Does South Africa and its government have a growth strategy?
This simple but fundamental question consists, of course, of two parts. And no easy answers.
First the “growth” part. Libraries of books and gridfuls of electrons underline why economic growth is the fundamental basis for all other arenas of public goods, from human upliftment (and its twin, poverty suppression) to rebirthing industrialisation and its companion, infrastructure improvements. Investors needed to finance all these goodies are, naturally, not attracted to low-growth countries.
The list is as long as the quest for its attainment – in the words of one title – remains for many nations “elusive”. Twenty-five years ago, when South Africa’s growth prospects appeared far rosier than today, my parliamentary colleague and DA finance spokesman Ken Andrew stated matters plainly. He said: “If you are passionate about alleviating poverty, you need to be passionate about economic growth.” He also offered that the only way to beat poverty and joblessness was “not to dare settle for less than six percent GDP annual growth”.
Low growth
Some 12 years later, in 2012, the SA Cabinet (and Parliament) approved the findings of the National Development Plan (NDP) based on a commissioned chaired by one Cyril Ramaphosa, then not in government. Its key recommendation was that South Africa required 5.4% annual GDP growth in order to eliminate or reduce its “triple lock” of inequality, poverty and unemployment.
It suggested a menu of reforms – some departing from the orthodoxy of dirigiste ANC ideology. It posited that if such a growth rate was both achieved and sustained, then by 2030, GDP – per capita (generally regarded as a good measurement of a country’s standard of living and how prosperous each citizen feels) would double.
This of course never happened, and instead of doubling this measurement within 13 years (which is the compounding effect of 5.4% annual growth) which, in according to the plan should have happened by this year, something else occurred. On 0% to 1% GDP growth – our past and current trajectory – it will take 70 years to achieve this doubling target, by which time many readers of this column (and most members of the present government) will be dead. Whether the state itself will survive such a poor outcome is also moot.
In 2008, a fundamental conclusion of the Spence Commission on Global Growth and Development (on which Trevor Manuel served) quoted approvingly this assertion:
Its other obvious remark is worth retelling: “The key is simply to put sensible policies in place, and then let the intelligence, industriousness and ingenuity of the people do the rest.”
Many column inches in News24 have recently been devoted to the recently announced regulations published by the “reform-minded, less ideological” minister of trade, industry and competition, Parks Tau (as some optimists branded him six months ago).
This includes the extortionate shakedown of a new (and incidentally, as published, illegal and unconstitutional) 3% tax on the after-profit taxes of all businesses to fund racial transformation. And the demand that all law firms, regardless of areas of specialisation or expertise, must achieve a mandatory 30% to 50% black ownership and management of legal practices.
No shortcuts
Readers and investors can judge whether these are “sensible policies”. Last week, on the same day when these new shakedowns from the DTIC were publicised, the Presidential Economic Advisory Council, yet another committee in a country drowning in them, “urged the government to position SA on a path of rapid economic growth due to the changing global environment”.
This statement was unaccompanied by any suggestion that the same government, rather than doubling down on the very policies which have driven us into the economic ditch, should change course. Left unsaid were a raft of other home truths: these include that there is no shortcut in avoiding hard choices and that you cannot be both pro-growth and simultaneously anti-business, the precise place where the DTIC has placed the country.
Paul Romer, former chief economist of the World Bank and Nobel laureate, was cited by local policy expert Ann Bernstein on the gap between government rhetoric and real life: “Everybody wants growth, nobody wants change.”
Yet even that statement has dated. Consider the inauguration of Donald Trump on Monday and his Day One reordering of both US economics and its global implications. Or the achievements in Argentina of President Javier Milei. He has taken a far worse performing economy than our own by the scruff of its elegant neck and now is on course to achieve 5% GDP growth this year, the exact target promised to us over 13 years ago by the NDP. And today there is nowhere in sight at home.
Little wonder that the large SA delegation trying to achieve Andy Warhol’s “15 minutes of fame” at the World Economic Forum will be up against it in Davos this week .
A low-growth, small market economy with failing infrastructure does not fill the dance card. The absence of a clear investor-friendly growth strategy makes this even harder. Then, there is the strategy part of the equation. A strategy to achieve growth (or anything else) is not the same as a plan, a report, a cliché or a wish list.
Peter Mandelson knows a thing or two about breathing new life into ossifying parties (such as his work for transforming the hidebound UK Labour Party into a winning machine under Tony Blair). He described strategy as “a washing line”.
“Each individual policy or initiative must be attached to the line like an item of clothing.”
Good. If you want 5% (or even 3%) growth to drive up jobs, improve revenue collection, and fund infrastructure, then that is the washing line. It’s about, in the words of Blair (who achieved the sort of high growth poor Kier Starmer, current Labour prime minister, can only dream of), “keeping the day-to-day aligned with the year-to-year”.
No to aggressive American-first trade policy
So that high growth target only comes with NOT publishing or pushing every fancy of the fanatical or fantastical ideologues who populate key government departments here and important ministries from health to minerals. The leader, or president who sits atop government, must in the view of Blair, make sure that political necessities (such as appeasing party factions) “do not collide with the strategic objectives of the government that defines its essential purpose”.
This begs the largest question of all: What, if anything is the strategic purpose of the GNU? Racial redistribution? Perfecting the National Democratic Revolution? Economic growth?
The latter in reality, on current form and notwithstanding some modest reforms, appears last on the list. Offering the views of the World Bank, Tony Blair or the Spence Commission on Growth probably holds little appeal to the comrades at the top of government. Karl Marx is probably a better bet. But even he cautioned, “Men make their own history, but they do not do it as they please; they do not make it under circumstances chosen by themselves…”
Indeed, and a warning echo of this was published this week by the decidedly non-Marxist SA-born economist, Desmond Lachman. Previously a senior official at the IMF, he serves as senior fellow at the American Enterprise Institute, a key thinktank in Washington DC.
Writing in Business Day, Lachman warns that the “last thing an export-intensive SA economy needs is an aggressive American-first trade policy”.
Yet there is every indicator that this precisely is what we will face in months, not years.
“SA’s economic policymakers should prepare the country for the risk that Trump’s economic bite will be as bad as his bark.”
And with the spectre of rising US interest rates to reduce world investors risk appetite (and so increase the already barely sustainable government borrowing here), the shockwaves from Trump Mark 2 will be directly felt here. What to do then? Get your public finances in order and embark of serious “supply side reforms that would make for a more productive economy” suggests Lachman.
What these reforms are, from tax cuts to public service changes, education improvements, red tape reductions and privatisations, are no mystery, nor unknown unknowns.
It’s all in the blizzard of papers, reports, commissions and expert analysis, many commissioned by the SA government itself.
What is really missing, the real mystery, here is the presidential leadership and strategy to read the writing on the wall. And not assume it is addressed to someone else.
