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Monday, May 23, 2022

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The merry go round of economic policy

Dr Pali Lehohla is a Professor of Practice at the University of Johannesburg and a former Statistician General of South Africa and former Head of Statistics South Africa.

Dr Pali Lehohla is a Professor of Practice at the University of Johannesburg and a former Statistician General of South Africa and former Head of Statistics South Africa.

Published May 1, 2022

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There were media reports this week that the ANC has drafted a discussion document on economic policy, ahead of the party’s policy conference later this year.

Central to this is the privatisation agenda and a negation of the state-owned enterprises path, captured as the Isibujwa outcome in the Indlulamithi scenarios – Growth Employment and Redistribution (Gear) de javu.

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Indlulamithi South Africa Scenarios 2030 is a multi-stakeholder initiative born out of a need to develop a framework to better understand our country's trajectory.

At the onset of Covid-19, business compiled a document as the basis for discussion with the government to structure an Economic Recovery and Reconstruction Plan. The targets contained in the proposal by business were very impressive and pointed to the fact that the National Development Plan (NDP) targets could still be met albeit that what is not clear is the time frame.

Of the well-known triple challenges of poverty, unemployment and inequality, business submission said the unemployment rate in South Africa could drop to 15 percent from where it was at about 27 percent, inequality could drop to 0.43 from 0.71 and there was no indication on what would happen to poverty as a third of the evil triumvirate.

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As far as growth the submission said the economy could grow to $550 billion. In rand terms the economy would have almost doubled to R8.3 trillion. Debt to gross domestic product (GDP) ration would drop to 60 percent and business confidence would rise to 60 percent. This is an impressive set of economic metrics that are far better than anything that has been known as a promise in post-apartheid South Africa.

To get to this point, business was looking to government to implement a number of reforms, key amongst them was privatisation. In addition business wanted government to load about three times the trillion business was willing to put forward.

The government sadly refused to come forward to a well-structured discussion with business and 20 months went by. Or did the government suspect that this was just a bait? It was not clear.

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In addition to former president Thabo Mbeki’s lamenting that the government seemed disinterested, many including myself critiqued the government for this lukewarm response. I do know why they failed to respond as they simply have no tools to process what was on offer from business.

However, at the very least the president should have thrown his bureaucrats and business in a room, thrown the key away and asked only for one thing – come up with a plan that meets these targets and the door will then be unlocked.

That did not happen and time was lost and other calamities followed of Personal Protective Equipment looting, fire and floods. This is where we are now.

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Indlulamithi had, through a set of scenarios projected on the future of South Africa through three possibilities of firstly, Gwara Gwara, which is a fumbling and illusive new dawn in a land of disorder and secondly, Isibujwa, whereby the country lives in enclaves both amongst the bourgeoisie, the proletariat and the lumpen. In both instances all seek rents by whichever means possible to make a living.

Thirdly, the Nayi le Walk is a scenario where the country is in step with itself and this is a scenario that allows for major changes on a number of frontiers of micro economic policy and sectoral policies. It suggests the reopening of the macroeconomic framework that in the main would be dealing with inflation targeting, debt to GDP ratio and the government budget to GDP.

Under this scenario the outcomes on unemployment are a reduction from 27.5 percent to 12 percent by 2030, an 80 percent increase in real GDP per capita, a debt to GDP ratio of 33 percent and a GDP annual growth of 5.74 percent.

At the launch of the Idlulamithi scenarios in June 2018, President Cyril Ramaphosa said the following about these scenarios: “Scenarios reinforce the notion of agency – that as individuals and as a collective we can act in ways that determine the course of history.”

He went further to say these scenarios must be owned by the people, business and NGOs alike. They could not be left to the government.

The scenarios have been under-girded by hard modelling and in a modelling exercise undertaken by Advanced Development Research Solutions options affirming each of the scenarios presented.

What is interesting is that the Nayi le Walk targets are similar to the business targets, but in terms of policy options business is not explicit on what policies are to be followed and how they are modelled for different options and outcomes.

Given that the ANC might be looking at deepening the Isibujwa towards a modelled Gwara Gwara outcome, it is worth reminding ourselves of the wise words of Noam Chomsky.

Chomsky, who was born December 7, 1928 is an American linguist, philosopher, cognitive scientist, historical essayist, social critic, and political activist. He is also a major figure in analytic philosophy and one of the founders of the field of cognitive science in his analysis of ever-impoverishing neo-liberalism. He is also sometimes called "the father of modern linguistics“.

Chomsky has this to say about privatisation: “That’s the standard technique of privatisation: defund, make sure things don’t work, people get angry, you hand it over to private capital.”

In light of this, is it not time to demand an intelligible question to the road ahead for South Africa’s economy?

This after the economic policy is like a toy for the nation, which is changed every three years.

Bearing monument to this folly: the first amongst these was the 1994 Reconstruction and Development Programme (RDP), then the 1996 Gear, then 2003 Accelerated and Shared Growth Initiative for South Africa (Asgisa), then the 2009 New Growth Path (NGP), then the 2012 NDP, then the 2014 Nine Point Plan, which mutated into a Fourteen Point Plan followed by the 2019 Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa, and then the 2021 District Development Model and the 2021-22 Economic Recovery and Reconstruction Plan.

Dr Pali Lehohla is a Professor of Practice at the University of Johannesburg and a former Statistician General of South Africa and former Head of Statistics South Africa

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