Privatisation not the answer to SA’s economic ills

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.