Pri­vati­sa­tion not the answer to SA’s eco­nomic ills

The Citizen (Gauteng) - - NEWS -

Zamikhaya Maseti

Last Tues­day Min­is­ter Fi­nance Tito Mboweni re­leased a draft doc­u­ment ti­tled “Eco­nomic Trans­for­ma­tion, In­clu­sive Growth, and Com­pet­i­tive­ness: Towards an Eco­nomic Strat­egy for South Africa”. The doc­u­ment is in­deed a breath of fresh air as it in­tro­duces the much-needed de­bate about the new eco­nomic trajectory that the sixth ad­min­is­tra­tion must adopt.

In my pre­vi­ous ar­ti­cle, I wrote about the need for Pres­i­dent Cyril Ramaphosa to adopt a new eco­nomic pol­icy that will ul­ti­mately take the South African econ­omy to the new heights.

A cur­sory glance at the Mboweni dis­cus­sion doc­u­ment con­firmed it was noth­ing but just a re­or­gan­i­sa­tion of the Na­tional De­vel­op­ment Plan.

It some­how iden­ti­fies the

bind­ing con­straints to the South African econ­omy and pro­poses so­lu­tions. The ra­tio­nal – or ir­ra­tional­ity – of some of the pro­pos­als is some­thing we will deal with later.

Let me start by prob­lema­tis­ing Mboweni’s ap­proach to this pol­icy shift. His ap­proach, in my view, makes many pol­icy an­a­lysts think the cen­tre of pol­icy for­mu­la­tion has now shifted from the pres­i­dency to the Na­tional Trea­sury or the min­is­ter of fi­nance.

It there­fore ren­ders that huge bu­reau­cracy in the pres­i­dency to­tally ir­rel­e­vant and re­dun­dant.

The Na­tional De­vel­op­ment Plan­ning Com­mis­sion and its sec­re­tariat, the depart­ment of plan­ning, mon­i­tor­ing and eval­u­a­tion, and the re­cently res­ur­rected pol­icy unit are all in the pres­i­dency.

Their col­lec­tive re­spon­si­bil­ity is pol­icy for­mu­la­tion, im­ple­men­ta­tion, co­or­di­na­tion, plan­ning and eval­u­a­tion.

We ex­pected this huge bu­reau­cratic ma­chin­ery in the pres­i­dency to lead any pol­icy shift and di­rec­tion and they have not been able to do that and there­fore can­not ac­cuse Mboweni of usurp­ing the pres­i­dent’s pow­ers. They must be bold enough to ad­mit they have failed to give the much-needed pol­icy di­rec­tion.

Mboweni’s big­gest chal­lenge now is to bring key stake­hold­ers on board – es­pe­cially mem­bers of the Tri­par­tite Al­liance. They are al­ready out­raged. In­ter­est­ingly, the Demo­cratic Al­liance (DA) wel­comed the dis­cus­sion doc­u­ment and praised it as a one-pager of the DA pol­icy.

The in­tra-Tri­par­tite Al­liance re­la­tions are likely to get more strained in the com­ing months. Herein lies the big­gest prob­lem for Mboweni – and it re­mains to be seen how Ramaphosa will nav­i­gate these al­ready trou­bled wa­ters.

Let us now deal with some of the pol­icy as­sump­tions and pro­pos­als that Mboweni is mak­ing. The doc­u­ment pro­poses the fol­low­ing: par­tial re­lax­ation of reg­u­la­tions that im­pede growth of the small and medium en­ter­prises, re­lax­ing of visa re­quire­ments so that vis­i­tors can come to South Africa, al­low­ing third party ac­cess to the coun­try’s rail net­work, ig­nite in­fra­struc­ture de­vel­op­ment, pri­vati­sa­tion of coal-fired power sta­tions, al­lo­ca­tion of broad­band spec­trum to pri­vate com­pa­nies through an auc­tion and thereby al­low­ing com­pe­ti­tion in Telkom’s in­fra­struc­ture.

Clearly, Mboweni is an ortho­dox lib­eral econ­o­mist and some of his pro­pos­als and as­sump­tions are some­how fal­la­cious.

His strong be­lief in the auc­tion­ing of the South African state-owned en­ti­ties (SOEs) is pred­i­cated on the false no­tion that once they are in the pri­vate hands their run­ning will be smooth.

The fact of the mat­ter is that the free mar­ket sys­tem does not open up eco­nomic op­por­tu­ni­ties and en­cour­age com­pe­ti­tion as it is sup­posed to.

Ac­tu­ally, it breeds and en­trenches eco­nomic dom­i­nance by mo­nop­o­lies.

For in­stance, the Bri­tish gov­ern­ment pri­va­tised Bri­tish Rail be­tween 1994 and 1997. Crit­ics of the Bri­tish ar­gued that rail­way op­er­a­tions were dom­i­nated by mo­nop­o­lies and many fran­chises ended up in the com­mon own­er­ship of these mo­nop­o­lies. This is the dan­ger that will come to haunt South Africa in many more years to come if we go the Mboweni route.

The best thing that we can do is to look at the un­bundling of the South African rail sys­tem that gave rise to Prasa and Transnet as sep­a­rate en­ti­ties.

Was it the right move? If the answer is no, gov­ern­ment must con­sider re­pur­pos­ing of the two en­ti­ties and maybe com­bine them (again).

The only thing Ramaphosa must do ur­gently is to re­con­fig­ure and repur­pose all the SOEs and de­vel­op­ment fi­nance in­sti­tu­tions.

The prob­lem with Mboweni’s ap­proach is his over-em­pha­sis on pri­vati­sa­tion as a panacea to South Africa’s eco­nomic ills. Yes, some of the pro­pos­als that he is mak­ing are sound but some are out­ra­geous and fal­la­cious.

The only things that his pro­pos­als do, is to make us think long and hard about the cur­rent eco­nomic chal­lenges that are con­fronting South Africa.

Some of his pro­pos­als and as­sump­tions are fal­la­cious

Zamikhaya Maseti is a po­lit­i­cal econ­omy an­a­lyst and MD of Ngubengcuk­a Consulting based in Cen­tu­rion.

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