Ivo Vegter: Cyril and the ANC’s only game plan is talk - not action.
Key topics:
Ramaphosa announces a new “economic war room” with unclear purpose
Government’s repeated “action plans” lack real strategy or implementation
Vegter argues state control hinders growth; private sector should lead
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By Ivo Vegter*
Last time, I said “Ramaphosa will talk this country to death”. Now he’s foisting yet another talk shop on us: an “economic war room”. It will fail.
Four months ago, Cyril Ramaphosa’s latest idea for turning South Africa around was to convene a costly “national dialogue”, in which nobody is participating except his hand-picked invitees.
I said Ramaphosa will talk this country to death.
Well, he’s been doing some more talking, and I’m running out of exasperated headlines to describe the economic promises he just plays on repeat.
“Economic emergency”
This time, he was talking to the National Executive Committee of the ANC, which is its highest decision-making body.
Taking a leaf out of Donald Trump’s playbook, he declared an “economic emergency” (although it is unclear whether he seeks to activate emergency powers, or what, if anything, he would do with such powers).
He also unveiled a 10-point “Economic Action Plan”, which is nothing of the kind.
Despite addressing a party-political gathering, Ramaphosa had some government news to announce. He’s supposed to be in a Government of National Unity for this sort of business, but I guess he is keen to demonstrate that the ANC is still important and he is a bold man of action.
It is true, South Africa does have an economic emergency, but it is an emergency entirely of the ANC’s own making, and an emergency it is uniquely ill-equipped to resolve.
Economic war room
Ramaphosa announced the establishment of an “economic war room” in the Presidency, “to coordinate cross-government performance, monitoring and publish regular score cards on progress”.
Besides creating another score of millionaire jobs, it is unclear what this “economic war room” will do that the 27 commissioners of the National Planning Commission, the 19 members of the Presidential Economic Advisory Council, or the entire ministry of Planning, Monitoring and Evaluation aren’t already supposed to do.
Not to mention the Departments of Trade, Industry and Competition; Finance; Electricity and Energy; Employment and Labour; Mineral and Petroleum Resources; Transport; Public Works and Infrastructure; Science, Technology and Innovation; Tourism; Small Business Development; Communications and Digital Technologies; Forestry, Fisheries and the Environment; and whatever other economy-related ministries we’ve long forgotten about.
What do all these people do all day?
It is also unclear what this plan will do that Ramaphosa’s plan to reignite the economy seven years ago, and his economic recovery plan of five years ago, and any of the myriad previous ANC plans to fix the economy, failed to do.
Socialist millionaires
The economy cannot be fixed by hiring more socialist millionaire advisers to staff a “war room”.
Ramaphosa reportedly said that his party is targeting 3% GDP growth by 2027. That’s lovely. I’m hoping to win the lottery by 2027, too. (Cue the “meet me halfway, buy a ticket” joke.)
If wishes were horses, beggars would ride.
Ramaphosa in particular, and the ANC in general, have shown no indication that they have the slightest idea why the economy is not growing at 3% right now.
They have provided no analysis demonstrating that their proposed interventions (like discounting electricity for smelters) will achieve 3% economic growth (and not, say, 1.5% or 5% or -3%).
They have not addressed the fact that 3% is a pretty sluggish rate of growth for an emerging economy. All other emerging economies – including the basket cases – are expected grow at an average annual rate of 4% over the next decade. The Asian emerging economies are growing at a clip north of 5%.
South Africa’s economy can, and should, be able to grow even faster than that. Rapid growth is a necessary precondition for achieving every other socio-economic objective, from job creation to poverty reduction to higher life expectancy to reducing inequality to erasing the geospatial legacy of apartheid.
The problem is that the ANC had no idea how to achieve this.
Ten points
Let’s briefly look at the 10 points of the Economic Action Plan. Per this report:
“Use electricity tariffs and transmission investment to drive economic activity.”
That just means giving discounts to large industrial users of electricity, in the hope of bribing them not to shut up shop. The consequence is that everyone else will have to pay more in order to subsidise selected big businesses.
