The worst ANC economic policy discussion document I have read
Over the past 25 years — since the ANC’S national conference in 1997 in Mahikeng— it has always been easy to read the party’s economic policy documents. I go straight to the section on the macroeconomic policy framework. It is always the shortest, less than a page, and pretends to say something substantial.
Since this framework determines what is possible, I can conclude that everything else in the document is just a wish list that cannot be implemented.
But the latest draft document produced by the ANC’s economic transformation committee (ETC)
— the final version will be released tomorrow and inform discussions at its policy conference in July — does not have a section on macroeconomic policy.
It is the worst ANC economic policy discussion document I have read, a symptom of everything that is wrong with the party and the ETC. The ANC appears to have given up on itself.
SA is emerging from its worst recession in almost a century. It is now an unviable society with record levels of unemployment, poverty and inequality, with African women bearing the brunt of the failed economic policies of the past 28 years.
According to StatsSA, there were 12.5-million unemployed people during the fourth quarter of 2021. The overall unemployment rate was 46.2%. For youth it was 77%, for Africans 50.7%, for African women 55.7%, for the Eastern Cape 53.2%, for Limpopo 52.8% and for Mpumalanga 52.4%.
The economy has returned to its pre-pandemic trend of low GDP growth. But the government has no plan to get us out of the crisis. “We are on a dangerous development path,” former statisticiangeneral Pali Lehohla said at a recent South African Council of Churches workshop on the economic crisis.
In July 2021, the country witnessed its worst riots since the end of apartheid. Three months later, Eskom could not keep the lights on during the local government elections. The voters punished the
ANC and 2.7-million fewer people voted for President Cyril Ramaphosa and the ANC than in 2016 when Jacob Zuma was president. The party received 46.12% of the proportional representation votes — 8.36 percentage points lower than in 2016.
On February 23, finance minister Enoch Godongwana, the ETC’s previous chair, presented an austerity budget whose outcome will be higher levels of unemployment by the time of the next elections. The only way to make sense of the budget is that the ANC hates votes. It does not want to be in power and is preparing to share it. DA leader John Steenhuisen will be Ramaphosa’s deputy after the 2024 national elections.
SA has had political, socioeconomic and public health earthquakes over the past two years. But none of this mattered to the Wits academic who has been writing ETC policy documents for the past decade. He made a few changes to the documents he wrote before the earthquakes. Nobody in the ETC objected.
One committee member said: “Comrade, this is a very good document, but can you please add something about how we can pay for land reform by allowing white farmers to donate land.” Go figure. The document provides no critique of the government’s failed economic policies because the ETC has become a mouthpiece of the National Treasury. It does not have a single new idea on how to address unemployment, poverty, or inequality.
In October 2020, Ramaphosa announced an economic recovery plan that has two interrelated pillars.
First, in September 2018, he said the government would establish a R400bn infrastructure fund. In February 2019, the Treasury said the fund would mobilise R100bn over the next decade. But a public sector investment strike is the main reason for the collapse of total investment. Between 2016 and 2021, investment by general government declined 27.3%. Between 2013 and 2021, investment by public corporations plunged 53%. Every year since 2019, the Treasury has made an allocation to the fund which was subsequently cancelled. Four years later, the fund has no money. The government must stop talking about an infrastructure-led recovery until it explains what it will do to reverse the public sector investment strike.
Second, the recovery plan has pinned its hopes on structural reforms and a neoliberal catchphrase, “blended finance”, to unleash an improbable new wave of private sector investment. “Structural reform” is code for privatisation, deregulation, liberalisation and the withdrawal of the state from network industries — electricity, transport, telecoms and water. It refers to measures to improve the supply side of the economy by removing institutional and regulatory impediments to the functioning of free markets.
Blended finance seeks to leverage public funds to attract private investment and deliver cheaper financing of a country’s sustainable development goals. It has failed in the rest of the world. Leverage ratios are very low. The public sector has ended up picking up most of the tab for blended finance investments.
SA had an investment ratio of about 13% of GDP in 2021, the lowest since it started collecting national statistics in 1946. The annual shortfall to achieve the 30% target in the National Development Plan is more than R1-trillion.
The 2022 budget allocated R812.5bn towards infrastructure for the medium-term expenditure framework period until 2024-2025. This was equivalent to an annual average of 4% of GDP during the period. The annual shortfall to achieve the NDP’s 10% of GDP target for public investment is R400bn.
The structural reforms in the energy and transport sectors — the lifting of the licensing threshold for embedded generation projects to 100MW, new independent power producer projects and Transnet’s invitations to private companies to use its broken rail network — are expected to attract investment of R50bn a year for the next three years. This will reduce the annual investment shortfall by just 5%. The structural reforms are not gamechangers for the economy.
This week, government ministers were talking about yet another social compact at the National Economic Development & Labour Council ahead of the 100-day deadline that the president set in his state of the nation address. Excluding weekends, the deadline is mid-June.
But there cannot be a genuine social compact unless the government is prepared to discuss its failed macroeconomic policy framework and policies. If not, the result will be another pointless summit declaration that tries to find new ways of implementing failed projects and picking lowhanging fruit.
There is a failure of internal democracy in the ANC because the ETC’s views do not reflect those of most of the party’s members. The government must put an end to the Eskom horror show and develop a new macroeconomic policy framework that has 6% GDP growth and full employment targets that are binding on the Treasury and the Reserve Bank. We cannot continue to have a situation where the Treasury cares only about debt and the Bank talks only about inflation.