LOWER RAND THE KEY
Michael Power, a strategist at Investec Asset Management, but who writes here in his personal capacity, says a vital part of fixing the SA economy is an ultra-competitive exchange rate that will reduce our dollar-based wages and increase our prices
Iwas recently asked “What is wrong with the SA economy? Why can’t it grow like other emerging markets?” The emphasis of the question was on the concept of “wrong”. In answering this question bluntly, I will upset friends and colleagues. Labour unions will not like my argument. Most captains of industry will hate it. The establishment will call for my head. Government, especially treasury and the Reserve Bank, will reject my logic point-blank. And the economics profession, of which I am a part, will probably dismiss my analysis out of hand. Indeed, the only interest groups I will not offend are the tragically large pool of unemployed and the exporters.
Mel Brooks once said: “We want to get people laughing; we don’t want to offend anybody.”
I, on the other hand, want to get people thinking, and am out to offend nearly everyone by echoing Keynes’s dictum: “Words ought to be a little wild, for they are the assault of thought on the unthinking.”
Nearly all SA’S economic commentators miss the point as to what ails us. Some are in denial, as it suits their circumstances. Upton Sinclair said: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
My aim here is not to offend nor to put people’s backs up — my aim is to have a fresh conversation, to question what needs to be questioned: SA is in economic peril and we really do need to reopen the debate about macroeconomic policy.
Phrases like radical economic transformation are all the rage in SA. So they should be: rage is the right word. Ask the residents of Imizamo Yethu or Diepsloot. Exceeding our 13.8m employed, we have 17m citizens receiving grants — hardly surprising, since 10m adults are unemployed.
Let me cut to the chase: when measured in US dollars, nearly all of us lucky enough to be working in SA enjoy much higher standards of living than similarly qualified workers in our emerging-market peers. By contrast, most South Africans without work