Two recent key government speeches gave rise to two important questions:
- Is the inability of the government to effectively implement its policies & plans (?) worse than its inability to table concrete action plans, underpinned by clear strategies, designs, milestones, budgets and target dates?
- Why can even Thabo Mbeki see the president is naked whilst organised big business still praises the beauty of his imaginary clothes?
The president’s tabling of the Economic Reconstruction and Recovery Plan (ERRP) was lame and lacked detail, whilst the Minister of Finance’s Medium Term Budget Policy Statement (MTBPS) left one with a feeling there is not much grasp within the collective government on how to prevent SA from slipping rapidly, if not tumbling, down the slope.
Instead of rekindling confidence and inspiration, vague and mixed messages fuelled doubt and a disbelief that the government can prevent SA from boarding the proverbial bus to Argentina (debt default). I put the following three arguments to illustrate this assessment:
- Will the government stand solidly behind Mboweni’s strategy of freezing public sector wages for three years when they cannot deal with the much easier route to stop financing the effectively bankrupt SAA? Recall also how Pravin Gordhan in 2018 (knowing well that Eskom was not only overstaffed, but the personnel besides overpaid) overruled the Eskom Board and management when they had decided on a zero salary increase as part of addressing the Eskom viability issue.
- Can one rely (trust would be too much to ask) on the government’s undertaking to reign in public expenditure? This, when they had failed multiple times to table a comprehensive plan on how to deal with Eskom’s debt and the growing debt burdens of other State-owned Enterprises (SOEs).
- How is the “growth through infrastructure roll-out” approach different from numerous previous attempts – since the days of Thabo Mbeki – to strengthen the country’s economic fibre by infrastructure investments announcements, with the emphasis on announcements?
Flipchart notes or a detailed plan?
The Enterprise Observatory of SA reckons four fundamental problems underpin the ERRP and the MTBPS:
- The approach to infrastructure interventions is (on a continuum) closer to notes scribbled on a flipchart during a brainstorming exercise than to a comprehensive strategic thrust that could restore investment confidence.
- There is no break with the philosophy that views the state and its organs (government and administration) as enterprise factories that will churn out businesses and decide which businesses will flourish.
- The path to economic growth is pursued by import substitution that boils down to protectionism with the end consumers having to subsidise inefficiencies of local producers that cannot compete with landed prices.
- The ANC is still blind for its own shortcomings that have rendered the state and its machinery incapable of conducting the Kindergarten tasks of governance (maintaining law and order, protecting the lives and property of its citizens, maintaining effective and efficient administration) and that the economy would benefit if the government would just be conducting these tasks properly.
(The latter issues will be handled in subsequent blogs. To get an email alert to new blogs, insert your email address on this blog site.)
Economic growth by chopping off black wattle
After months of deliberation with ‘social compact partners’, no core set of mega projects emerged that can compare with the late 60’s & earl 70’s construction of the Gariep and Van der Kloof dams, the development in the 70’s of the Richards Bay complex (pioneer industries, a dedicated coal rail line and export terminal) or Secunda (Sasol 2 & 3) of the 80’s.
The 2019 ‘new cities and bullet trains’ speech of Ramaphosa was embarrassingly void of detail of the kind of economic activity that would fuel the growth of these cities or the bullet trains. Again, the ERRP and the MTPBS (meant to rekindle and reignite the economy) also fell dismally short on detail.
Rather than that “wow” moment it created a “what’s that?” reaction when Mboweni talked optimistically about “more than 12 new harbours”. And ex-president Mbeki rightly commented in his monthly newsletter that the employment stimulus of “R100 billion to create jobs through public and social employment” is, unlike claimed by Ramaphosa, not focused “on interventions… that have the greatest impact on economic recovery”.
Or is the president convinced that the economy will recover by getting rid of invasive black wattle and more implementation of government-funded job-creation programmes like the Integrated Fire Management in South Africa.
…or growth through exporting dagga?
The lack of detail about the goods to be exported or imported from the 12 new harbours did not stand in the way of announcing these “exciting” projects. For harbours to be viable, one needs efficient imports and exports, or a base for viable commercial fishing or recreation activities.
With several of these harbours to be developed in the Eastern Cape and given Mboweni’s perception that dagga cultivation for commercial purposes could become a money generator for the country, would dagga will provide the bulk of the exports? However, the 12 new harbours were dreamt up under the umbrella of the “blue economy” or Project Phakisa: Oceans to act as new centres for commercial fishing. Whilst such fisheries could have some limited regional and local impact, it is a far cry from the kind of infrastructure development that would get the country back on a path of growth and job creation.
