A radical economic rethink?
Choice of mainstream economist seen as signal of policy shift
● Last year’s political buzzwords — radical economic transformation — may have no space in the lexicon of a Cyril Ramaphosaled government.
The announcement this week of economist Trudi Makhaya as the president’s economic adviser has sparked speculation of a break from leftist policies that surfaced in the final days of the Jacob Zuma era and a return of more conservative policies on which the foundations of this democracy emerged.
Last year, former finance minister Malusi Gigaba attracted criticism for appointing an economic adviser in Chris Malikane, an associate professor at the University of the Witwatersrand who had called in an academic paper for the nationalisation of mines and banks to cure the country’s economic ills.
Bold thinker
Makhaya, a Rhodes scholar and an alumnus of Wits and Oxford University, is described as a bold thinker.
In addition to hiring Makhaya, Ramaphosa has also enlisted former finance minister Trevor Manuel; former deputy finance minister Mcebisi Jonas; chairman of Liberty Holdings and former Standard Bank CEO Jacko Maree; and Phumzile Langeni, executive chairwoman of Afropulse Group; as special envoys to canvass investment abroad.
The announcement of special envoys attracted criticism that he was perhaps creating a shadow economic cluster through a committee that would be less inclined to preach radical economic transformation as it tugs on the purse strings of the world.
Lumkile Mondi, an economics lecturer at Wits, said given the economy Ramaphosa inherited — where the GDP-to-debt ratio is at 52%, VAT has been raised to improve revenue and state-owned entities are “basically bankrupt” — bolder and more imaginative ideas were necessary and this was reflected in his choice of adviser and special envoys.
Xhanti Payi, economist and a director at Nascence Advisory and Research, said: “If we really are discussing opening up the economy, Trudi would be the best person to fit into that job given her experience, international exposure and what she has been able to do over time.”
Payi said Makhaya was “quite bold in her thinking but I don’t think you have the kind of drama and radicalism that’s dangerous and also unfounded”.
Manuel was well-entrenched in the global investment community, the type of figure that could “make the right kind of phone calls”, Payi said, at a time when Ramaphosa desperately aims to attract $100-billion (R1.2-trillion) into the economy.
Makhaya is measured and able to navigate between populist rhetoric and market-oriented views. In her public columns she has encouraged the restructure of problematic state-owned enterprises, private-sector employment and the improvement of employment relations while also eliminating anticompetitive behaviour among companies.
She has advocated lifting the regulatory burden on business, resolving policy impasses and support for small business while also throwing forward ideas on the structure of modern society. Not discounting land reform, Makhaya has argued the need to learn from successful reform models globally. In her writing she has also called for powerful institutions and an active citizenry.
But implementation of the National Development Plan — for which organisational infrastructure is already in place — is “the best gospel” for Ramaphosa’s quest for unity, she argued in a column earlier this year.
Ideological divide
Ramaphosa led a delegation to the Commonwealth summit in London this week where on the sidelines he told Bloomberg TV land redistribution without compensation was necessary to contribute towards economic growth.
Azar Jammine, chief economist at Econometrix, said: “What we have is an ideological divide in the country between those favouring market-oriented solutions and those who want more not less regulation and more government involvement even though government has proved itself to be dysfunctional. So long as you don’t actually have clearly defined directions, are international investors really going to be wanting to commit large amounts to South Africa? On top of that you’ve got the uncertainty surrounding land expropriation without compensation.”
Frans Cronje, CEO of the Institute of Race Relations, said the establishment of the committee “jars with the drift of ANC rhetoric over the medium-term past and very recent past. Is Mr Ramaphosa so compromised within the government and his party that he is seeking a way to convey his message through an entity such as this committee? They are all good people — my concern is why can the cabinet not convey the president’s message and thinking?”