The world is changing fast and to keep up you need local knowledge with global context.
As usual Cees Bruggemans cuts to the chase and this time questions the implementation of the government’s 9-point plan. A ‘wonder plan’ presented by President Jacob Zuma at this year’s State of the Nation address, 7 months later and not much progress bar a few meetings – in many ways “a flea-biting and head-scratching exercise.” A bigger challenge is not putting such a plan together but rather getting stakeholder buy-in from different segments of the economy. Cees throws Cyril Ramaphosa into the mix and reminds us how integral he was during the 1990’s negotiations. He wonders if he is the right man to reverse the current downward trend and get things off the ground, but will South Africans have to wait until 2019, and is that too late? A superb piece of work. – Stuart Lowman
by Cees Bruggemans*
Why waste a good crisis? The government’s 9-point plan is slowly coming into focus, but possibly not in ways fully envisaged. Something to watch closely.
Is it only in increasingly hard times (“bleak times” as Dickens may have typified them?) that minds get concentrated, where old wounds and deep pains may perhaps be overcome and petty beliefs may have to give way to achieve new paradigms and better results?
Let’s not run ahead too quickly or too far. There is as yet precious little true indication of the standoff of decades really being overcome. But there may be some movement, however small and as yet insufficient to achieve significant closure. All big outcomes have presumably small beginnings. We may be still only in the foothills and may be prematurely tripped by events, but primarily by ourselves. Yet there are these stirrings and one ignores them at one’s peril.
The context is a dithering, deteriorating condition, not only economically but also politically fraying and socially increasingly challenging. Despite professed good intentions of decades, we are not making real progress on unemployment, poverty and inequality in a fundamental sense. Papering over the cracks with social grants to 17 million recipients today may be heroic as redistribution goes, but this is not a long-term solution. Only job and income creation (GROWTH) will.
In the 75 years to 1994, the SA economy only averaged 3.5% annual growth. Perhaps adequate for a developed country at near to full resource mobilization and having restrained demographics, but totally inadequate for a still largely undeveloped society in which the majority did not fully participate in political, social and economic life, with a high population growth dynamic to boot, and these needing to change across all dimensions.
Even so, that achieved 3.5% GDP growth then was not the country’s full potential. Instead, it was a repressed potential. Held back by regressive policy choices that deeply interfered with resource allocation, prevented a natural integration of the economy and society and a more efficient use of scarce resources through market allocation.
From 1970 there were additional strains to be absorbed as the country had to face increasing objections from within and without, further undermining the growth process, through ever poorer capital and scarce manpower allocations and the progressive loss of confidence.
From 1994, the external political constraint was lifted, but internal strains were not as new policy paradigms came to apply, heavily favouring redistribution and skill displacement. This did not assuage global financial doubts or local business concerns, inviting caution, while public sector delivery suffered.
Growth, after a decade averaging near 1% in the 1980s, recovered but barely averaged 3% after 1994, not enough to achieve structural breakout, addressing the big shortcomings. There followed a short 5% growth spurt during 2004-2007, but it had feet of clay, favoured by World Cup soccer investment mania, a strong commodity supercycle giving us national income gains, low interest rates, speculative binging and this driving a strong consumption revival but this also expanding the current account deficit over the balance of payments. None of it sustainable.
From 2008 the wheels progressively came off yet further, reminding of the unfolding 1980s. Major global banking and sovereign debt crises created widespread recession, and thereafter allowed only slow recuperation, undermining growth. SA too was forced into recession, partly by these external forces, but also because our infrastructure (electricity) had become constrained. The recovery from recession in 2009-2010 looked normal enough, a typical inventory bounce back with spillovers, but turned out to be anything but normal.
Externally, the commodity supercycle peaked, from 2011 giving us major falls in Dollar export prices, eroding our national income growth. More fundamentally, public sector functioning kept deteriorating, while private business confidence never recovered its élan of earlier recovery phases. Something was deeply going wrong, with business assaulted by multiple supply-side shortcomings (energy and transport infrastructure, labour market disruptions, government regulatory intrusions, pervasive redistribution agendas), with government and organised labour giving no indication of ‘trusting’ business, and this ‘trust deficit’ coming to symbolize much dysfunctionality.
