Treasury’s document: Small shift in common sense; no giant leap in ideology

Johannes Wessels
@johannesEOSA1

The public reaction to the most important Government document on economic policy since the ANC threw GEAR (Growth, Employment and Redistribution Policy) into reverse, namely Treasury’s “Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa”, will convince both Moody and potential investors that South Africa remains far removed from a stable investment destination.

Since its release end August, the Treasury document attracted both support and condemnation. For some it signals a first ray of the much-delayed New Dawn promised by Ramaphosa’s 2017 manifesto; for others, a total onslaught on worker’s rights and a selling out to the forces of unbridled capitalism. 

Much bolder than the elaborate National Development Plan (NDP) that received mere lip service during the Zuma-Ramaphosa era from 2014 – 2018, Treasury’s document bluntly concludes:   

The current state of the South African economy is unsustainable. Low economic growth entrenches poverty and inequality… Addressing our economic challenges requires an immediate focus on policies that will raise South Africa’s potential growth.”

Ideological drift sand

For a brief moment, it appeared as if Mboweni’s scavenging in the dustbin of discarded policy advice had yielded positive results.

Whilst the document acknowledges the need for economic transformation that would impact on the patterns of ownership, it argues that such transformation should not be hedonistic pillaging but rather have sustainable and intergenerational impact. The acid test for that would be the maintenance of an ability to be globally competitive, whether in products or services.  It states:

The starting point should be an economy that grows… Low growth limits the ability of the economy to transform.”

A statement about the need for growth that is part of humankind’s instinctive knowledge since the most rudimentary forms of trade in products and services began to free individuals and households from the bondages of a subsistence hunter-gatherer existence, is now embraced by several private sector leaders as a fresh breeze.

That in itself is indicative of the ideological drift sand in which the country finds itself in.

In the SA context, Treasury felt a deep need to stress the importance of competitiveness and growth… Almost as if officials in Treasury realise that a tentative shift towards common sense would amount to a gigantic ideological leap for the ANC.  Almost akin for the ANC to land in a post-Leninist reality.

To expect the document to stave off a downgrade by Moody’s, or to rekindle investor confidence, is too optimistic.

In a business-unfriendly context, rather than certainty about policy direction and stability, the Ramaphosa-led government has embarked on processes involving:

  • Prescription of private investments;
  • Confiscation of property;
  • A National Health Insurance scheme that scares not only medical professionals, but also every person paying through his teeth for private medical services; and
  • massive public expenditure commitments for the unplanned introduction of free tertiary education.

These actions are a cloud of witnesses belying the promise of a gentle shift towards a more business-friendly environment. Treasury’s document could have signalled a tipping point, but alas: the reaction to it emphasises the chaotic morass in which economic policy is stuck.  

As the document states:

A deterioration in investor confidence compounded by political and policy uncertainty, institutional weaknesses, and unresolved regulatory conflicts have contributed to a low-growth environment.”

The syntax is wrong…

The choir of condemnation from Cosatu, the SACP, fellow Cabinet ministers and ANC factions and the calls for the withdrawal of the document shows that the only fault with this formulation is the syntax: it should not be in the past tense, but in the present tense.  Policy direction and certainty remain elusive, resulting in weak investor confidence.

The isolation of National Treasury within Cabinet and the scorn for “lack of consultation” emanating from within the ANC and the Tripartite Alliance, is not new.  Trevor Manuel can testify to that.  He could survive since he had strong backing from the Presidency. Grasping that the instinctive anti-market force DNA of the ANC had a Chernobyl potential for an economic meltdown, the Mbeki-Manuel policies tried to combine the need for global linkages with those of transformation. The latter was pursued inter alia through Black Economic Empowerment, charters for industrial sectors, a labour regime that entrenched the rights of big business and big labour as well as a plethora of initiatives to stimulate and finance black owned SMEs.

A fake landing?

Since the release of the document end August, the only signal from president Ramaphosa was that Treasury’s document was only one of the ideas on the table.

The Treasury document represents, therefore, no gigantic ideological leap for the ANC, to paraphrase Neil Armstrong’s famous words.  Without proof of reversing the plethora of central command initiatives (NHI, prescription of investments, expropriation without compensation) it resembles a fake landing…

The hope that Ramaphosa might resurrect society and the economy like a Lazarus, is declining. Many business leaders still cling to the hope for action and clear policy direction contrary to what they perceive. The hope that “Ramaphosa knows what is required” is based on viewing the ANC as comprising a “good ANC” and a “bad ANC” and that the good guys will restore the country to a golden growth path. 

The good guys are supposedly led by Ramaphosa, Mboweni, Pravin Gordhan and Gwede Mantashe, with the bad guys represented by Ace Magashule, Faith Muthambi, Bathabile Dhlamini and others.

This cowboys-and-crooks-perspective is naïve. It also fails on at least three grounds.  (To be dealt with in the next blog).

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