It’s jobs, not polls, says Cyril
‘Silly and populist’ notions won’t boost economic growth
● Faced with a country in its second recession in less than a decade and the very real prospect of the economy slipping into yet another quarter of negative growth, the state simply had to react with a stimulus package to revive the economy regardless of polls next year, President Cyril Ramaphosa said.
“We had to respond to this … any government that’s worth its salt when the economy goes into a challenging period has to respond,” Ramaphosa said in an interview with Business Times on Friday.
“This is not aimed at the elections; this is aimed at cranking the economy into life.”
SA heads into its sixth post-apartheid general election next year with an economy bereft of any substantive investment over the past decade, and a national psyche drenched in tales of corruption centred on the ruling party and the role of its former president, Jacob Zuma. These tales have served to dent both consumer and business confidence to levels last seen more than 30 years ago.
The Reserve Bank now predicts the country’s growth to be a paltry 0.7% this year and 1.2% in 2019.
SA’s self-inflicted wounds come against a backdrop of global markets turning sour on the investment case for emerging markets.
While Ramaphosa’s stimulus package aims at bolstering the economy and reducing record high unemployment that sits above 27%, he doesn’t hold the view that the state is a creator of jobs, but rather an enabler.
Governments are “…usually not very good at creating jobs … We do our little part,” he said.
“Overall, we are not good at creating jobs. We should be at the top of our game when it comes to being an enabler and being a catalyst.”
When Zuma came into office, he promised to create 5-million jobs in 10 years to make up for losses in the private sector.
Suffice it to say his target wasn’t met and instead the state has ended up with a bloated and rather expensive public service.
It’s this largesse and a weak economy that have caused falling tax revenues, and state spending constrained as debt-to-GDP levels remain above 50%.
Ramaphosa and his cabinet have had to work within these tight confines to try to stimulate the economy without raising the ire of credit-ratings agencies.
The generally held view is that for emerging-market nations, a healthy debt-to-GDP level is about 40%, and breaching it on a long-term basis is not advisable.
Rising debt in emerging markets has also afflicted nations such as Turkey and Argentina over recent years, which has only been further complicated by the US Federal Reserve’s monetary policy normalisation.
Ever since it was first mooted, currencies such as the rand have been on the back foot, with the local currency weakening 45% against the dollar, raising inflationary temperatures.
In response, the Reserve Bank has offered some warnings that it may have to react by raising rates to protect the value of the rand. It’s a stance that has led some political actors to criticise the Bank, arguing that it should be more preoccupied with growth and unemployment.
The bank has a targeted inflation range of 3%-6%. August’s inflation rate came in at 4.9%.
“There are people who say ‘forget inflation targeting’, and I often say to them that if you forget inflation targeting you are going to hit the poor even more because when you target inflation, you are actually looking after the value of your currency,” Ramaphosa said.
“I’m confident that the central bank and the governor of the central bank [Lesetja Kganyago] has his eyes in the right place, heart in the right place, and he knows the type of policy trajectory they should follow should be enhancing growth.”
Turkey’s President Recep Tayyip Erdogan has usurped the independence of that country’s central bank, which has fed into a severe currency crisis in that country, sending the lira crashing almost 40% against the dol-
There are corporates that have said, ‘we own land, we want to give it away’
Cyril Ramaphosa
South African president
lar this year alone.
On his concerns about the growing economic populism in both his party and in the general body politic, Ramaphosa said the country shouldn’t follow populist policies and that it’s time for “prudence”.
Within his party, Ramaphosa faces opposition from supporters loyal to his predecessor and their rallying cry has been that of “radical economic transformation”.
“We have to restructure ownership of the economy, restructure the control thereof but you do not do it by coming up with silly and populist notions,” Ramaphosa said.
He and his party have backed changes to the constitution in order to ensure that land expropriation without compensation takes place to speed up transformation with regard to land ownership.
It’s been an emotive topic and one that even US President Donald Trump has waded into with one of his tweets in recent months.
Ramaphosa said the state would target land from state-owned enterprises and private sector businesses that have large tracts of unused land — such as forestry giants Sappi and Mondi.
“There are quite a number of corporates, not only state-owned enterprises, that have said, ‘we own land, we want to give it away’. It then makes this land-reform project much more interesting.”
Ramaphosa named Vuyokazi Mahlati as chairperson of a panel that would advise the government on the implementation of the country’s land-reform process.
