RW Johnson: GNU must sober up; no economic growth without policy changes

The Democratic Alliance (DA) has set clear goals for economic growth and reducing unemployment in the Government of National Unity (GNU). Despite some improvements, such as a stronger Rand and falling bond rates, RW Johnson argues that there are no solid plans for long-term growth. To achieve its aims, the DA must advocate for major policy changes and urge President Ramaphosa to abandon initiatives that could jeopardize economic stability..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..By R.W. Johnson.The DA has, from the outset of the GNU, been very forthright that the whole point of its participation in government is to see an increase in economic growth and a reduction in unemployment. .___STEADY_PAYWALL___.Sure, we know that the GNU has produced a large improvement in the national mood, a strengthening of the Rand, falling bond rates, made the national debt much more payable, and has led to a stock market boom. This is all very nice but these things are perfectly consistent with low or no growth and a consequent rise in unemployment. An improvement in the national mood could lead to a somewhat higher rate of investment by domestic businesses but they have all been through a decade and more of miserably low growth and falling real per capita incomes, an experience which makes people cautious. .Moreover, they have all been through nine years of Zuma state capture with its corruption, incompetence and the dismantling of almost all the key institutions of state. This has been visited upon the country because of the ANC, which is commonly regarded by business as an unpredictable wild animal. At the moment it is more passive and behaving less horrifically, but at any moment it could revert to its deeply damaging behaviour of yore. Just imagine the presidency of Paul Mashatile with the Alexandra mafia in power and the Gauteng populists of Panyaza Lesufi in the driving seat. Such a prospect makes anyone quail but the fact is that it could now be just three years away..David Makhura, one of the more thoughtful ANC leaders, was quite frank: "If the GNU fails, we are all finished". If you think of it, this is a considerable admission: the ANC has brought the country to the very point of collapse. So I find it quite surprising that leading South African businessmen – who are undoubtedly working extremely hard to help the government – are talking of a growth rate of 2% or even 3% as soon as next year. .Read more: Ramaphosa's GNU plan to focus on economic growth and infrastructure reform.For a start the GNU has been put together in a lackadaisical fashion. Ideally, there needed to be a proper agenda and an agreed plan of action with targeted outcomes – and all of that should have been shared with the public. Instead, all that is lacking. There is, meanwhile, no sign that ANC ministers are working any harder or faster than their previous extremely dilatory pace. Clearly, for them it's just a continuation of business as normal. And, lacking any clear agreement, the DA has been repeatedly taken by surprise: first, that they were not going to have anything like their correct proportion of ministries; second that Ramaphosa was going to push ahead with NHI and BELA, despite the DA making clear that they had red lines around both; then that the Gauteng ANC was to be allowed to exclude the DA from power-sharing; and now that the ANC would act to get rid of a DA mayor who was successfully cleaning up the capital. .In addition, Ramaphosa has still not made the obvious point – in the case of the Justice ministry – that the combined national effort of a GNU is incompatible with corruption. Thus far the solution to every problem has been for the DA and ANC leaders to get together for a chat, which simply means Ramaphosa soft-soaps Steenhuisen until the next time..The big question is where is this great spurt of growth supposed to come from ? We are a long way from that. Mining is still stuck, waiting for a cadastral system and with the Mining Charter effectively making new investment impossible. The ports and railways are still a mess – the worst in the world – and the promised remedial measures are taking an age. Eskom has improved its performance and kept the lights on – but it is demanding a whole series of enormous electricity price increases which will kill growth and close many businesses. Home Affairs has been working vigorously on the problem of visas – but even tourism has problems: the strengthening Rand will hurt it and the continuing disaster of the Durban beach closures is against it..And it's not that the DA's ministers are going to make much difference. It's possible that streamlining Home Affairs and making it more efficient might add a percentage point or two to growth but it's harder to see how Public Works or Basic Education can do that. In theory Agriculture could be a major growth point but all manner of policy changes would be necessary for that. We would need to abandon many of the hopeless land reform schemes, encourage private farming in large areas of the Eastern Cape, do away with communal land tenure and so on. There are no prizes for forecasting when