Finance Minister Tito Mboweni is clearly ready for battle as he attempts to revive and reform the economy. But he'll get nowhere unless he gets President Cyril Ramaphosa's direct and explicit backing, argues Mpumelelo Mkhabela.
The publication of South Africa's economic strategy discussion document by Treasury somehow revealed President Cyril Ramaphosa's seemingly hands-off style of leadership in policy making.
Finance Minister Tito Mboweni published the economic strategy document and called for public comment. But instead of comments, the first thing Mboweni got were attacks from some of his comrades.
The ANC's alliance partners, Cosatu and the SA Communist Party, immediately demanded the withdrawal of the document because they were not consulted on what they believed was a conservative economic strategy. ANC officials summoned Mboweni for an explanation because he had not consulted them.
After the meeting with Mboweni, ANC spokesperson Pule Mabe issued a statement encouraging members of the public and alliance partners to submit their comments. Clearly motivated after the meeting, Mboweni posted a social media message, saying the way he was treated reminded him of the kind of support he got from "previous presidents" who always appreciated his unusual ways.
He described his actions as "disruptive" and "destructive" of inertia in order to move forward. He was prepared to disturb the comfortable and get into trouble for as long as there was a movement forward. Kudos to Mboweni! We need some boldness in the right direction.
Now, what does this say about Ramaphosa? The president had said a few weeks before the release of the document that his administration would unveil an economic plan to revive the economy. Was the Mboweni discussion document the plan the president was referring to?
Ramaphosa's seemingly distant posture on the economic strategy document is in sharp contrast to former president Thabo Mbeki's style, who personally became involved in making unpopular economic policies.
This is not to say Ramaphosa is not interested in economic issues. To be fair, he is leading a few initiatives to revive the economy. He appointed investment envoys, initiated the annual investment conference and committed to meet key stakeholders monthly under the auspices of Nedlac. At the World Economic Forum meeting in Cape Town, he told investors of the need for economic reforms.
But it's one thing to market the country to investors. It is quite another to have a grand plan that serves as the basis of macro-economic management and investment attraction. Mboweni's discussion document is an attempt at developing an overarching economic strategy.
In recognition of the fact that previous ideas, some contained in the National Economic Development Plan and others in the Industrial Policy Action Plan, have never been implemented, the document is not really groundbreaking. It is a synthesis of existing ideas contained in various documents.
The document confirms government's stance on inflation targeting, flexible exchange rate and sustainable fiscal policy. With regard to the latter, Mboweni has on several occasion spoken out about the negative fiscal impact of bailing out underperforming and inefficient state companies.
Some brilliant ideas
It is a battle he will probably continue to fight. He will get nowhere without the president's explicit backing or direct involvement of the president in pursuing a fundamentally different trajectory for wasteful state companies.
There are some brilliant ideas in his discussion document. For example, the proposals to make it easy for small businesses to thrive. It covers access to the export market, access to credit, enforcing timeous payment by state entities, and dealing with onerous labour regulation and state procurement reforms. But the proposal for prepayment to small contractors is bad idea that has a potential to drain government resources through corruption.
Another bad idea is the assumption that renewable sources of energy can employ more people than coal, which is used not only as an energy source but also as a feedstock for liquid fuels and other chemicals. Coal, which sustains about 700 000 direct and indirect jobs, also earns export income for South Africa.
Without getting into more details here, the truth is that the document has some useful ideas about making the economy more competitive. Hopefully, the final document will incorporate economic diplomacy to secure preferential trade arrangements, as well as a plan to boost research and development. In its draft form, the document is a good start to reignite debate about coherent economic strategy.
Its evolution gives us the basis to compare economic management styles of the past. The first economic strategy South Africa adopted in 1994 was the Reconstruction and Development Programme. It had been in the ANC's inaugural election manifesto. It had full backing of Cosatu.
As an economic policy, the RDP was largely seen as Keynesian, in that it favoured what the British economist John Maynard Keynes called "loan expenditure" designed to stimulate growth. But, in the face of crippling debt, the democratic government could not proceed with "loan expenditure" and risk the deteriorating budget deficit and possibly seeking a bailout from the International Monetary Fund.
To deal with the problem, South Africa adopted a self-imposed structural adjustment programme in the form of Growth, Employment and Redistribution (Gear) in 1996. It helped improve public finances and fiscal sovereignty. South Africa paid off its debt, recorded budget surpluses and beefed up social expenditure.
This helped us survive the chill winds of the Great Recession ignited from across Atlantic in 2008. Gear's negative legacy was the uncalculated reduction in trade tariffs, which wiped out South Africa's textile manufacturing base. And its privatisation programme didn't go far enough, leaving taxpayers to continue to foot the bills of the high-flyers of South African Airways.
The other legacy of Gear was political divisions within the alliance. The SACP even coined the phrase "96 Class Project" in protest against what it regarded as a policy meant to pacify the capitalist class at the expense of workers. Mbeki, first as deputy president and subsequently as president of the republic, personally oversaw the implementation of Gear and other economic strategies such as Asgisa.
Mbeki convened "under-the-tree discussions" with a few union leaders: Kgalema Motlanthe, Gwede Mantashe, Enoch Godongwana, Mbhazima Shilowa and Vusi Nhlapo. He explained the logic behind cutting down government's debt to free up money for social expenditure. "He did the sums for us. He used logic to convince us, and it worked. Once I listened to him, my position changed. And I was not the only one," Motlanthe told Mbeki's biographer, Mark Gevisser.
Mbeki introduced the policy in Parliament after limited consultations with ANC's alliance partners. His finance minister, Trevor Manuel, oversaw its implementation. But Mbeki was there to defend it in ANC meetings and other public platforms. "Call me Thatcherite!" Mbeki once scoffed at leftwing critics.
As for Ramaphosa, we don't know of his personal involvement in the drafting of the draft economic strategy published by Mboweni. It's unthinkable that Mboweni would have released the discussion document without the blessing of the president
Ramaphosa should appreciate that in times of great economic distress, South Africans expect him to instill a greater sense of coherence in economic management of the country. He must openly support - and lead - Mboweni. The latter need not invoke nostalgia of "previous presidents" in the presence of a current president.
- Mpumelelo Mkhabela is former editor of the Sowetan, a former member of the parliamentary press gallery and is a regular columnist for News24.
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