DA misleading public about economy

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iol news pic Gordhan budget speech 2014 GCIS Co-operative Governance Minister Pravin Gordhan File photo: Siyabulela Duda

The DA is so desperate to gain legitimacy for its economic policy proposals that it is resorting to false claims, writes Pravin Gordhan.

Johannesburg - Desperate times seem to lead to desperate measures. As our fifth democratic elections edge closer, the DA has resorted to misleading the public about the credibility of its economic policies as well as putting gloss over the performance of the Western Cape economy.

The DA’s desperate measures extend from seeking legitimacy for its proposed policies by claiming support from the SA Reserve Bank and National Treasury, to making selective and sometimes incorrect references to economic data about the Western Cape.

In contrast, ANC policies and plans have the benefit of actually running a country and the lessons from this experience, as well as the experience of similar economies and societies elsewhere in the world.

Central to these plans is the fundamental transformation of the economy so that we retain what works, build new capabilities to succeed in an increasingly challenging world, and substantially change the economic and social wellbeing of the majority of South Africans.

Three issues illustrate the opportunistic approach of the DA.

The first is the claim that its magic formula would raise economic growth to 8 percent a year. To validate its claim, the DA quotes a working paper, “Achieving higher growth and employment: Policy options for South Africa”, published on the SA Reserve Bank website in July.

The DA is so desperate to gain legitimacy for its economic policy proposals that it is resorting to false claims. The DA initially said in February this year that the SARB had modelled the DA’s economic proposals and confirmed its 8 percent growth projections. When the SARB denied this, the DA scaled back its claims to only quoting the working paper as proof that its projected 8 percent is achievable.

Most recently, it has claimed the working paper was written by the National Treasury. Despite repeated requests from the Reserve Bank not to tarnish its independence, the DA persists in its claims. This is shameful.

More fundamentally, the DA has appropriated the results of a modelling exercise and given it an interpretation to suit its legitimacy-seeking goals. That reflects political opportunism at its worst.

The second instance is its claim that the gains of a democratic South Africa have been reversed in the past five years under this government. It is absolutely fascinating that nowhere in the DA manifesto is there mention of the Great Recession. A once-in-70-year-recession wreaked havoc in the global economy and set back South Africa’s progress during the 2000s – high growth, increasing the social wage, low or no fiscal deficit, low debt.

It is this administration’s skilful and bold interventions that minimised the negative impact of the recession. Our excellent banking regulations protected our banks. Our decision to implement countercyclical policies bolstered our economy and sustained social programmes. At the same time, the serious fault lines in our economy, frankly identified in the Diagnostic of the National Planning Commission, were exposed.

Our response was, for example, to intensify investment in infrastructure (more than R1 trillion in the past five years), support manufacturing and other sectors, increase public-works jobs, continue with the implementation of social infrastructure and begin the implementation of the National Health Insurance.

These are just some of the programmes this administration has been undertaking in a tough, uncertain and turbulent period in the global economy. The DA chooses to be oblivious to a phenomenally challenging time.

The third approach relates to claims about the Western Cape. Such is the DA’s desperation that it has been making false or misleading claims about the performance of the Western Cape economy under its watch. Here are some examples:

* The DA falsely claims that nearly one out of every four jobs created in the country came from the Western Cape (123 000 of 561 000 jobs created in the country). This is an incorrect statement. Data for the period 2009-2013 from the QLFS shows that 15 percent – or one in every seven jobs created in the economy – came from the Western Cape. The most dominant provincial job generator in the economy was Gauteng, which created a third of all jobs.

Of the 1.2 million jobs created in the period 2009-2013, the Western Cape accounted for about 191 000 of these, Gauteng 411 000, Limpopo 196 000 and Mpumalanga 152 000.

* The DA claims the province also created significantly more jobs than Gauteng despite the fact that the Western Cape’s labour force is less than half the size of Gauteng’s. This is statistically wrong, and completely at odds with the data for both total employment and non-agricultural employment. Estimates show that Gauteng created 411 000 jobs to the 191 000 of the Western Cape. This means Gauteng created more than twice as many jobs as the Western Cape.

