In the lead-up to the medium-term budget policy statement yesterday Tim Harris, the DA’s finance spokesman, laid out a concise plan as to what Finance Minister Pravin Gordhan should focus on.
It highlighted the deficits on the current account and the national budget balance as the major problems to be addressed in South Africa and included suggestions such as infrastructure development, abolition of exchange controls, increased competition, and decreased spending on ineffective state-owned entities.
Harris’s plan is good, although it places an over-emphasis on the need to increase international competitiveness and prime the economy for foreign investors.
South African policymakers need to stop looking to the outside world as the key to domestic growth. They need to look within. They need to encourage South Africans to think like Africans in Africa.
One of South Africa’s leading female chief executives once said to me: “Until I was 49 years old I spent my life trying to fix my faults. My real success came when I started focusing on my strengths.”
This advice applies as well to individuals as it does to entire countries, and Africa has many strengths. We are innovative, creative, and resourceful and despite being faced with monumental macro challenges, examples exist everywhere of how individuals are finding ingenious solutions to everyday problems. Growth can come from within if the government simply allows citizens the freedom to explore it.
One of Harris’s proposals is to slow down the rise in administered prices such as electricity, water, communications and fuel. The goal is ideal but its success depends on how it is achieved. Containing the rise in electricity prices will not come from regulating Eskom – it will come from letting South Africans produce their own electricity and feed it back into the grid.
The same applies to telecoms. Forcing Telkom to drop its prices will never bring the full benefit to the consumer and the economy. Rather open up the market to free and fair competition and see if Telkom can survive without dropping its prices.
The infrastructure in South Africa is overloaded and Harris calls for the government to expand its infrastructure spend to at least 10 percent of gross domestic product (GDP). But instead of asking “how much” we should be asking “why”?
Is 10 percent of GDP necessary if it ends up being spent on a toll booth? Does it include spending on a mega coal power project or a major dam for water security when really what we need is to waste less rather than produce more?
A focus on consumption and distribution would be more effective, use less of the stretched budget, and place a lower burden on government capacity.
One area where I agree wholeheartedly with Harris is his suggestion to open up South Africa to trade with Africa. Not only is there huge benefit to be gained in the market for exports as many African countries continue to stabilise politically and their economies continue to grow, but opportunities exist in working alongside other Africans and what they have to offer.
Immigration is seen as a problem, but we should rather be looking at what potential these foreigners bring with them.
The debate around growth in South Africa should not centre on what the government is spending on but, at each instance, whether the government should be spending at all. The government must be the enabler, not the executor.
Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision-Making course. Follow him on Twitter @PierreHeistein.