such changes might occur..So unless some miracle happens the DA is before long likely to wake up to the fact that economic growth has not taken off and that unemployment is still rising. If the DA wishes to avoid that it has to urge major policy changes on Ramaphosa. First, though, they have to stop Ramaphosa from making the situation worse. BELA would, clearly, trample on the constitutional rights of Afrikaans-speakers and NHI would more or less blow up the whole country: most business executives would leave, as would more than half of all the doctors and the cost of NHI would crash the fiscus. The DA has to be firm: its red lines mean that if Ramaphosa presses ahead with these measures, he is forcing the DA to quit the government. If he really doesn't want that to happen, he has to change NHI and BELA. .If they can overcome these admittedly steep hurdles, the DA could move on two quite different fronts. One would simply be to accelerate reforms. For example, Transnet is still creeping along towards a situation where there will be some private participation in running the railways and where a Philippine firm may have a role in running some of Durban's port. But this all hopelessly too slow. Many of the rival ports in southern Africa have been privately managed for some time now. This has led to large scale investment, huge increases in tonnages delivered and in profits made. The result is that these ports are now taking more and more business away from South Africa. There is a real urgency about forcing through what needs to be a complete – not a partial – change. .Secondly, the DA should argue for an important policy change. In the last few years a whole series of major companies have left South Africa: Barclays, HSBC, BNP-Paribas, Anglo-Gold Ashanti, Total Energies, Shell Downstream SA (with its 600 petrol stations), BP Aviation Fuel, Fitbits (a Google subsidiary), General Motors, Chevron/Caltex and Rolex. This is an extremely worrying indication that more and more large enterprises are effectively deciding that doing business in South Africa is simply too difficult or not worth it. It is both essential and urgent that this trend should be reversed. And it is simply not good enough for Ramaphosa or Mashatile to mount some kind of roadshow trying to tempt investors with honeyed phrases. It won't work. Ask yourself: if you were a London investor how convinced would you be by Mashatile (of all people) grinning as he declares that "South Africa is open for business". For heaven's sake..As Ramaphosa's recent meeting with Elon Musk showed, foreigners are rightly wary of BEE laws that require them, effectively, to give away 30% of their company. And surveys have shown that BEE regulations are the biggest single barrier preventing European investment in South Africa. And South Africa's competitors elsewhere in Africa do not make the same BEE demands. .Ramaphosa tried to coax Musk with syrupy talk about "coming home" but proper action is required. Accordingly, the government ought to lift all BEE requirements for foreign investments of a certain size. This would also imply the removal of the Mining Charter. It should be enough that foreign investors would be creating many thousands of jobs, re-industrialising the country and making it clear that South Africa was not receding into the heart of darkness. It would be a dramatic gesture, showing that government was determined to elicit foreign investment and was prepared to sacrifice ideology to do so..The model is the motor industry, which has always refused BEE completely. Instead the motor manufacturers have committed themselves to sourcing most of their inputs from black-owned or BEE-compliant firms. The government has accepted this compromise: it means many thousands of jobs, a major export industry and large-scale import substitution as South African motorists buy locally produced cars which they might otherwise have to buy from abroad. .In general, Ramaphosa needs to come down off the cloud of good feeling that he's been on and concentrate his mind on the simple fact that the ANC has brought South Africa to a parlous situation. He now has a heaven-sent chance to turn things around but he needs a real sense of urgency. He cannot afford to keep threatening the collapse of the GNU by signing into law pieces of legislation which he knows his coalition partners cannot stomach. The logic of a GNU is that all such legislation has to be agreed in advance by the parties in coalition. Instead, Ramaphosa is continuing to act unilaterally as if the ANC had an overall majority. Moreover, he needs that urgency to be reflected in the speed of reform. It will soon be 2025 and Ramaphosa's presidency ends in 2027. There is no time to waste. And finally, he needs to listen to constructive proposals for reform, even those which have not been part of an ANC conference resolution..Read also:.South Africa's plans to fix ports and rail for economic growth surgeSA unemployment rate rises to 32.9% ahead of critical electionsHow poor governance has caused SA's unemployment crisis: Ann Bernstein

RW Johnson: GNU must sober up; no economic growth without policy changes

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