the very accomplished speakers that the role of government in the economy has been rising since the 2008 financial crisis – that it is – at this point – bigger than most of the emerging markets.
What intrigued me is that in parallel with this upward slope of the role of government, unemployment rose and continues to rise under Ramaphosa. Mboweni’s recovery plan has potential to reverse this.
But he is, sadly, alone – with very few people in the ANC supporting his approach. His president is not bold and publicly supportive of the plan. We need more voices in support of his sane ideas. PM
© PHUMLANI M. MAJOZI