Thanks McKinsey for the 12 new harbours
The ocean economy strategy for South Africa was formulated by McKinsey & Company, the same entity that assisted the Guptas with their harvesting of Eskom billions. The potential of the blue economy was trumpeted by McKinsey.
The envisioned new small fishing harbours offer limited viable business opportunities, simply because fish is a limited resource. Once an ocean has been overfished, the damage to the fishing industry lasts years on end: West Coast fisheries understand this basic truth. And if one does not overexploit the fish resource but still promotes the creation of more commercial fishing enterprises, the viability of the new, as well as existing businesses, would be precarious.
With numerous reports about the over exploitation of our oceans (from abalone poachers to commercial fishing fleets from China, Korea and others), one feels to call out and paraphrase the poet of Psalm 121: “I set my eyes on the waters… where shall my fish come from?”
Why not a deep-sea harbour at Maseru Bridge?
If shooting ideas from the hip can make it into the MTBPS, why not a deep-sea harbour in the Caledon river at Maseru bridge with a dedicated cruise liner terminal? This is as ludicrous as some of the government’s expectations about the potential of tourism as a driver for economic growth with references to tourism as a “sunrise sector” with the number of tourists increasing to over 21 million by 2030, thereby becoming “the new gold of South Africa”.
Whenever South Africa tourism allure is brandied about with statistics of more than 14 million foreign visitors that arrive annually, little attention is paid to the fact that about 11.5% of these “tourists” come from the mountain kingdom. A total of 1.6 million Lesotho nationals have visited SA yearly from 2015 to 2019 and was counted as tourists but are migrant mineworkers or Lesotho citizens who are employed in the public and private sectors in SA. Moreover, they enter and leave South Africa numerous times annually for weekends and holidays in Lesotho.
The remainder are either Lesotho retail “tourists” who come to shop in Bloemfontein, Ladybrand, Ficksburg or Bethlehem. Once they have crossed the border, many take out their South African Identity and SASSA cards to partake in the benefits of social grants and free medical services.
Based on the often peddled “truth” that one tourism job is created by every 12 tourists, one could think the Lesotho tourists are responsible for about 133 333 jobs in South Africa.
Far from creating jobs, the largest percentage of these tourists are in reality holding jobs in SA and/or harvesting some of the benefits the country bestows on the poor.
Where’s the guts of Harry Oppenheimer & Anton Rupert?
Despite obvious problems with both approach and incomplete plans, the websites of BUSA and B4SA welcome the ERRP, stressing their efforts as social compact partners in formulating the recovery strategy. The closest they come to criticism of the ERRP is urging for immediate implementation. On the still central state-led role to reshape the economy by directing growth through specific interventions and regulations, e.g. procurement targets, they are silent.
In fact, Wendy Lucas-Bull, new chair of Shoprite, is even of the opinion that the private sector should assist the government to create a “capable state”.
When will the private sector in its organised form realise that they deal with a government that is just as interventionist in the internal affairs of enterprises, as the apartheid government was until the mid 80’s: they will determine:
- how your workforce and your boards of directors should be composed;
- how your management structure’s racial composition should look;
- how your shareholding should be if you want to be considered for public sector tenders;
- what your minimum wage should be; and now probably as well
- how much firms should procure from suppliers they decided upon.
Business should critically reflect on where they stand: in 1976 they rallied to a call by Harry Oppenheimer and Anton Rupert to found and fund the Urban Foundation: an initiative to develop policies and strategies that directly opposed the apartheid government. They succeeded thereby in ending influx control, introducing 99-year leasehold for black South Africans outside the homelands, rolling back job reservation and legalising unions for black workers, opening tertiary study opportunities for blacks that were closed by Verwoerd, to mention some important nails in the apartheid coffin.
Where is the guts of a Harry Oppenheimer and an Anton Rupert now to protect the freedom to trade without undue government interference?
Considering that money was found to waste again on the SAA by a cash transfusion from an almost bled dry taxpayer base, it is a pity that there was no announcement about a new airport in the MTBPS that could serve as the hub for all the flights of Fly Gordhan. My own preferred location for a new airport would be in the Northern Cape. Airport Verneukpan would at least convey to taxpayers how studiously and effectively their tax money is applied.