Last chance to catch up on ‘lost decade’? | Fin24
 
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Last chance to catch up on ‘lost decade’?

Oct 03 2019 12:28
Andile Ntingi

The fearlessness with which finance minister Tito Mboweni is challenging his comrades within the Tripartite Alliance to rise to the occasion to address South Africa’s worsening economic shortcomings is a sight to behold.

Mboweni has been in his job for a year, but he has dispensed with the ‘try-to-please-all’ attitude of his predecessors that we had become accustomed to – those who tried to curry favour with business-aligned factions inside the ruling ANC and the ruling party’s long-standing alliance partners, labour union federation Cosatu and communist party SACP.

Since taking over the reins in October 2018, Mboweni has shown that he is not afraid to slug it out with his comrades when it comes to debating the management of our economy, often annoying his detractors with his support for the privatisation of poorly managed state-owned enterprises (SOEs) draining state coffers. 

So it has come as no surprise that the brawling finance minister recently tabled a set of economic reform proposals, contained in a 77-page document prepared by National Treasury. If implemented, the reforms could potentially resuscitate the economy and lift growth by 2% to 3% and generate more than 1m jobs for unemployed South Africans. 

The proposed reforms are long overdue, given that our economy has been in the doldrums since it got caught up in the 2008 global recession that led to our economy shedding more than 1m jobs.

It is also worth noting that we have not had a clear and coherent economic strategy since the discontinuation of the Accelerated and Shared Growth Initiative for South Africa (Asgisa) policy, the implementation of which was cut short after Jacob Zuma became president in 2009.  

Asgisa was a successor to the Growth, Employment, and Redistribution (GEAR) strategy and was meant to run from 2006 to 2014. Asgisa was supposed to build on the achievements of GEAR, an austerity policy implemented between 1996 to 2006 to stabilise the SA economy after the end of apartheid in 1994.

GEAR’s main achievement was to drive down inflation, the budget deficit, and government debt to a point that a foundation was laid for government to run a budget surplus in 2008.

However, GEAR failed to make a significant dent in our high unemployment rate. And, during GEAR’s implementation years, growth was mainly driven by consumption spending, thanks to low interest rates and the rise of the black middle class.

Asgisa, an expansionary Keynesian policy, was introduced to address the challenges that result in low growth and low levels of investment in the local economy. Under Asgisa, government intended to stimulate the economy through state-led investment in infrastructure and the development of scarce skills. The target was to halve unemployment by 2014 to 14% from 28% in 2004. Asgisa’s implementation lasted for just over two years before it was dumped for no apparent reason, other than that its sponsor, former President Thabo Mbeki, was ousted from power in 2008 after losing the ANC’s leadership race to Zuma in 2007.

After Asgisa’s culling, Zuma’s back-to-back administrations, running from 2009 to 2018, came up with two policy documents: New Growth Path (NGP) in 2010 and National Development Plan (NDP) in 2013. Neither of these policies has ever really been implemented, despite promising to address SA’s structural unemployment decisively. During Zuma’s reign, the country was rudderless as far as economic policy implementation is concerned. Instead, we saw widespread corruption taking root across the entire state, damaging the economy and SOEs. 

What Mboweni is trying to do now is to reverse the decade-old damage, which some commentators have referred to as “the lost decade”. The criticism levelled against Mboweni’s economic proposals by Cosatu and SACP is rather unfortunate because it has not dealt with the substance of his proposals. The ANC’s alliance partners are crying foul over being sidelined during the drafting of the document. 

To his credit, Mboweni has not backed down and has asked the public to give feedback on his proposals. I understand that, at the time of writing, National Treasury had received over 700 responses from the public. Cosatu and SACP will do well to contribute to strengthening the 77-page document instead of throwing out the baby with the bath water. 

The reality is that we have a chance as a country to start afresh and rebuild our economy. Mboweni wants to implement structural reforms that can allow our economy to become more competitive and grow faster. Our competitiveness has declined sharply over the years, resulting in our country’s position falling from 44th to 67th between 2007 and 2018 in the Global Competitiveness Rankings.

For SA to move up the competitiveness curve, Mboweni proposes the modernisation of our water, road and telecommunications infrastructure; lowering barriers to entry and boosting of competition; promotion of small-business development and prioritising labour-intensive growth; and promoting export competitiveness, among other recommendations. 

These reforms talk to improving our infrastructure to lower the cost of doing business and attracting the skills necessary to support the growth and development of our economy. SA is a natural resource-rich, but human capital-poor country. This has for a long time been holding us back.

Most wealthy nations do not have natural resources, but they make up for this shortcoming by laying out excellent social and economic infrastructure and harnessing human capital that is hardworking, disciplined and entrepreneurial. 

The time to act is now. Otherwise, we are faced with a bleak future, wherein our economy continues to shrink and bleed jobs. 

Andile Ntingi is the founder of GetBiz.

This article originally appeared in the 10 October edition of finweek magazine. Buy and download the magazine here or subscribe to our newsletter here.   

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