SADEC 'pragmatic' on economy

Johannesburg - While both the ANC and the breakaway party launched at the weekend will compete in the "leftist space", the new party will probably be more pragmatic and the ANC will drift to more dogma.

This is the view of chief economist from Investment Solutions, Chris Hart, who feels that while the ANC may drift into less market-friendly policies under pressure from its alliance partners, the new party could adopt a degree of socialism that supports market practices.

"Things are never linear," he points out.

He highlights one of the big areas where economic change could take place is in the small and medium enterprise space - an area he feels the ANC may talk about, but is insensitive to the real needs of this sector.

He says industrial policy at the moment seems to favour few numbers of larger companies.

"I hope the new party is a genuine supporter of small and medium enterprises," he says.

"I hope they look to broaden the business base- this is where employment comes from," says Hart.

"My hope is the new party will come with a strategy on poverty reduction rather than just poverty alleviation," he emphasises.

One of the problems Hart foresees is that the country is entering a very difficult period for that he calls "good economics".

"We are going into an election in an economic slowdown," he says.

Desperation

"The problem is politicians get desperate at election time, where winning is all-important."

At times like this promises are often made which are not good for the tax base long term.

"I suspect we will see a bout of populism," says Hart. As an example, he says that the Democratic Party seems to want to outdo the ANC on social spending.

"That is clearly unsustainable," he says.

"I am not sure we will have a proper debate. My hope is there will be some difference and the new party will come with an economic growth strategy," he says.

He feels while the ANC moves down the path of looking to remove inflation targeting, the new party may be more supportive.

"It will probably be easier to have a balanced budget under the new party than under the ANC with the way the ANC is going," he said, pointing to the ANC call to make changes to money bills as seeming like a "free for all" when it comes to allocating resources.

"They could then allocate beyond the pool of resources, which increases the tax burden over time," he concludes.

The new party breaking away from the ANC under the leadership of Mosiuoa Lekota and Mbhazima Shilowa will be known as the South African Democratic Congress (SADEC), it was announced on Monday.

While little has yet been said about their economic policy, this is going to be one of the key issues to emerge in the next few weeks and months as the debate heats up ahead of elections in the second quarter of the new year.

- I-Net Bridge