Betting on the “good ANC guys”: Building sand castles in an hourglass

Johannes Wessels
@johannesEOSA1

The perception of numerous commentators and business leaders that South Africans should mobilise behind president Cyril Ramaphosa, Pravin Gordhan and Tito Mboweni to support the “good guys” in the ANC to ensure an economic recovery, is not only simplistic: it is utterly naive.

It is also not new. It is a rehash of the theme of the 1970s when the National Party was assessed as comprising good guys (the verligtes) and bad guys (the verkramptes) with many commentators arguing the case to support the verligtes. The person who eventually took the quantum leap with a definite break with apartheid (F W de Klerk) was not counted amongst the verligtes. He was seen as rather conservative and a natural choice to chair the Ministerial Council for White “Own Affairs”.

Verlig-verkramp focused primarily on how Nationalist MPs were oriented on apartheid. That analysis had no eyes for another fundamental division: The PW Botha approach with the security structures of the military and national intelligence as key players versus those who preferred a civil-oriented approach with parliament in the fulcrum. De Klerk belonged to the latter faction. Botha and the securocrats had commenced talks and interaction with both Nelson Mandela (then in Pollsmoor) and the ANC in exile, but De Klerk was largely uninformed and excluded from these discussions.

Playing whilst the resource base is shrinking…

Verlig-verkramp was an insufficient perspective to detect the person who would make the decisive break with apartheid.

Now, many commentators and business leaders still cling to the hope for action and clear policy direction, contrary to what is happening in reality. 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. Treasury’s document on economic policy is clung to as a lifebuoy.

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

This cowboys-and-crooks-perspective is naïve. It also fails on at least four grounds. 

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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

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Ramaphorian air spray no longer conceals the stench of a decaying economy

Johannes Wessels
@johannesEOSA1

President Cyril Ramaphosa’s commitment to revitalise the economy reminds one almost of president Zuma’s commitment to combat corruption: spraying air freshener to divert attention from a rotting carcass.

Read instructions on the can for effective application…

The person who promised in his New Dawn manifesto a growth rate of 3% in 2018 through “an unrelenting focus on economic growth” has delivered after 18 months a growth rate of 1.3% in 2018 and negative growth up to date for 2019. Some people would say low growth is still growth, however economic growth below the population growth rate impoverishes the population.

He presides over an economy in worse shape than when he assumed power: one characterised by:

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Economic freedom globally up but SA tumbles down

ECONOMIC FREEDOM in South Africa deteriorates rapidly. The country has tumbled 12 places and is now firmly embedded in the bottom half of the 162 countries and territories evaluated in the Economic Freedom of the World: 2018 Annual Report. This report by the Fraser Institute confirmed SA’s decline from position 82 to 94 due to anti-freedom policies and practices.

In 2003 SA almost made it into the most-free quartile ranking gaining position 45.  Now the country is a 3rd quartile fixture, being three consecutive years in the bottom half.

The Economic Freedom of the World Report  is the world’s premier measurement of economic freedom, evaluating and ranking countries in five areas: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, labour and business. (See full report).

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Government sabotages growth through property rights uncertainties and ignoring Moody’s warning shots

The heated debate between proponents of property protection and those in favour of  confiscation (expropriation without compensation) has been characterised by a lack of data and waged mainly on ideological and emotional arguments.  The lack of an acceptable factual basis is evident in:

  • Government, AgriSA and Afriforum operating with different figures for categorising land ownership according to race;
  • The number of farms on the list for the first round of expropriation.  (If there was such a list).
  • Uncertainty about the number of recipients of free subsidy houses (where transfer of title has not taken place) and how these properties should be counted.
  • Arguments that expropriation would kill the economy simply being countered with promises that the economy would not be harmed.

At the public consultations the facts applied were almost always derived from (and limited to) local situations and narratives with no or little attention to systemic information. EOSA therefore analysed last year’s WEF’s Global Competitiveness Index (as part of our enterprise research on relevant data and statistics) to assess whether there are some global indicators to inform the debate.  Several significant correlations are evident from the WEF data:

  • Highly competitive countries have strong protection of property rights.
  • High per capita GDP goes hand-in-hand with property rights.
  • Poor policing and high cost of crime for businesses are not characteristics of highly competitive countries.

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