Bad news, and re­ally bad news

Last week, eco­nomic ex­perts gath­ered to dis­cuss how to turn around SA’s dire eco­nomic out­look. The ver­dict? It can be done, but it’s no pic­nic

CityPress - - Business - MONDLI MAKHANYA busi­ness@city­ ECO­NOMIC

‘I’m hear­ing only bad news from Ra­dio Africa. I’m hear­ing only bad news from Ra­dio Africa.” So went the catchy 1980s hit by Bri­tish band Latin Quar­ter. The con­text then was the trou­bles af­flict­ing the African: apartheid, poverty, proxy Cold War con­flicts, postin­de­pen­dence blues and suf­fo­cat­ing aid lend­ing con­di­tions. That song played a huge role in con­sci­en­tis­ing cit­i­zens of Western coun­tries about Africa and putting the con­ti­nent on the global agenda.

That song would be so apt in re­la­tion to the South African econ­omy right now, where, week in, week out, we are bom­barded with bad news.

This week it was the turn of Stats SA boss Pali Le­hohla, who hit us with the de­press­ing news that our gross do­mes­tic prod­uct had shrunk 1.3% in the sec­ond quar­ter. The break­down was dire:

Neg­a­tive growth in most man­u­fac­tur­ing sec­tors of 6.3%; A 6.8% de­cline in min­ing; and A 17.4% de­cline in agri­cul­ture, forestry and fish­ing. The only pos­i­tive growth was in the highly tech­ni­cal and low-em­ploy­ment fi­nan­cial ser­vices and prop­erty sec­tors.

The path out of this quag­mire was high on the minds of pan­el­lists at a seminar or­gan­ised by the OR and Ade­laide Tambo Foun­da­tion and the Univer­sity of Stel­len­bosch Busi­ness School last week. But as hard as they tried to shine a light into the tun­nel, its bat­tery just kept on fal­ter­ing.

Even the Na­tional De­vel­op­ment Plan (NDP), that sup­posed panacea for our all prob­lems, does not come up with a de­fin­i­tive way out of the cri­sis, as dif­fer­ent sec­tors dif­fer strongly on the medicine re­quired.

As Na­tional Plan­ning Com­mis­sion mem­ber Mo­ham­mad Karaan pointed out, busi­ness and labour are at odds about the way for­ward.

For in­stance, busi­ness be­lieves the fo­cus should be on “cre­at­ing a con­ducive in­vest­ment cli­mate”, ag­gres­sively re­duc­ing reg­u­la­tory im­ped­i­ments, pri­ori­tis­ing the in­for­ma­tion and com­mu­ni­ca­tion tech­nol­ogy sec­tor and im­prov­ing labour pro­duc­tiv­ity. Labour, on the other hand, is con­cerned that the jobs the NDP is tar­get­ing will be low qual­ity, that the plan is un­am­bi­tious about the poverty thresh­old and that there is too lit­tle em­pha­sis on rein­dus­tri­al­i­sa­tion.

Karaan said the coun­try had al­ready done the costlier – but eas­ier-to-do – in­ter­ven­tions, such as re­dis­tribut­ing money and as­sets such as hous­ing. The chal­lenge was now to em­bark on more sus­tain­able ac­tions that would have a greater im­pact on growth and poverty re­duc­tion, in­clud­ing broad­en­ing the reach of qual­ity ed­u­ca­tion and “cre­at­ing work for un­skilled peo­ple”.

A tough con­ver­sa­tion needed to be had about the role of unions in the ed­u­ca­tion sys­tem, as this was a hin­drance to the skilling of South Africa’s fu­ture work­force.

“Re­search shows that the more unionised the ed­u­ca­tion sec­tor, the lower the out­comes,” said Karaan.

He added that, in as much as the up­skilling of the work­force was im­per­a­tive, this was a long-term pro­ject that would not do much to dent the cur­rent un­em­ploy­ment cri­sis.

“We need to cre­ate jobs where the un­em­ployed are at the level of the skills of the un­em­ployed. Farm­ing is one of those ar­eas,” he said.

Stel­len­bosch Univer­sity’s eco­nomic man­age­ment dean, Stan du Plessis, who painted a bleak pic­ture of the coun­try’s im­me­di­ate prospects, said a big ques­tion that had to be an­swered was why pri­vate cor­po­ra­tions were not in­vest­ing in busi­ness ex­pan­sion. While low de­mand and the ab­sence of skilled labour had been cited as some of the rea­sons in re­cent years, the de­te­ri­o­ra­tion of the po­lit­i­cal cli­mate had emerged as the key rea­son cor­po­ra­tions were not in­vest­ing in growth.

Quot­ing re­search done by the univer­sity’s Bureau for Eco­nomic Re­search, the rate of busi­nesses cit­ing the po­lit­i­cal cli­mate as an ex­cuse had gone from about 20% in 2005 to 75% in 2013, and cur­rently stood at just un­der 70%.

While they had no specifics about the mean­ing of “po­lit­i­cal cli­mate”, pol­icy in­co­her­ence came up as a ma­jor is­sue for busi­nesses’ de­ci­sion mak­ers.

The plethora of pro­pos­als – from the Ac­cel­er­ated and Shared Growth Ini­tia­tive to the Na­tional Growth Plan and the In­dus­trial Pol­icy Ac­tion Plan – is a cause for con­cern among busi­nesses want­ing cer­tainty.

Although these will not be im­me­di­ate sil­ver bul­lets, gov­ern­ment will need to move fast to sort out sta­te­owned en­ter­prises, achieve co­her­ence, re­form the labour mar­ket and re­duce the reg­u­la­tory bur­den if the coun­try is to achieve a growth tra­jec­tory in the next few years.

“We have to im­me­di­ately solve the con­straints on growth,” said Du Plessis.

Deputy Fi­nance Min­is­ter Mce­bisi Jonas be­moaned the po­lar­i­sa­tion of the eco­nomic de­bate, say­ing it was con­strain­ing the search for so­lu­tions.

“The de­bate is too ide­o­log­i­cal,” he said.

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