Gigaba’s to-do list is no blueprint for growth
• Finance minister has listened to investors’ concerns, but has not delivered a game changer for the economy
Finance Minister Malusi Gigaba’s “inclusive growth action plan” unveiled on Thursday in Pretoria is a signal that he has heard what investors are saying.
The list of 14 points and 45 actions are, with only a few small exceptions, items that have been raised with him in private meetings since he took office. Setting them down in a list with deadlines is Gigaba’s response to show that he has heard them.
But the list is no more than that: a list of things the government will do, many of them obviously things that should be done anyway. There are no game-changers or big ideas that could reset the economy on a path for 3% growth. There are no new targets for growth or ambitions of what will be achieved. Gigaba said quite pointedly that whether Treasury growth targets were revised up or down remained an open question, to be decided when the mediumterm budget policy statement was tabled in October.
In short, the 14-point “inclusive growth action plan” is not a growth plan at all.
For those who expected one, Gigaba’s efforts are a reflection of the absence of a vision and a plan in the administration of President Jacob Zuma. Says Wits economist Lumkile Mondi: “This is just another plan that has been put on the table. It has not been properly thought through; there is no co-ordination and no coherence. There is no understanding of what levers to use to support growth.”
Argon Asset Management economic strategist Thabi Leoka says much of what is in the “plan” is “operational and not growth-inducing” and is already part of the Treasury’s work.
“We are plan-fatigued so to package these measures as a plan is not going to garner the right attention. The natural reaction will be that people don’t expect implementation of this plan either.”
Leoka is dead right. There has been a plethora of growth plans over the past decade that have hardly been unpacked from the box.
Each one had its specific bent, usually in reaction to its predecessor. The Accelerated and Shared Growth Initiative in 2006 aimed to unlock structural constraints to growth and investment; the New Growth Path in 2011, produced by Economic Development Minister Ebrahim Patel, aimed for a more aggressive role for the state in the economy, when many of those constraints proved unmovable; the National Development Plan in 2013 put the plan for the economy in the context of development in general, but has been referred to only in name and hardly in practice; and the Nine Point Plan announced by Zuma in 2015 was an admission that none of this had actually worked and the plan needed to be pared down and prioritised.
In this context, for Gigaba to slap a new detailed growth plan on the table would have made little difference. The public and investors are now looking for actions and have long since tired of great plans.
Gigaba’s 14-point plan is, therefore, more appropriately understood as a list of shortterm pledges aimed at building confidence and restoring credibility with the public, investors and the market.
On this measure, how did he do?
At the macro level, Gigaba is at a large disadvantage. The circumstances in which he came into the job; the negative news flow about him since he took office arising from board appointments he made as public enterprises minister, which imply complicity with the Guptas; and the lethargy with which he responded to attacks on the independence of the South African Reserve Bank by the public protector have thrown up repeated questions about his integrity.
In his favour, however, is that investors are more pragmatic than the moralistic public and the judgmental political opposition. Many would be happy to turn a blind eye to transgressions from the past as long as Gigaba showed his commitment to doing the right things now. This is why many points in his “growth plan” are about small but important signals: appointing a new CEO for South African Airways (SAA); reaching a sustainable wage agreement with public servants; and engaging with business and labour over the Mining Charter.
Six of the 14 action points refer to restructuring of stateowned enterprises, viewed by credit-ratings agencies as the biggest risk to public finances and the most important indicator of the government’s health.
Almost all of the pledges are actions “that were already in the offing”, says Lesiba Mothata, executive chief economist at Alexander Forbes.
They include developing a framework on the disposal of noncore state-owned enterprises, reducing reliance on government guarantees to fund operations; and recapitalising SAA and the Post Office.
“The good thing is that the minister has put timelines on things that were already in the offing. There are no new proposals other than when these things will be done,” he says.
Talk about selling of noncore assets has been doing the rounds ever since Nhlanhla Nene was finance minister, says Mothata, and it is not very significant anyway. “It is obvious that the core state-owned companies will be the ones that remain underperforming.”
The recapitalisation of SAA and the South African Post Office are both on the to-do list — and have been before.
More interesting is Gigaba’s big hint about Eskom’s sustainability. Although reducing reliance on state guarantees is one of his pledges, “soft support” might have to be given to Eskom, a warning that the company’s balance sheet may be in a lot more trouble than Public Enterprises Minister Lynne Brown has led us to believe.
“We have a deep appreciation of the weakening of Eskom’s balance sheet. There is an urgency to provide assistance,” Gigaba said in the question and answer session afterwards.
The list also promises that conditionalities will be placed on state-owned enterprises that need bail-outs or guarantees from the fiscus and that new measures will be put in place to select and appoint boards and to restore good governance in state-owned enterprises.
If there is a story that has been told one time too many, it is this one.
Since 2014, when Zuma set up his ministerial task team under Deputy President Cyril Ramaphosa and Brown, there have been several promises to resurrect governance in stateowned enterprises, to appoint fit-for-purpose boards and executives as well as to introduce “private participation” to raise equity.
The framework also includes costing the developmental mandates of state-owned companies so that these are recognised as separate from their commercial rationale.
That nothing has been done — apart from a single announcement by the Treasury last November, after which, once again, nothing happened — means that no one will believe in reform before it can be seen in practice.
If credibility and confidence building were the object of this week’s endeavour, then Gigaba could have been a dozen times more effective if he had simply been tough on SAA before throwing it a R2.3bn lifeline last week. Top of the list of conditions could have been the immediate departure of chairwoman Dudu Myeni, under whose leadership the airline has been severely mismanaged.
Unlike Thursday’s “growth plan”, a move like that would have made us all sit up and take notice.
THERE HAS BEEN A PLETHORA OF GROWTH PLANS THAT HAVE HARDLY BEEN UNPACKED FROM THE BOX