* The Western Cape has the lowest unemployment in the country (12 percent below the national average) and the lowest number of people who have given up looking for work.

This is wrong. When comparing the official unemployment rates by province for every year from 2009-2013, we find that in not one of the years is the Western Cape unemployment rate the lowest. Its unemployment rate stood at 21 percent last year. Using the fourth quarter QLFS data for each given year, for 2009-2013, the following are the provinces with the lowest unemployment rates: KwaZulu-Natal (19 percent) and Limpopo (17 percent).

* Latest available figures from StatsSA (for 2012) put the Western Cape at the head of the pack, with a growth rate of 3.2 percent (versus 2.9 percent for Gauteng and 2.8 percent for KwaZulu-Natal).

This is true, but only for the period 2011-2012. For the 2009-2010 and 2010-11 periods, Gauteng recorded the highest provincial growth rates in the country. Note: no data for the 2012-2013 period exists as yet given that provincial GDP figures are yet to be released.

* Last year, unemployment in South Africa grew by 121 000, while it shrank by 48 000 in the Western Cape. This statement is statistically true for the period 2012-13. However, for the full period of DA rule for which we have data (2009-2013), the evidence shows that unemployment increased by about 48 000. For the period 2011-2013 (a three-year trend, for example) – unemployment in the Western Cape increased by about 29 000 individuals.

By contrast, the ANC claims no easy victories, but it does have a growth story. More importantly, in carrying out our economic plan, the ANC will continue to promote a national dialogue with all role-players to enhance inclusive economic growth and develop consensus on the urgent need to transform the economy.

The DA’s economic policies, on the other hand, seek to reinforce existing inequalities through a view that says markets must always be unfettered, and government should be as small as possible.

As the Commission for Growth and Development (chaired by Nobel laureate Michael Spence) reminded us, high rates of economic growth are a necessary but not a sufficient condition for job creation. The causation from growth to jobs is not an automatic one.

“Fast, sustained growth does not happen spontaneously. It requires a long-term commitment by a country’s political leaders, a commitment pursued with patience, perseverance and pragmatism,” the commission said.

It is this pragmatism that has seen successive ANC administrations grappling with the challenges of unemployment, poverty and inequality. It is also the ANC’s appreciation of the need for a long-term commitment that led to the creation of the National Planning Commission and the development of the National Development Plan, the country’s framework for economic and social transformation.

The NDP provides a broad strategic framework to put the economy and society on a new trajectory. It recognises that development has never been a linear process, one step following another in a predictable and orderly sequence. Instead, development requires a multidimensional framework of interacting initiatives, policies and investments that generate a virtuous cycle of progress, with actions in one area supporting advances in others. The DA’s mechanistic approach is a far cry from this nuanced approach.

Together with the New Growth Path and Industrial Policy Action Plan, the NDP lays the basis for economic transformation, stressing that change is required on many fronts to modernise the economy, address development challenges and improve the lives of South Africans.

Over the next five years the ANC will:

* Consolidate the industrialisation and infrastructure expansion programme.

* Empower and promote education and employment for the youth.

* Make the financial sector serve the real economy and people.

* Implement a massive public-works programme.

* Advance equality and decent work in the workplace.

* Build an extensive support network for small business and co-operatives.

* Promote broad-based black economic empowerment.

* Invest in science and technology.

* Advance rural development, land and agrarian reform and food security.

The NDP’s integrated approach increasingly guides the allocation of public resources within a sustainable framework.

Page 4 of the 2014 Budget Review lists projects which are fully funded and being implemented by the government.

The NDP advocates a new approach to addressing policy challenges that builds on expanded collaboration between the public and private sectors, labour and civil society. Together we can move South Africa forward.

* Pravin Gordhan is the Minister of Finance.

** The views expressed here are not necessarily those of Independent Newspapers.

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