As part of his stimulus plan for the economy, Ramaphosa announced plans to reallocate R50bn of the national budget to focus on agriculture and economic activity in townships and rural areas. The government will also direct R400bn towards an infrastructure fund over the next three fiscal years.
With the country gripped by tales of corruption in the corridors of power, just how the funds will be spent will be monitored closely.
Ramaphosa, much like Nigeria’s President Muhammadu Buhari, came in on a ticket of anticorruption which has led to the exposure of much wrongdoing in the public sector.
Under such scrutiny, there’s a risk of a “procurement paralysis” in the public sector, much like what has gripped the Nigerian economy in recent years.
But Ramaphosa feels spending will be properly implemented.
“Corruption in government manifests itself through procurement … through this infrastructure fund that we are putting together we’ll be seeking to agglomerate quite a lot of money in government for infrastructure and also destroying the silo effect that you have in government.”
Ramaphosa wants to ensure that the country doesn’t overpay for projects, that there are no cost overruns, no delays and that projects are implemented.
One of the main factors behind the travails of Eskom is its multibillion-rand expansion project that moved into full steam a decade ago.
The build of mainly its two coal- fired power stations, Medupi and Kusile, has been delayed and costs have soared since the parastatal got the go-ahead for the build.
“The objective is to streamline the process,” Ramaphosa said.
Finally some sobriety. That is my take from this Friday’s economic address by President Cyril Ramaphosa and team. There were no grand announcements of billions flooding into the economy from friends in Asia, no promises of the creation of millions of jobs in whatever catalogue of time frames politicians dust off the shelf. And importantly, it also wasn’t the matter-of-fact economic diagnosis that former finance minister Malusi Gigaba once delivered that sent everyone into a mad panic. (I must admit to feeling a bit sorry for our former finance minister, in truth, ’cause I guess one could get what he was trying to do last October in trying to show that he was well acquainted with just how difficult the task ahead was.)
What emerged most for me from the Ramaphosa “stimulus” announcement was that this cabinet, or at least those members of it that are in his corner, have a grip on the reality of the situation. It was a sober addressing of the immediate challenges facing an economy that threatens to sleepwalk its way into another quarter of negative growth. I don’t know just how fast the R50bn promised spend will trickle down into the economy, not to mention the R400bn that is geared towards infrastructure spend, but it was an announcement that seemed to carry some weight in the context of our economic travails.
This was no place to talk of 5-million jobs in a time when the global market is looking at emergingmarket nations as a whole and thinking that they don’t sound like places where one’s capital will return, let alone grow.
From within our own limited budget, finance minister Nhlanhla
Nene is going to have to find the resources to feed into the economy.
That means some sacrifices will have to be made and some national departments are going to find themselves out of pocket. Looking at how bloated the state is and just how many unnecessary departments have been added over the past decade, there are many crevices into which public money slips that can be written off as wasted expenditure.
For so long, the centre of the narrative about our economic malaise over the past decade has been the presidency of Jacob Zuma. Yes, while it may be true that his stay in the highest office was a confidencesapping one, where were the departments that were actually responsible for the smooth running of the economy? I am not talking about the Treasury, for any growth-hungry economy relying on the miserly — and I mean it in the friendliest terms — nature of the men and women in that department will be sorely disappointed.
I am instead talking about the ministries of economic development, trade & industry and small business. The mandates of these three ministries centre on ensuring we have a healthy economy, and we can all agree that it’s a mandate that they have not met. Deindustrialisation continues at what seems an unstoppable pace, and with that jobs continue to be lost in places such as Vanderbijlpark.
Small and black-owned businesses still don’t have an enabling environment and there’s seemingly no co-ordination among the role players and institutions of the economy to ensure that we at least sing from one hymn sheet.
Broadband is still but a discussion on these shores. Was it really impossible to bring that irrepressible Faith Muthambi, our former minister of communications, into line?
Now I’ll be first to admit that the Zuma years weren’t conducive to the positive sentiment that any economy needs, but just how much blame can we realistically place on one man, as bad as he was? Every time there’s a question about the state of the economy, these departments aren’t called to account. Blame is placed at the door of the former president and solutions are expected from the Treasury.
This is a cluster of departments that could cut all manner of red tape in institutions under their influence, such as the competition bodies and the Industrial Development Corporation to name but two. The IDC, under its former CEO, was loath to take on risky ventures except for the Gupta uranium deal.
With Nene now tasked with finding funds within our limited budget, perhaps these departments need to be the first to line up outside the principal’s office.
There are many crevices into which public money can slip