Where are all the state economic advisory councils?
If economists were laid end on end, George Bernard Shaw famously said, they would not reach a conclusion. Economists agree on many things, but when their views clash, it attracts attention because economics, after all, revolves on the fundamental issues of people’s livelihoods and incomes. The fact that 100 economists recently asked parliament to roll back finance minister Tito Mboweni’s supplementary budget appears to lend credence to Shaw’s view.
But the dire socioeconomic effect of Covid-19, globally and in SA, calls for tough decisions about lives and livelihoods, buoyed by empirical evidence and a unity of purpose. That the economists asked parliament not to merely adjust but to reject Mboweni’s supplementary budget must be taken seriously and answered.
What have the Treasury, the cabinet (which approved the revised budget strategy), the Reserve Bank, other economists and the markets overlooked in determining how the Covid-19 economy should be managed?
The supplementary budget’s warnings of a future sovereign risk debt crisis for SA are compelling, as are the economic policy steps needed to avert it. An old proverb says “heavenly vengeance pursues a crime slowly but nevertheless catches up with it in the end. In matters of debt the penalty is not halting; it pursues the culprit at a gallop”.
But what is striking about the intervention by the 100 economists in the debate is the extent to which the Treasury has apparently had to fight this battle, at least so far, almost entirely on its own.
Where are structures like the Presidential Economic Advisory Council (PEAC), the Financial and Fiscal Commission (FFC) and even the National Planning Commission (NPC) as the “custodian” of the National Development Plan and its offshoots, in this important fiscal decisionmaking process?
The absence of the PEAC in recent economic deliberations and developments is noticeable. Though occasionally mentioned in dispatches, the PEAC has not, surprisingly, assumed prominence during a period generally described as SA’s worst economic setback since the Great Depression of the 1930s. Difficult decisions have had to be taken about the Covid-19 lockdown. If ever there was a time for the PEAC to be visible and offering sage advice, it is now.
It may be that structures such as the PEAC have been consulted informally behind the scenes. “Doing good by stealth” has its merits, but it is inappropriate for these times. The PEAC was specifically created nearly a year ago to
“serve as a forum for in-depth and structured discussion on emerging global and domestic developments, economic and development policies ... and ensuring greater coherence and consistency in the implementation of economic policy”. Transparency is needed to build confidence and support.
Yet given the unprecedented and rapid developments over the past few months, most of the economic debate has been left to others, with the PEAC not playing its assigned public role. That does not mean the PEAC, the FFC or the NPC would necessarily be unanimous in their views. But given their professional expertise and credibility, the research that has already been done, and these bodies’ mandate to give practical advice to decisionmakers, they would bring balance to the debate.
With the margin for error in policymaking in SA now drastically reduced, the PEAC especially must bring its unquestionable insights to bear in determining what will and will not work in the present economic circumstances. The medium-term budget policy statement in October should bear the imprint of its counsel. Ultimately, the PEAC is helping to run a country, not a seminar.
Public finance is one of those subjects that sits on the border between economics and politics — even more so given SA’s febrile socioeconomic climate, now aggravated by Covid-19. Political factionalism in the governing ANC complicates the task of finding practical solutions to pressing socioeconomic challenges.
President Cyril Ramaphosa will find the PEAC’s advice either valuable or hampering, depending on the extent of political dissent within his own ranks. But if the PEAC smartly sets about its task, it will nonetheless be in a position to encourage the good economics SA desperately needs for the hard times it is experiencing.
Moreover, the council needs to acknowledge the big Covid-19 issues, think about them with a clear and steady mind, and be ready with the right advice at the right time.
Ramaphosa originally said he wanted the PEAC to provide him with “frank and honest advice”. If SA is to forge a successful, economic plan for after Covid-19, the time for such advice is now. ● Parsons is a professor at the North-West University School of Business School and Governance.
RAMAPHOSA ORIGINALLY SAID HE WANTED THE PEAC TO PROVIDE HIM WITH ’FRANK AND HONEST ADVICE’