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DANIEL SILKE: The GDP shock that wasn’t

Sep 06 2018 16:44
Daniel Silke

Many commentators seem surprised at the dismal second quarter GDP figures and the move into yet another technical recession. And yet South Africa has largely been left behind in the post-credit crisis crash, suffering a decade or more of economic underperformance.

Global factors, like the end of quantitative easing, a rising dollar, a high oil price and trade wars, to name a few, clearly contribute to our economic malaise – and to that of Argentina and Turkey. But we have failed, domestically, to take bold steps to enhance our attractiveness.

There simply is no cohesive economic policy to speak of. Yes, you can blame the Zuma years for this. But that is only part of the story. The ANC continues to be a political party afraid of its own shadow, and all the contributing shades within that shadow.

No political party that cannot determine whether it supports the markets, or socialism, or communism (whatever that means), or state capitalism, or Chinese-style state capitalism, or even Venezuelan-style redistribution, is ever likely to get it right.

When you’re that confused, don’t expect economic growth.

Market-sceptics

The ANC has not modernised enough to understand that while it might not like the global financial system and the influence of markets, it still needs to take heed enough to make it attractive to that sector.

The party harbours market-sceptics who believe that the influence of 'vultures' like currency traders and ratings agencies can be ignored as the country steers its own course. While this view remains influential, don’t expect the economic message to shift.

This is where Cyril Ramaphosa comes in. Considering his linkages to the private sector and to business interests carved out of the global financial space, leadership must come from him.

Ramaphosa is the best-paced ANC leader to begin the long, arduous process of playing the global game to the satisfaction of the markets, yet also to the benefit of a developmental state like South Africa.

But when you still don’t have a mandate from the electorate, require considerable internal support from market-unfriendly individuals and party formations, and stare down a radicalised opposition in the form of the EFF, you become somewhat hamstrung by what you can do.

Conundrum

The irony, of course, is that the more you feel stymied by these factors, the more you fail to be brave. The more you fail to be brave, from a policy point of view, the more you hurt your own economy, and – as the cycle goes – stability and belief in your own leadership.

Ramaphosa is locked in a conundrum. He cannot move without bringing his party with him; but his party – at least in significant part – is not ready. He is a victim of an ANC that has had its intellectual core shredded over the last decade and its talented, market-savvy cadres gobbled up by the private sector with a propensity for avoiding the public sector.

Given these issues – together with a global environment hostile to more fragile emerging markets – South Africa’s economy is stuck. You can go on blaming the past – namely the Zuma era – for this, but now is the time to do what other African states are doing.

Ethiopia has announced a ground-breaking initiative to privatise state companies as had quasi-Marxist Angola. Such initiatives are market-friendly and instil confidence, yet clearly, the political systems in both countries allow a greater 'autonomy' for the ruling elites than South Africa.

Rama-reboot?

Other African nations like Ghana, Cote d’Ivoire, Kenya and Rwanda are growing at well in excess of 5% annually. They all have two things in common: projecting a coherent, market-friendly approach to foreign investment, and encouraging domestic consumption expenditure to drive their economies.

Both these aspects are sorely lacking in the South Africa of today.

The technical recession might have shocked some South Africans, whose expectations of a Ramarevival continue to manifest, but poorer citizens have been feeling the recession for some time. When job creation was all flatlined and 9.5 million were out of work, they were well aware of it.

President Ramaphosa now has a fully-fledged economic crisis on his hands – officially confirmed by the statistics. Indeed, an agricultural revival in the second half of the year can ameliorate the present empirical recession – but at the heart of the matter is a governing party that needs an economic policy reboot.

If the issue is the core of the ANC and its alliance partners, this ‘reboot’ may still be some time away.

*Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own.

Follow him on Twitter at @DanielSilke or visit his website.

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