Policy consistency is crucial to economic stimulus

This week, President Cyril Ramaphosa took a leaf out of the Jacob Zuma notebook by delivering his own late-night address. After the conclusion of the ANC NEC meeting that lasted two days, Ramaphosa made a set of pronouncements that highlighted two key issues that the NEC had deliberated on. The first related to the ANC’s latest position on the land debate. According to Ramaphosa, the ANC has now decided to support an amendment to the constitution to clarify conditions under which uncompensated land expropriation can be effected.

Given the polarising nature of the land debate and the resultant anxiety it has created, the rand predictably reacted negatively. In addition to the land pronouncement, Ramaphosa stated that the ANC had directed the government to immediately work on a stimulus package to boost the economy. This was on the back of the release of the latest unemployment statistics which reflected a rise in the official unemployment rate which now stands at 27.2%. The manufacturing sector alone lost more than 105,000 jobs in the quarter under review. To make matters worse, mining companies Lonmin and Impala Platinum also announced planned retrenchments of more than 12,000 workers. For a country whose three greatest challenges are unemployment, poverty and inequality, a rise in unemployment rates makes the idea of reducing inequality and eliminating poverty even more elusive.

The details of the desired stimulus package were not explained by the ANC and one assumes that the government will have to provide them. Organisations such as the DA have called for a reduction in the fuel levy to provide some relief to citizens. The challenge with recommendations of that nature is that the government would then have to find alternative sources of income to fill the gap. In reality, a stimulus package that would tackle SA’s economic challenges would require a range of initiatives that have occasionally been beyond the reach of our politicians.

The drive to raise $100bn in foreign investment has been one of Ramaphosa’s key initiatives since he took office. While this has already resulted in some investment commitments from the Chinese and Saudi Arabia, it is worth remembering that the investment community has multiple options when it comes to choosing investment destinations. Countries that are able to commit and stick to policies that provide certainty are able to attract investment. SA’s recent history of policy paralysis and inconsistency does not help matters.

In crafting the stimulus package, it will be important to articulate that the government understands the role of consistent policy implementation in lending credibility to its efforts. Additionally, while various constituents would argue that any package needs to tackle the key challenges underpinning our struggling economy, it is unlikely that any package initiated in the run-up to general elections will prioritise long-term outcomes. Consequently, we have to accept that whatever gets crafted will focus on shortterm gains rather than seek to fundamentally address the root cause of the country’s economic paralysis.

The economic envoys tasked with raising foreign investment may be able to sell SA as an investment destination but their efforts have to be part of a bigger push towards ensuring robust economic growth.

The growth of the economy at large remains the most powerful instrument for dealing with the socioeconomic problems that are prevalent in SA. For it to be robust, the country needs to be able to generate its own momentum and not depend primarily on foreign capital flows. This requires the type of support for small and big business that has often been lacking. Such support will do wonders for boosting business confidence and play a significant role in tackling the unemployment crisis. Tragically, the poor education outcomes evident in SA mean that, the good intentions of business notwithstanding, the lack of an appropriately skilled labour force will derail the economic recovery project for another generation.

It is unlikely any package ahead of elections will prioritise long-term benefits