The country was engaging, but in an quibbling kind of way, rather than really scrumming in order to put the ball into play and proceed with the game.
This quibbling had of course gone on for decades, but as inclusive democratic forces gained confidence, their redistribution agendas kept mushrooming, all the while telling themselves this was the way to greater growth while patently this wasn’t true, when going by performance. Some preferred to blame the outside world for this, others looked to the past to explain everything, none were really willing to examine own goals and methods and test them realistically on adequacy.
#NEDLAC Ramaphosa says President Jacob Zuma’s 9 point SONA plan should be addressed by social partners. Hasn’t been much discussed.
— Tehillah Niselow (@tehillahniselow) September 11, 2015
Yet there comes a time when the obvious starts to stare anyone in the face.
From 2010, the country’s performance had started again to slide, by 1H15 averaging barely 1.6%, with yet lower expectations for 2015-2017 shining through, with structural shortcomings remaining unaddressed, yet political and social strains steadily multiplying.
Something was calling out plaintively for something to be done. But what? Ever more of the same, digging the collective grave ever deeper, or a quiet suggestion to start looking for new paradigms, hopefully much more successful in unlocking accelerated development?
The ANC government since 1994, not unlike its predecessor since 1948, was ever steadfast in offering hands-on guidance. The state was in overall control, would set the development agenda, and make things happen.
Various regime philosophies had so prospered, though with society and the economy languishing. For there was never enough public sector focus, never enough private confidence, always too much stuff liked by ideologues, populists and traditionalists, but far too little to support the true widespread flowering of our modernity.
And so we kept stumbling onward, called by some muddling through in the old British sense of the word, but with development shortcomings in our case that would penalise such dithering if not addressed in the long run.
And this finally got us to 2015, its February State of the Nation address, followed after six months by a Presidential Business Working Group (emergency) meeting on 7 August and this in turn followed by Deputy President Ramaphosa’s Address at the 20th annual Nedlac summit on 11 September.
Things were happening. But was it just more talk or was there tangible progress to something more viable than the largely unproductive past necessitating these hastily called emergency meetings and challenging Addresses?
In many ways, this is a flea-biting and head-scratching exercise.
In his February State of the Nation address to parliament, President Zuma had confidently spelled out his government’s 9-point plan to ‘regruk’ (right track) the nation. But by August it seemed clear the nation didn’t want to be regrukked in the manner suggested. If anything, it was steadily slipping deeper into the mire.
Even the more ideologically informed and driven ministers seemed by now to have realised this, but for them this apparently meant to buckle down and accelerate the set agenda. Thus Minister Davies of Trade and Industry, on behalf of government, set the tone at the August Presidential Business Working Group by reiterating the 9-point plan to regruk the nation. Much of it proffered like received wisdom forming the basis of discussion.
Though business would undoubtedly have formulated its collective views very carefully (no sense in seeking individual victimisation), there was some dissent in the ranks, particularly at other forums where especially mining executives stopped being careful, and laid out the consequences of continued dithering.
So there was movement, possibly not so much at the emergency Presidential Business Working Group, but in a larger context where truth serum was starting to be rediscovered, some executives and their businesses having basically nothing to lose, given the trajectory many were now finding themselves on.
Did this matter? Yes, fundamentally. For the government’s 9-point plan is anything but universal received wisdom. Instead, it reflects a bureaucracy and political leadership wanting to ‘structure’ and guide the shape of society in line with their own thinking, ideologically and populist inspired, rather than asking at any time whether this approach would yield the ‘ultimate’ desired results.
These the government itself describes as addressing unemployment, poverty, inequality, which at a pinch can be described as the greater aims of all the social partners. So it isn’t the ends that are so much in question as main stumbling bloc. But when it comes to the means, all communication breaks down on the grounds of irreconcilable differences (think of the worst divorce you know about, and multiple the strains by a factor of 1000, or more).
I hear you, but am not listening (doing my own thing, can’t you see?).
So in February the President dispensed, in August Minister Davies once again raked over the ideological and populist coals vigorously, but by September, at yet another venue, that age-old talking shop called Nedlac, our Deputy President Ramaphosa also had another go at the social partners happily gathered there (it was their 20th summit, and presumably not without champagne and heavier stuff).
