Why is Treasury the ANC's recycling plant?

Hours before Tito Mboweni was announced as finance minister last Tuesday, deputy minister of higher education and training (the youngish) Buti Manamela, tweeted a single character - the universal symbol of recycling, the three arrows rounding into each other to make up a circle.

They were the three golden men, in an age of robust commodity prices and strong economic growth, the terms of Thabo Mbeki as president, Trevor Manuel heading up Treasury and Mboweni as the Governor of the South African Reserve Bank (SARB) overlapped to a large extent.

A quick look at the Gross Domestic Product (GDP) during this period is impressive, with economic growth reaching 6.5% in 2006.

However, if the same graph is overlaid with unemployment figures, the results are less than stellar. The jobless rate fell from above 30% in the early 2000s but was still just under 22% before the global economic crisis hit South Africa, pushing unemployment mostly above 24% in the last ten years.

The inability to bring substantive structural change to the economy, long bedevilled by de-industrialisation and rising unemployment since the 1970s, led the trade union movement to blame Mbeki’s government for 'jobless growth'.

Manuel, who as the cliché goes, is the 'darling' of the financial markets, ran a budget surplus in 2007 while finance minister. A crime, according to some developmental economists, who asked why a country so desperately in need of infrastructure, health and education didn’t use its entire revenue base and borrow further to fund growth sectors.

And Mboweni stuck to government's inflation targeting principle of keeping price growth between 3% and 6%, despite outrage from the ANC’s leftist allies and even concern by mainstream economists that there should be more leeway for inflation to rise and economy to be opened up further.

Relaxation of capital controls

The halcyon days of the three were also a time of the relaxation of capital controls, allowing companies to dual-list on foreign stock exchanges and invest in offshore ventures, long restricted under apartheid government. This was sold to the ANC as a guaranteed move to entice investment to SA.

Instead it had the opposite effect, with ever-weaker levels of domestic investment and fixed capital formation, while major SA companies eyed deals abroad to shore up profit amidst domestic political turbulence and uncertainty.

Some would argue that the prudent, even conservative nature of the trio, left SA in a good position to withstand the global economic crisis and the country managed to avoid a massive spike in unemployment by reaching into reserves and pumping money into infrastructure.

But Mboweni takes over as finance minister when the country is at crisis levels, with a 27.2% unemployment rate and the first recession since the global economic meltdown. This isn't the time to reach back into the economic toolbox and produce jobless growth while there’s no commodity supercycle to boost tax revenue. 

Bold and new ideas

This is the time for bold and new ideas, to industrialise, increase domestic investment levels and boost the number of artisans and skills in infrastructure.

Mboweni, known to the markets as a financial safe bet, has spent the last few years building up an impressive portfolio of directorships in the private sector, at companies such as Nampak and Discovery.

He also, in April this year, made noises on social media about the need for state-owned bank, a sovereign wealth fund from mining dividends, and the state owning 40% of all mining houses, while the Economic Freedom Fighters (EFF) have even quietly dropped this demand, given the difficult state most mines find themselves in and weak commodity prices.

There appears to be almost complete reluctance to appoint new thinking to Treasury, with Pravin Gordhan and Nhlanhla Nene both brought in to steady the ship after serving their terms, and even Manuel's name whispered as a possible contender for the position.

Is Mboweni still harking back to the glory days of the commodities supercycle, when he, Mbeki and Manuel appeared set to dominate every business school’s textbook examples of economic growth miracles?

Let’s hope, for SA's sake, that he’s moved on and is up to the task in 2018.

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