“We shouldn’t act like all the ills of the world re­sult from poor pol­icy choices or con­tested lead­er­ship”

Neva Makgetla Pro­gramme man­ager for trade and in­dus­trial pol­icy at Tips ( Trade & In­dus­trial Pol­icy Strate­gies) and former pol­icy co­or­di­na­tor for Cosatu

Finweek English Edition - - COVER STORY POLITICAL ECONOMY -

1 What are the top three pol­icy is­sues that are de­press­ing SA’s growth rate?

By far the most im­por­tant fac­tors de­press­ing growth are the end of the com­mod­ity boom, elec­tric­ity con­straints, and an un­usu­ally steep level of in­equal­ity. The lat­ter de­presses do­mes­tic de­mand and leads to in­vestor un­cer­tainty be­cause it causes wide­spread protests and strikes, a ran­corous pol­icy dis­course and rapid changes in pol­icy.

2 What are the pos­i­tives? Can we strengthen and im­prove on th­ese?

Com­pared to our peers, SA is still a suc­cess story. Many of them have suf­fered much more with the end of the com­mod­ity boom (Brazil and Rus­sia, for in­stance).

SA has a so­phis­ti­cated econ­omy, strong civil so­ci­ety and real democ­racy. Eco­nomic strengths in­clude parts of agri­cul­ture (wine, cit­rus, other hor­ti­cul­ture for ex­port as well as ba­sic foods) and manufacturing (the met­als value chain, chem­i­cals, agro­pro­cess­ing, auto), and so on. The econ­omy and so­ci­ety have a re­silience that much of the pre­vail­ing com­men­tary, which re­ally is shaped by Afropes­simism, tends to un­der­es­ti­mate. As in Latin Amer­ica, which SA re­sem­bles in many ways, the coun­try may suf­fer set­backs but it will also make real progress in the long run.

The un­der­ly­ing prob­lem is the end of the com­mod­ity boom. We shouldn’t act like all the ills of the world re­sult from poor pol­icy choices or con­tested lead­er­ship.

3 What can we do in the short term to boost growth?

I would rec­om­mend tak­ing a hol­i­day re­gard­ing pay­ments into the Un­em­ploy­ment I nsurance Fund ( UIF) and work­ers’ Com­pen­sa­tion Fund. This would act as fis­cal stim­u­lus with­out af­fect­ing the fis­cus. Both of th­ese funds are get­ting a R10bn ad­di­tional sur­plus ev­ery year, and they have ac­cu­mu­lated re­serves of around R100bn. In ef­fect, they are a forced sav­ings scheme at a time when, be­cause of the fall in com­mod­ity prices, we are risk­ing stagfla­tion. I would also de­velop pro­grammes ur­gently to im­prove work­place re­la­tions, which should start with a tri­par­tite agree­ment on what con­sti­tutes a de­cent work­place ( i nclud­ing for ex­am­ple im­proved su­per­vi­sion, se­nior­ity pro­gres­sion, ca­reer mo­bil­ity and an end to dis­crim­i­na­tion in fa­cil­i­ties in the work­place).

An o t h e r way to boost growth quickly is by mak­ing the Min­ing Phak­isa work – t he com­mod­ity bust has the po­ten­tial to re­ally dam­age this crit­i­cal sec­tor un­less gov­ern­ment, busi­ness and labour in the sec­tor make the hard agree­ments with mean­ing­ful fol­low-up. Min­ing Phak­isa i s a pro­gramme mod­elled o n Malaysi a ’ s “Bi g Fast Re­sults” ini­tia­tive that aims to i mprove up­stream link­ages be­tween mines and cap­i­tal providers, en­hance ben­e­fi­ci­a­tion of raw out­put and im­prove re­search and de­vel­op­ment as part of a far-reach­ing mod­erni­sa­tion of SA min­ing.

4 SA has slid a fur­ther four places to 73 out of 189 coun­tries in the World Bank’s lat­est Do­ing Busi­ness re­port. Do you agree that SA is slip­ping, and if so, how would you fix it?

It’s not very sci­en­tific, so one has to check which el­e­ments have crashed.

5 What would your strat­egy be to ad­dress the need for trans­for­ma­tion and em­pow­er­ment, while en­sur­ing an at­trac­tive busi­ness en­vi­ron­ment for in­vestors?

In­vestors un­der­stand the need for trans­for­ma­tion, but not at any price. The rules have to be clear; the costs not ex­ces­sive and they have to be con­sis­tent. If we want a mixed econ­omy, we have to ac­cept that busi­nesses need to make a rea­son­able profit and have rea­son­able se­cu­rity of own­er­ship.

Gov­ern­ment has to be clearer about its pri­or­i­ties. Do we want job cre­ation, i ndus­tri­al­i­sa­tion, t o pro­mote black own­er­ship at any cost or to fix the en­vi­ron­ment? Dur­ing the com­mod­ity boom, we could af­ford to be a bit slack about gov­er­nance and just add costs to busi­ness to achieve all of our aims. Now we have to deal with the real trade- offs. Oth­er­wise it ap­pears to busi­ness that gov­ern­ment is just pil­ing on new bur­dens and chang­ing the rules ev­ery year or two. My per­sonal pref­er­ence would be to mod­er­ate our de­mands around every­thing ex­cept jobcre­at­ing in­vest­ment. But it’s prob­a­bly more im­por­tant to come up with a com­bi­na­tion that builds suf­fi­cient sup­port to en­sure sta­ble re­quire­ments go­ing for­ward.

Also as a com­ple­ment to re­quire­ments for meet­ing so­cial obli­ga­tions, gov­ern­ment has to be more re­spon­sive about other costs, for in­stance in terms of the avail­abil­ity and pric­ing of in­fras­truc­ture, the ef­fi­ciency of reg­u­la­tions, and so on. Crit­i­cal is­sues in­clude (a) sys­tems for set­ting user fees, which are cur­rently very poorly reg­u­lated, (b) en­sur­ing more ef­fi­cient met­ros, and (c) avoid­ing con­tin­ual changes to fine-tune reg­u­la­tions.

I would rec­om­mend tak­ing a hol­i­day re­gard­ing pay­ments into the Un­em­ploy­ment In­sur­ance Fund (UIF) and work­ers’ Com­pen­sa­tion Fund. This would act as fis­cal stim­u­lus with­out af­fect­ing the fis­cus.

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