“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
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.