ANC looks at post-crisis economy
Recovery plan pushes greater state control and ‘radical’ ideas
● ANC leaders who have been pushing for the state to have greater control over the economy have been emboldened by the disruption caused by the two-month lockdown and are using Covid-19 to push for radical policy implementation.
Their radical ideas have found their way into an ANC recovery plan document that was sanctioned by the last meeting of the party’s national executive committee (NEC).
The document is the product of engagements with the tripartite alliance leaders.
SACP leader Solly Mapaila, who has sat in these meetings, said the Covid-19 crisis provided an opportunity for the state to be “empowered” to “discipline capital and the private sector”, which was at its “weakest.”
Mapaila said the government could reposition its terms of engagement with business using conditions for the relief funds it was offering to business.
“We want a much more assertive state which is not cajoled or bullied by the private sector,” he said.
Mapaila is an advocate of the South African Reserve Bank using quantitative easing as a means of driving economic growth. “Monetary policy in the way it has been driven has been pathetic, to say the least. It has been the wrong posture — these quantitative easing measures were initiated by Japan [when] they were already at 6% inflation,” Mapaila said.
“With the new adjust- ments made by the Reserve Bank … now is the time to use quantitative easing.”
Deputy finance minister David Masondo has publicly aligned himself with those who believe that the Bank should make use of other instruments to revive the economy, such as the issuing of government bonds.
The head of the ANC’s economic transformation committee, Enoch Godongwana, said there was an ongoing debate in the ANC about the role of the Reserve Bank in the economy. He would not be drawn on the specific proposal contained in the document.
“Let me move away from people who are putting instruments. Let me conceptualise the debate about the Reserve Bank at the moment; that debate is about what developmental role the Reserve Bank can play. The instruments are a matter of detail for the Reserve Bank to prescribe,” said Godongwana.
The NEC is divided on the resolution adopted by its 54th national congress in 2017 to nationalise the Reserve Bank. Some in the NEC believe the way the Bank is currently structured — by way of ownership — is a hindrance to more diversified responses to economic challenges as opposed to the more conservative approaches which have characterised the Bank. Those NEC members believe nationalisation or public ownership would open the door to decisions which would allow the Bank to play a more developmental role in the economy.
Since the onset of the Covid-19 crisis, the Bank has opted to cut the interest rate in a bid to stimulate economic activity by putting more money in the pockets of consumers. But the epidemic has reignited an old debate on the role of the Bank in the economy.
The NEC instructed Godongwana’s committee to work on a recovery plan to save jobs. The National Treasury has projected that about 7-million people could lose their jobs. The ANC alliance secretariat has met several times to discuss how the government could respond to possible job losses.
Godongwana would not say if the idea was for the state to take up share ownership in companies that would be rescued. However, he said there was agreement within the ANC that the state should be at the centre of rescuing the economy.
“There has never been a difference in the ANC about the centrality of the role of the state. The difference has been on the modus operandi. What form should that state centrality take? I think that’s the main difference we’ve had.
“Clearly, in the current circumstances Covid-19 has put that on top of the agenda, because if we had to stimulate this economy, you must have seen it must be the state that must assume the central role thus far. It’s our considered opinion that role will continue to be critical, particularly in the foreseeable future,” he said.
Godongwana said the proposals in the document were not necessarily the official position of the party but were a compilation of inputs from different stakeholders.
“These are rough ideas which have not been fine-tuned, and not edited … some of them have not been processed.”
The document proposes the government should urgently re-look at visa regulations by working on the “next round of visa-free countries” when the borders are reopened, to save the tourism industry.
The sector is one of the hardest hit and the industry has been pleading with the government to open it up as it predicts about 600,000 jobs could be lost by September if it remains closed.
The document also identifies small businesses as the most vulnerable. It proposes a credit guarantee to banks that provide assistance to struggling businesses, and that municipalities consider giving small businesses a rates-payment holiday.
Most of the proposals in the document are not new as they were adopted as party policy at previous national conferences.
They include licensing Postbank, the establishment of a state bank, a state-owned pharmaceutical company, cutting data costs and opening up the radio frequency spectrum. Godongwana said the idea of a pharmaceutical company was at a “conceptual” stage, and the party had not worked on the details of what it would look like.
“What people are discussing in that document is state institutions can play a critical role — because of their current capacity — in the creation of that pharmaceutical company. Therefore we need to be creative and innovative in that area,” he said.
There is also a proposal that if a company acquires a South African mine, and that mine contributes 40% of the group revenue, that company must have its primary listing in the country.
“The debate we’ve had over the past five to six years about mining houses is that we are a resource economy but we don’t have a mining champion. Most of the mining companies are foreign-listed companies and therefore cannot have a specific South African championship of the resource sector ... Therefore there are people who argue that we should have mining companies whose primary listing is South Africa and therefore whose home base is South Africa in order for them to be South African mining champions,” Godongwana said.
His report was tabled at a meeting on Friday last week. It is currently being refined as more structures forward their comments. ● ➽ See Business Times