Guys, the situation is serious, if not quite critical. Want to see the whites of their eyes before capitulating, or are you ready to start talking some turkey?
Ramaphosa may not be quite ready himself (the next President will enter office in 2019, whoever she may be), but clearly time is short, and it may be necessary to start piling on the pressure now if we are not all to disappear down the chute hole ere long. Or was this a mere softening up exercise? For those in the audience with sensitive political antennae (admittedly more in the nature of cave women than cave men, kind of funny in that Nedlac gathering), realizing the game of talking was up and that serious negotiations with premier dealmakers was really coming into view.
Better be ready for the right trade-offs rather than making poor choices (1994 being a useful remembrance?).
So in good church tradition, Deputy President Ramaphosa passed the plate and asked for offerings, in his case in the form of ‘trade-offs’, no specifics offered, but presumably a blind man will be able to navigate that obstacle course without trouble when the time comes to do deals.
Any hints? Difficult to say, as the Ramaphosa utterances nowadays are so well wrapped up, it is difficult to see the wood for the meat. But here some hints.
The loaded observation of declining government revenue, widespread labour retrenchment and falling business profitability and sustainability. The unstated message? You want that to get much worse, then do keep messing around.
Then the compliment. SA isn’t helpless, it has platforms like Nedlac to enable social partners to take collective action. Smile, the hungry nation is watching.
Then offering a common goal: act together to stabilise the economy, even if this requires negotiating necessary trade-offs, with the guiding priority being the saving/creation of jobs. That presumably being mainly a sob to labour and government.
Ramaphosa then seriously offered up the 9-point plan for debate among the social partners (it being far too ‘early’ for anything else?). Debate is to aim at resolving weak growth, poor employment performance, poor investor confidence. Clear Motherhood and Apple pie stuff where everyone can find themselves in the ends (if not quite yet in the means, the old sticking point).
Then the happy suggestion to meet again, perhaps, to ‘dissect’ (bury?) the 9-point plan so that the social partners can share views, and discuss new and innovative solutions to challenges. In other words, go away, think carefully about your rock bottom negotiation positions, bearing in mind the wilderness and Julius awaits us all if we keep quibbling the way we have become so very used to in recent decades.
A pious concluding remark about Nedlac being a platform for deliberation, dialogue, negotiation and action. If this isn’t the economic Codesa so many talk and dream about, you will be hard pressed to find it elsewhere (certainly not in Julius’s august stables).
Where there any reactions? Plenty, some predictable, others pointing the way.
Business is deeply concerned about insufficient growth (and many other things, for which reason most companies keep globalising at the speed of light, lowering their exposure to defunct and super fragile SA).
Business wants a new alliance between government, business and organised labour, abandoning the notion of business as “monopoly capital”. This nonsense has to stop, lambasting the characterization of government and labour as ‘comrades’ and business at ‘the enemy’. Clearly, we are in this together, and sink or swim together (no longer entirely true, for the comrades will assuredly sink, while business will swim on globally, something that a few too many people seem not to have realised by now).
Business is ready to redefine the enemy, indeed calling her three enemies, namely unemployment, poverty, inequality. And NOT big business. And this frankly is fine, on behalf of the comrades, provided big business doesn’t ask for new subsidies for things that it will in any case do if the right stuff happens.
Labour, by way of Cosatu, also had views. Labour was ready to abandon anti-business rhetoric, but doesn’t like certain things, such as business remaining quiet about the legal bid to prevent the Labour Minister to extend collective agreements of bargaining councils to nonparties. Labour remains ready to take the fight against this action to the streets. So there, one in your eye.
Labour also describing as lamentable the focus on stemming job losses rather than creation of jobs, with 8 million unemployed and discouraged in our midst, clearly not politically sustainable. That’s more like it.
Ramaphosa had the final word in giving the happy warriors their marching orders. Social partners, go and deliver practical proposals on how to improve economic conditions. These must say to ALL constituents that we need to do extraordinary things in times of extraordinary challenges to seize extraordinary opportunities.
This from a quite extraordinary Deputy President, no mean dealmaker in his own right, remembering 1992-1994. But that was so very long ago…
* Cees Bruggemans, chairperson, Bruggemans and Associates Consulting Economists
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.