Budget vote speeches show state has no plan to grow economy

If you listened to the budget vote speeches last week — without the benefit of context — of the departments of trade, industry & competition and mineral resources & energy, what do you guess the growth rates would be in 2019 and 2020: 2%, 3% or 4%?

And given they were brimming with optimism, what would you guess business sentiment would be? Positive?

There was a strange, even bizarre, aura of “policy as usual” around the speeches. There was no real recognition of a major crisis of unemployment or inequality. Hands were certainly not waving in the air with a blood-curdling scream that would signal urgent recognition of SA’s economic predicament.

The department of trade, industry & competition was predictable enough: lists of sectors and interventions. The timing couldn’t have been less fortuitous barely 24 hours after ArcelorMittal had announced about 2,000 job losses.

The message to business was that money is available if you fit into a mould and want to partner with the government. If you just want to get on with it, less is on offer.

The government has a love affair with interventions. These appear to be trying to mimic the automotive industry, which is unique with its huge ecosystem of small, medium and microsized enterprises, upstream

suppliers and downstream demand. Other industries, such as mining or high-tech manufacturing, struggle with this set-up.

The public enterprises speech extolled the religion of state-owned enterprises (SOEs) by unhelpfully referring to the conditions in which they can flourish — which don’t exist in SA. SOEs in Singapore, China and Europe run off some of the world’s best education systems, an acceptance of foreign talent, and wider, more developed industrial complexes.

A quick whizz around a range of business leaders after the speeches suggested some serious head scratching.

The home affairs speech mentioned skilled-immigration visa processes improving with e-visas but made no mention of the skills list, which is the real bugbear of immigration policy.

Overall, a business with rock-bottom sentiment would have little reason to feel any better because it was clear there was no mindset change from the government.

This isn’t to say there isn’t reform. The more efficient deployment of government funds for industrial development (even if picking winners doesn’t create growth), the move to e-visas and the speeding up of business registration processes will help get from negative to zero per capita growth. A recovery will take place — the point is to where and how quickly.

One particularly egregious set of references among the speeches that led to the most head scratching among business was energy policy. This left the unanswered question: what does the government favour? Surely an energy policy should maximise jobs, investment and growth, and minimise tariffs for users, and supply risk.

The Integrated Resource Plan process doesn’t seem to be aimed at optimising this mix. Instead a cadre is put in charge of colouring-in boxes for different energy allocations using MS Paint.

Gwede Mantashe made it clear in his energy budget speech that the key optimisation point is using SA’s resource endowment. Why this should be so important is unclear — certainly not why it should be more important than tariffs or jobs. Does the endowment include SA’s world-beating solar energy reliability? That is a resource after all.

The department of trade, industry & competition speech was all about lowering tariff costs — something no-one has ever explained. Does it mean cross-subsidy between users? Taxpayer subsidy to industry? Surely it would be far easier just to have a system producing the cheapest power?

The government is clearly not undertaking any proper optimisation. Work by the Council for Scientific and Industrial Research has shown how it is possible to optimise a system with lower tariffs (saving up to R60bn annually), more jobs (up to 60% more than alternatives) and more investment and growth under a transition towards renewables.

Yet the status quo in the government of maximising use of the resource endowment combined with pipe dreams on industrialisation remains stubbornly in place.

SA should be feeding the seeds of tech and fintech startups with talent and policy support, not trying to resurrect a globally problematic nuclear industry from a standing start.

For business the message of the past week is that the government’s thinking is not changing, and inequality and unemployment will continue.

Sentiment will not recover government until there is’evidence s mindset the is changing. This is how trust with business will be built.