There are no silver bullets for SA’s growth crises but Tito Mboweni’s discussion document does offer some direct actions and targets that allow for accelerated growth in the medium term, writes Cas Coovadia
The National Treasury discussion document – Economic transformation, inclusive growth and competitiveness: Towards an Economic Strategy for South Africa – is an important contribution to the development – and urgent implementation – of a pragmatic economic recovery plan for the country.
The Banking Association South Africa (Basa) supports the proposed strategy.
We appreciate the opportunity – given to all South Africans – to contribute to the discussion document.
It is a welcome departure from the normal policy-making processes of the government and the governing party.
Economic policy affects the quality of life of all South Africans and cannot be the sole preserve of the governing party and its allies, especially given the last nine years of state capture, low economic growth, corruption and maladministration.
Today South Africa has a depleted fiscus, debilitating unemployment, poverty, inequality and dangerous levels of social instability.
The discussion document speaks to the realities of the economic crisis facing our country and the urgency with which it must be addressed – without narrow political or ideological considerations.
We urge the president of South Africa, Cyril Ramaphosa, to take ownership of – and responsibility for – the strategy and hold his ministers accountable for its implementation.
Without brave, committed political leadership, these proposals cannot succeed – and neither will our country.
Due to the limited time available to respond to the document, Basa has not engaged in detail on all the proposals.
- Agricultural reform. Agriculture is a sustainable means of job creation and land reform. Lending by commercial banks to agriculture increased by 12% in 2018.
- Small business. Basa supports efforts to reduce red tape and the regulatory burden on small businesses. Commercial banks provided almost 70% of all funding for small and medium enterprises (R230 billion) in 2018.
- Skills. Visa regulations that hinder the transfer of vital skills and tourism must be suspended. The president has said the visa regime will be made more accommodating of the economy and job creation, yet this has still not been done on the necessary scale. Banks spent more than R5 billion on skills and social development programmes in 2018, of which approximately two-thirds went to education.
- Infrastructure. Government borrowing to keep Eskom – and other struggling state-owned enterprises – operating is crowding out investment in productive infrastructure.
The release of telecommunications spectrum – necessary to strengthen telecommunications infrastructure – has been dragged out, despite the president making it a priority.
Without the infrastructure required for the fourth industrial revolution, South Africa will become increasingly less competitive in the global economy.
An economy in crisis – as is South Africa’s – cannot be fixed by making small incremental reforms, in the hope of minimising political opposition.
Decisive action is needed on growth-enhancing initiatives to meaningfully boost business and investor confidence and efficiently stimulate the economy.
Presidential or ministerial announcements and investment and job summits – without effective delivery on approved programmes – will simply further undermine confidence in South Africa.
Companies want to invest. No value is created by sitting on funds.
However, for pension funds to invest and for banks to extend credit, government needs to create a coherent and stable policy environment – which is not held ransom to short-term political interests.
Government has a responsibility to provide:
- An efficient, responsive, accountable and honest public service, along with effective law enforcement. Without these, the cost of doing business often becomes prohibitive, especially for small businesses.
- A stable macroeconomic environment. The state must be fiscally responsible and use its borrowing for productive infrastructure and social development services, not for operational costs like the public service wage bill and bailouts for state-owned enterprises. The private sector has significant skills and experience that can be used to ensure that government receives good value for its money and package ‘bankable’ investment projects.
There is little in the document about the role of labour resolving the country’s economic crisis.
At the very least, organised labour must begin to accept the bona fides of much of business.
The welfare of employees is an important element of the success of any enterprise and, for business, retrenchments are a last resort.
Where this is not the case, workers should exercise their rights.
Basa urges labour to engage constructively with business and government in deciding the trade-offs that each are going to have to accept to secure sustainable, inclusive economic growth.
Under present conditions, the existing jobs that organised labour is trying to protect will probably disappear, because businesses are ceasing to exist.
Recent efforts to revive Nedlac into an effective policy-negotiating forum must continue.
The greatest strength of the document is that many of the proposals can be implemented immediately by the president and his Cabinet.
South Africa does not have the time for an extended consultation process on policies and programmes that have already been announced by government.
We recognise that there have been some reforms and restructuring in key South African institutions of governance.
Unfortunately, they are not enough. Political reforms require inclusive economic growth and job creation to give them meaning.
The proposed strategy is not a silver bullet for all of South Africa’s economic problems.
It proposes a specific set of actions and targets, but, more importantly, lays the foundation for accelerated growth over the medium term.
We look forward to more details on the implementation of the strategy in the medium-term budget policy statement in October.
Cas Coovadia is managing director of Basa