“Accelerate the recovery of the freight and logistics sector.”
That is not an action. That is a desired outcome.
“Rebuild the chrome and manganese industries.”
That is also not an action. It is also a desired outcome. What is the government doing “rebuilding” private industries in the first place?
“Improve the state’s capacity to manage major projects.”
Yeah, yeah, we’ve been hearing that for decades. The state shouldn’t have to manage major projects. Not a lot of them, at least.
“Drive local economic development and investment in local infrastructure.”
Drive how, exactly?
“Scale up labour activation and public employment programmes.”
What on earth is “labour activation”?
We can’t just keep creating ephemeral public works jobs paid at half of the national minimum wage and call it job creation. We need a vibrant, growing private sector to create jobs.
“Expand SMME support and transform Development Finance Institutions.”
How?
“Enable growth of provincial economies outside main urban centres.”
How?
“Diversify trade partners and expand export markets.”
Good idea, but it’s not the first time we’ve heard that, either. Why are South African goods hard to sell into export markets? The ANC either does not know, or does know but is not prepared to do anything about it because doing so would violate its core dogmas.
“Ensure effective budget and macroeconomic coordination.”
If I concentrate hard enough, that lottery win will come to me.
This is not an action plan. It isn’t even a plan. It is a vague wish list; a reheated summary of all the ANC economic wish lists that have come before. An AI could have done a better job drafting it.
Ramaphosa’s problem
Ramaphosa’s problem… wait, let me rephrase that. One of Ramaphosa’s many problems is that he and all his socialist advisers labour under the misapprehension that the state ought to, and can, lead, control, direct or plan the economy.
That is not how economies work.
The economy isn’t a war (no matter how much a certain protectionist obsessed with leverage to make deals other countries can’t refuse tries to make it look like one).
The only struggle is that of the private sector, trying to overcome the obstacles the government places in its way.
The economy is, or ought to be, largely a private sector concern. That is the source of growth.
Ramaphosa envisions the government as a planner, “driving” development, “rebuilding” industries, and offering incentives to favoured companies to achieve the government’s political objectives such as rural development or implementing labour-intensive processes or increasing exports.
In the socialist worldview, the government is the enabler, the facilitator, the controller, and the final authority about how the economy operates. Improve the capacity, skill and determination of the planners, so the logic goes, and the economy will respond with the wished-for growth and development.
Back in the real world, the government is almost always seen as an obstacle to economic activity.
Obstacles
Companies that need to fill out endless forms, jump through bureaucratic hoops, and sometimes wait years for applications to be processed while their assets stand around rusting and depreciating without earning revenue, see government as an obstacle.
Companies that need to keep their headcount below a certain limit to avoid ridiculous racial engineering laws – and would rather establish a second company than comply with onerous and expensive regulations – see government as an obstacle.
Companies that are forced to pay wages agreed not by them, but by their larger competitors in a collusive forum with one another, labour and the government, see government as an obstacle.
Companies that are trying to break into the market by offering higher-quality goods at better prices, who watch their bigger rivals hobnob with senior ANC politicians at lavish cocktail parties where they win tax concessions or tariff discounts or subsidies, see government as an obstacle.
Small and medium-sized enterprises that are held to mandatory industry standards proposed and written by their big-business rivals with the specific intent to erect barriers to entry for smaller competitors see government as an obstacle.
Companies that need to interface with government agencies to register property transactions, submit reports on their customers to government “intelligence centres”, or comply with complex tax laws, see government as an obstacle.
Government’s role
“I heartily accept the motto, ‘That government is best which governs least,’” wrote Henry David Thoreau in his 1849 essay, Civil Disobedience.
“Government is at best but an expedient; but most governments are usually, and all governments are sometimes, inexpedient,” he continued. “The government itself, which is only the mode which the people have chosen to execute their will, is equally liable to be abused and perverted before the people can act through it.”
