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Sifiso Skenjana: An economist's take on the three biggest parties' plans for growth

May 07 2019 06:00
Sifiso Skenjana

As election season nears its precipice, many voters might not have had an opportunity to reflect in detail on the manifestos of the three largest political parties in the country, ANC, DA and the EFF.

Here are some of the propositions the parties make – and what they may mean for inclusive growth and economic development.

The Democratic Alliance

Proposed New Labour Act

The DA proposed the introduction of a new labour act that, as per their suggestion, will make hiring and firing easier for business, which they argue is positive for employment growth and productivity.

In his paper, Cambridge University researcher Simon Deakin finds that "worker protective labour regulation generates net positive outcomes for economic growth and development", echoing findings by the World Bank in their 2016 Doing Business Report which argued that "under-regulation in the areas of working time and minimum wage protection have harmful effects on productivity and exacerbate the effects of macroeconomic shocks" .

The previous research suggested that employment regulations are unquestionably necessary as they allow for more efficient contracting between employers and workers.

Simply, this means that that the apparently rigid labour regulation in South Africa is conducive for economic growth and for the effective protection of the often-vulnerable low earning labour force.

Proposed competition legislation for SOE monopolies

The DA proposed revision in the competition legislation to ensure more competitive markets in the sectors that the country’s SOEs operate.

The sectors in which the SOEs in question operate are Energy, Airlines, Rail Transport, Military and Defence, Telecoms, Petrochemicals and Forestry.

However, the highest sector concentrations are in the intermediate industrial products, Food and Agro-processing, ICT and Transport.

Industry concentration research from the Competition Commission finds that in these sectors, the percentage of firms with market shares of 45% or more (quasi monopolies) are 24%, 21%, 9% and 9% respectively.

The focus, therefore, should be aimed at making these sectors materially more competitive before focusing on the competitive structures of SOEs.

The Economic Freedom Fighters

Proposed Revival of Fiscal Framework

The EFF proposes to increase tax collections by 20% in an attempt to boost the fiscal the strength of the economy. They propose this despite the recent numbers that have come out showing a budget deficit of R232bn as opposed to the expected R224bn as a result of lower tax collections and a weak economic environment.

 In addition, corporate income tax accounted for 18.1% of total tax revenue, with personal income tax accounting for 38.1% and VAT accounted for 24%.

If the EFF proposed to reduce VAT back down to 14% as well increase overall tax collection by 20%, it is difficult to see how they could achieve this without straining an already strained economy.

Proposed subsidisation of 4IR investors

The EFF proposes to subsidise companies whose investment is focused on fourth industrial revolution technologies; at the same time their manifestos anchors on jobs first.

These proposals could effectively be at odds, given that roughly two thirds of the South African labour force is either unskilled or semi-skilled labour.

In the same vein, 4IR technologies will most likely demand a semi-skilled and skilled labour force, meaning that such technologies may require skills importing if the economy is to utilise them to their highest productive capacity.

Such skills importing is materially opposing the jobs proposal of the EFF manifesto.

The African National Congress

Sector Revival Proposals

The ANC manifesto proposed a revival including mining beneficiation, clothing and textiles, pharmaceutical and agriculture.

However, a revival particularly of previously buoyant sectors needs a sober reflection on what led to the failures and loss of competitiveness of those sectors. Such a sober reflection will ensure an effectual revival programme that ensures past mistakes are not repeated.

South Africa does not need protectionism, but rather economic nationalism. The difference is that the latter focuses on investing and building the competitiveness on local industry as opposed to putting in place measures (often import tariffs) that will curtail demand for foreign goods.

The difference between protectionism and economic nationalism is a fine yet very important one.

Inclusive Economy Proposals

The ANC manifesto proposes to transform the economy to serve all people – in simple terms, a more inclusive economy.

Globally, countries like Iceland, German, Sweden, to name a few, have provided sufficient case studies to the ruling party to reflect on how to respond with urgency to the need of a transformed and inclusive economy.

The countries in question, for example, have legislated both for a reduction of the gender pay gap and gender representation in all spheres of the economy.

The ANC, as a ruling party, has shown little urgency in the material and effectual transformation of the economy to be inclusive and representative.

Final reflections

In an ideal setting,one could combine the manifesto proposals into a one white paper that looks to effectively bootstrap the economy out of the current low growth trap.

Each manifesto seems to have interesting contributions, albeit often soft, untested and unsubstantiated.

An economy that can absorb its labour force has everyone’s best interests at heart, yet we still find ourselves with little consensus on how to achieve this. When parliament reopens, it will be a fresh opportunity for the opposition parties to keep the ruling party honest about its promises, as well as how it proposes to fulfil these promises.

In the meantime, we will all soon breathe a some fresh air when we see the back of election season, and everyone can get back to working towards a more prosperous and inclusive economy.

da  |  anc  |  eff  |  sifiso skenjana  |  economic growth  |  jobs  |  elections 2019  |  labour
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