As the current economic challenges endure, new thinking is needed to unlock value, especially from the executive. President Jacob Zuma’s ANC government, which was established after the 2009 general elections, was much bigger than the previous ANC administrations. As this treatise will make clear, a number of factors led to this.
At its founding, Zuma’s cabinet had 34 ministers and 33 deputy ministers. Zuma felt obliged to repay comrades who supported him after former president Mbeki had expelled him from the position of the deputy president of the republic due to corruption allegations.
Moreover, Zuma’s supporters had ensured that he was elected the ANC president during the 2007 national elective congress.
It was during this conference that a resolution was taken to disband the police’s elite investigative unit, the Scorpions. This unit was perceived as a threat to Zuma’s march to the presidency.
Subsequent to the disbanding of the Scorpions, the National Prosecution Authority dropped the 783 counts of corruption charges against Zuma a few months before he was elected as president.
This underscores the fact that Zuma owes hordes of people for his ascendance to the presidency. Zuma is beholden to many comrades who saved him from possible unemployment and prison.
It was on this premise that he rewarded these comrades with various lucrative positions in his administration, cabinet, and state-owned companies.
That said, I posit that this reality led to Zuma’s administration becoming unnecessarily big.
To be granular, the ministry responsible for education was divided into two ministries – the Ministry of Basic Education, and of Higher Education and Training. In my view, one minister would have been sufficient.
In other words, there would be a Ministry of Education with two departments headed by the directors-general.
In the Presidency, Zuma created two unnecessary departments, those of the National Planning Commission and Performance Monitoring and Evaluation.
The Department of Performance Monitoring and Evaluation was headed by Minister Collins Chabane and this made him a de facto prime minister of the republic.
Again, this was erroneously thought out: how can a minister review the performance of fellow ministers?
Ideally, this responsibility should have been given to the deputy president. Unfortunately, the deputy president was redundant for five years. There was also no need to establish the Ministry for Women, Children and People with Disabilities.
There was also a lot of duplication in the allocation of positions in Zuma’s cabinet. The responsibility of economic planning and management was allocated to five ministries as follows – Treasury, National Planning, Economic Planning, Public Enterprises, and Trade and Industry.
The ministers occupying these positions held strong differing views regarding economic planning, and this sends confusion to the market and prospective investors.
Executive confusion has now entered the monetary realm; the rand has also been on the receiving end of the policy gridlock of these ministers.
Granularity should give us some perspective. Economic Development Minister Ebrahim Patel had left-wing political views.
He was a communist and served as union leader before Zuma appointed him in his cabinet. Patel crafted and published the New Growth Path (NGP) in 2011.
The major thrust of this document was job creation. The NGP portrays the high nominal value of the rand as an inhibitor of economic growth and job creation. The NGP argued that the value of the rand should be lowered because it hampered the volumes of exports.
The truth is that Patel saw himself as representing Cosatu and the SACP in the cabinet. How can a minister serving in the ANC’s cabinet serve the interests of organisations that are not part of the government?
Patel was supposed to advance the agenda of the ANC as set out in its 2009 election manifesto. Both Cosatu and the SACP had always argued that the higher value of the rand made the South African manufactured goods and raw materials expensive for exports. Truly speaking, they were wrong.
The substantial reduction of the rand value at the beginning of this year didn’t lead to any surge in exports. Actually, the volumes of our exports are somewhat decreased. Coal exports are not decreasing but one would have expected volumes to increase due to the weak rand.
Unfortunately, Cosatu felt that Patel didn’t push the left-wing agenda sufficiently while the SACP gave him some luke-warm support.
However, Patel received support from his counterpart at the Department of Trade and Industry, Rob Davies. Davies is one of the prominent communists in Zuma’s cabinet.
How can a communist conceivably be given the responsibility to drive trade and industry? Incredulous. Davies crafted and published the Industrial Policy Action Plan (Ipap) last year.
In line with Patel’s thinking, Davies used the Ipap to attack the strong rand. Ipap argues that an over-valued exchange rate leads to a consumption boom which encourages imports at the expense of exports and job creation.
As it is now clear, the only plan which supported the strong rand was the National Development Plan, which was spearheaded by Planning Minister Trevor Manuel in 2011.
This plan got more public support than both the NGP and Ipap, despite its imperfections.
The conclusion is that the value of the rand and other currencies in emerging markets depends on the overall management of the economy, trade and industry.
If South Africa wants to boost its economic growth and job creation, it should pay more attention to intra-African (regional) trade, and the construction of infrastructure in the form of roads, rail, seaports, and airports.
On the other hand, Zuma has a chance to trim down his administration after the forthcoming general elections. His new cabinet should speak with one voice regarding the rand and the expected trajectory of the economic development.
* Rabelani Dagada is a development economist at the Wits Business School. You can follow him on Twitter: @Rabelani_Dagada