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ANC spending 'must deliver'

Jan 12 2009 14:53 Ines Schumacher

Johannesburg - The swing to the left in the ANC's 2009 election manifesto runs the risk of increasing spending without delivering the goods, said Jean François Mercier, chief economist of Citibank.

The manifesto was launched in East London on January 10 and indicates a planned increase in government spending on key areas such as unemployment, healthcare and housing.

If the ANC is elected as the majority party, the SA economy can expect a boost with the introduction of the government's stimulus package in the short term, said Mercier.

He added that the manifesto's policies will be supportive to the economy in the long term, but that there is a risk of making the spending commitment too large and thereby inducing higher budget deficits and the reduction of foreign investment.

"It's too early to make a judgment. There is no doubt that structural problems such as crime and unemployment have the right to be addressed, but the challenge is to succeed in delivering on the increase in spending," he said.

Mercier said it is reasonable to expect a 2% budget deficit, as announced by Finance Minister Trevor Manuel in October 2008 in his medium-term budgetary policy statement.

However, Jeff Gable, head of research at Absa Capital, said that the country can expect a larger deficit: "The world has changed. The economy is significantly weaker and we are showing a local strain that is bound to reflect in our budget."

Gable added that the probability of the ANC manifesto being included in the budget announcement on February 11 is slim, but the deficit will still be apparent.

The leftist shift in the ANC's election manifesto should come as no surprise, Mercier said.

"The government has indicated for more than a year that industry policy needs to be revived and that there needs to be cheaper access to healthcare," he said, and added the reaction of foreign investors will depend on how the money will be spent.

"Growth is always good news, but building a budget deficit is a different matter," Mercier said.

- Fin24.com

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CTheB
Jan 12 2009 18:20 Report this comment

@Unathi - The rand strengthened and the economy did fine, no catastrophic drop in exports. The rand weakened and no upswing in exports at all. Yes, international trouble, but still. Failing business and unemployment are not the fault of a strong rand. There is concern about ANC spending because it should be helping those in need, but it appears it's not because it's inefficiently used. The concern is exactly the opposite of what you seem to think it is - if we've had strong economic growth, how is it possible that the poor's situation has not improved?

Unathi
Jan 12 2009 16:31 Report this comment

Its is very interesting for economists to comment the way they do. What interest me is the number of people suffering in this country more especially blacks and yet people are concerned about economy that doesn't help them at all. If the solution is to weaken the rand so be it. Small businesses are closing down, unemployment rate is high, retrenchments on the horizon, people are sleeping without food and all the economists are worried about is the spending by the ANC and worried about crime

KOBUS
Jan 12 2009 16:15 Report this comment

I'm sure the poor in this country are all very glad to have the latest military hardware (German frigates and subs, Gripen-fighters, etc.). It must make them feel so safe, lying under a cardboard box, to know that if the evil seamonsters ever attack South Africa, our Navy will be ready for them! Oh and they must surely all also be so glad that a large portion of the money went to their beloved ANC, seeing as how they treat Yengeni (and Mr Z) like a hero...

Michael Bowery
Jan 12 2009 16:12 Report this comment

Unfortunately, rightly or wrongly, there is a general perception that when the ANC led government spends public money it merely goes from government coffers to individual ANC official's pockets. This, by way of tender irregularities, ANC family in new venture inspired companies and the general mismanagement at all levels of Municipal, provincial and other levels of government.The intended poor recipient gets largely window dressing. In my book, that's Africa and enough said. Michael Bowery

Flaminca
Jan 12 2009 15:53 Report this comment

The poor of the poor in SA need urgent help - in schooling, training, housing, medical etc. Just giving grants as in past does not ensure this. We need to stop all the fraud in the housing and grants etc and all our efforts should be in job creation and anti crime. Over the past 14 years millions were badly spent with almost no recourse to the missing funds. Any reasonable person would see that nothing will change in next 5 years and poor will get poorer and further behind.

Disaster Guarenteed
Jan 12 2009 15:48 Report this comment

No African country whom won independence from any former "western-like" country ever succeeded in financial stability, human rights, infrastructure development & general wealth. I cannot see why some people still think South Africa is going to be any different? Man cannot re-invent the wheel. To grow the poor you must take from the rich. Last time I checked the rich are mostly sitting in Perth or where ever people go thesedays. It is rather sad, I did enjoy living in South Africa :/

KOBUS
Jan 12 2009 15:37 Report this comment

Just a small point, Nasdaq7. Germany is not out biggest import partner because we buy a lot of their cars (in fact, many of the German-brand cars we buy here are also manufactured here). They are our biggest import partner because we buy a lot of capital machinery from them to use in our factories. That is investment spending, not consumption spending. Your argument is sound, you just used the wrong example.

KOBUS
Jan 12 2009 15:35 Report this comment

Well, yes. Of course. It's no use spending money without getting results. We know as much from the last 14 years (and before that to a certain extent as well). We all know (or I hope we do) that it's a bad idea to put people to work digging holes and having other people fill them up again. I don't think we need a degree in Economics to tell us that...


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