And further: “[G]overnment never of itself furthered any enterprise, but by the alacrity with which it got out of its way… It does not keep the country free. It does not settle the West. It does not educate. The character inherent in the American people has done all that has been accomplished; and it would have done somewhat more, if the government had not sometimes got in its way.”
This description of the American government in the mid-19th century is no less applicable to governments today.
Choking weeds
If the ANC wants a plan that actually works, it can start by getting out of the way.
Dismantle the choking weeds of BEE, which burden everything produced in South Africa with costs that our people cannot afford and make our products uncompetitive on the global market.
Gut the Department of Trade, Industry and Competition (DTIC), which very often functions to reduce competition, usually functions to reduce efficiency, and almost always functions to make trade more expensive. Prohibit it from making decisions on mergers or tariffs conditional upon undertakings to achieve certain political objectives, like job creation or domestic investment. It has been turned into a tool of economic planning, attempting to achieve headline-grabbing objectives at the expense of economic productivity, competition and efficiency.
Thin out the asphyxiating rules that protect unions and make labour prohibitively expensive and risky to hire; eliminate rules that impose conditions upon companies who never agreed to them, and which only big business can afford.
Reduce the number and type of businesses and activities for which licences are required. For example, if a company owns a roadworthy vehicle and employs a driver with a professional driving permit, it should not need to obtain yet another licence simply to operate a business using that vehicle.
And if it does, it should not have to jump through the same elaborate hoops every time it wants to add a vehicle to its fleet. It should not have to prove to the regulator that there is a need for its new vehicle. And it certainly should not have to wait years for the application to be approved, as is the case now.
Ramaphosa waffles about “SMME support” and “transformation” and “growth of provincial economies outside main urban centres”, but there are tour operators, many of them black entrepreneurs, who are forced to operate illegally – at great risk to themselves and their businesses – just to make the payments on the vehicles they bought, because the National Public Transport Regulator has been sitting on their operator permit applications for months, or years.
Fix that, Mr. President! Where’s the “action plan” for that?
Remove restrictions
Remove entirely the restrictions on the number of licences issued for a given type of business, because all that does is create cartels.
Do away with central planning nonsense like “certificates of need”. It’s a business operator’s job to decide whether there is a need or a want for their product or service. The government not only should not decide that, it cannot decide that, because it doesn’t have the information to decide that. Even the investor who deploys capital at risk to provide a product or service is not sure of the need; they are betting there is, but only their eventual profitability can prove it.
Where licences are necessary to achieve important objectives, such as food safety or keeping adult things away from children, minimise the regulatory costs and red tape.
Instead of making companies beg (and pay) for permission every time they want to do something, the presumption should always be that a company should be free to operate unless there is a compelling reason to restrict it.
There are a myriad more examples like this. Ramaphosa keeps promising to slash red tape, but he has done nothing about it except establish an office that can trade bureaucratic axle grease for political favours. Is that too cynical? I think not.
Rebuild public institutions
Instead of trying to rebuild industry sectors, which is the responsibility of the private companies in that industry, rebuild the government agencies that perform the functions that companies are forced to rely upon.
I’ve mentioned the National Public Transport Regulator, but the same goes for the Deeds Office, and the courts, and the police, and all the other public institutions on which a well-functioning market by necessity depends.
Don’t try to perform the functions of the private sector. Don’t try to “direct” economic growth, or create industrial “master plans”. That’s none of the government’s business. Don’t try to “solicit investment”, or “make deals”, or “rebuild industries”. That’s not the government’s job.
Just improve the performance of government functions that cannot be provided by the private sector, and then get out of the private sector’s way.
This will free investors to deploy risk capital to establish or expand productive, profitable businesses.
Building an “economic war room” is an admission that Ramaphosa in particular, and the ANC in general, have not learnt anything about why and how economies grow in the last 30 years of trying to create “state-led growth”.
Stop leading. Let the market lead. Just follow; support; facilitate.
Where the market leads, growth and employment will follow.
*Ivo Vegter a freelance journalist.
*This article was originally published by Daily Friend and has been republished with permission.