By Busi Mavuso, BLSA CEO
The three central points of the document hold the keys to getting SA out of its economic slump
When the cabinet meets this week it will in all likelihood do so against a background of news of a second quarter of positive economic growth. This means SA escaped the technical definition of a recession, defined as two consecutive quarters of contraction.
But a positive second quarter should not prompt complacency in anyone, let alone policymakers, who need to ensure that over the next 10 years the ground is laid for a secure and certain policy path that can attract the sort of investments the country so desperately needs.
In that light, it was prescient that finance minister Tito Mboweni released the discussion paper, “Economic transformation, inclusive growth and competitiveness: towards an economic strategy for SA”.
The proposal, which joins a long list of similar documents released over the past couple of decades, such as the new growth path and the accelerated shared growth initiative, is a 77-page report that one hopes the whole cabinet has studied to help ensure the three central points — transformation, inclusive growth and competitiveness — are achieved in this highly competitive globalised world.
If there was any risk of complacency stemming from the quarterly growth figures, the economic growth strategy document couldn’t have been better timed.
There is always a risk that the proposals will get wrapped up in debate about the process followed in their drafting and release, rather than their substance. The well-known fractures in the governing party provide fertile ground for such friction, so this was to be expected. Indeed, critics have questioned why there wasn’t broader engagement by Treasury officials. Perhaps it is an imperfect contribution — it is certainly no panacea to our economic stasis, and in the case of telecomms, there is much more homework to be done.
However, in an environment where the economy will grow by less than 2% this year for the fifth year running, and with the country staring down the barrel of a possible ratings downgrade from Moody’s Investors Service, it is a welcome intervention all the same. It is a reminder for all to focus their energies on a rapidly deteriorating situation.
What we need is for the cabinet to fully support and stand behind the policy document, while working on smoothing out its wrinkles. Clear targets need to be set, with even clearer time frames. We need to look at the policy statement and ask ourselves what can be done now, with least resistance — the low-hanging fruit. We need to move now. The time for grandstanding and demanding perfection is past. This is not about supporting Mboweni, it is about standing behind SA Inc.
Mboweni has a thick enough skin to deal with the internal fallout from his move to throw the department’s views into the economic debate. It may just be the dry log that will help refuel the fires driving the new administration to deal with our economic malaise.
This week’s cabinet meeting should not be used as an opportunity for policymakers to gloat about SA’s narrow escape from recession. They have been challenged and given homework to do, and we are all invested in how they respond. The government needs to ensure its departments align themselves in a way that boosts investor confidence and takes advantage of any low-hanging fruit, including appointing the right executives at the most important of state institutions, starting with Eskom.
The state of Eskom has clearly placed a cap on SA’s growth potential as it grapples with getting Medupi and Kusile fully functional while simultaneously dealing with a long maintenance backlog. What we need is for the operator’s board — with the shareholder’s approval — to settle on a CEO who can guide what is increasingly becoming the most ambitious corporate project on the continent.
This is just one of many appointments that should be made as soon as possible, so we get the source of 95% of SA’s electricity back into a strong and stable operational position. It is important to get the right people into the most important positions within the state and its various institutions, and to get the SA government, 30% contributor to the overall economy, functioning optimally.
Unemployment is a structural issue in SA, so the solutions lie in longer-term educational plans as well as making the right decisions to boost industries such as tourism in the short term. Procedural gripes aside, the Treasury’s contribution is a healthy one. It is essential that the cabinet meeting helps bring the state closer to speaking with one tongue.