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ANC parliamentarians under President Jacob Zuma and his predecessors, Kgalema Motlanthe and Thabo Mbeki, spent years tying up the country’s economy in knots. Red tape is excessive, to the extent that it is even arduous for tourists keen to spend money to enter the country. As a result, South Africa’s position in the Global Competitiveness rankings fell from 44th to 67th between 2007 and 2018. The statistic is no surprise to entrepreneurs, who have been hugely frustrated at the lost opportunities in one of Africa’s most exciting prospects. Many have been driven elsewhere, at the cost of jobs. President Cyril Ramaphosa and his team promised to do their utmost to fix the economy and their approach is in stark contrast to their predecessor. Minister of Finance Tito Mboweni is keen to hear the views of citizens on a master plan, released by National Treasury, to add 1m jobs and boost the economy by at least 2%. Have your say. – Jackie Cameron
Minister @tito_mboweni is calling for public comment on an economic policy paper titled: Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa. Access the policy paper here: https://t.co/KERRZc1DU1 pic.twitter.com/njMtsyGg09
— National Treasury (@TreasuryRSA) August 27, 2019
"We welcome the economic strategy paper released by Finance Minister Tito Mboweni.
— Democratic Alliance (@Our_DA) August 28, 2019
South Africa sees selling coal plants and visa reform boosting GDP
By Prinesha Naidoo and Mike Cohen
(Bloomberg) – South Africa’s National Treasury outlined its vision to bolster economic growth and tackle a 29% unemployment rate, proposing a range of reforms including cutting red tape for businesses and easing visa rules to boost tourism.
The reforms could lift the average economic growth rate by 2 to 3 percentage points and create more than one million jobs over a decade, the Treasury said in a policy paper released on Tuesday.
While proposals such as easing visa rules and releasing broadband spectrum could be low-hanging fruit and have also been suggested by the Reserve Bank and International Monetary Fund, others, such as selling off power plants owned by state utility Eskom Holdings SOC Ltd. and introducing new rules that will let households and companies sell excess electricity they produce back to the national grid, may be more difficult to push through.
The policy paper is an attempt to circumvent obstacles to structural reform in both the cabinet and the ruling African National Congress and is likely to trigger an angry reaction from within the government and parts of the party, according to Frans Cronje, chief executive officer of the Johannesburg-based South African Institute of Race Relations.
It “is likely to be welcomed in analyst and investor circles but not sufficiently to change investor sentiment, and will rather be read as further evidence of the contradictions and confusions that continue to bedevil government policy in South Africa,” he said.
Weak growth has exacerbated social pressures in Africa’s most-advanced economy and failure to create jobs and reduce income inequality could spark unrest. The economy contracted an annualised 3.2% in the first quarter, the most in a decade, as power shortages curbed output.
The Reserve Bank projects growth of 0.6% for the year. That’s well short of the more than 5% rate the government says is needed to halve the unemployment rate.
The Treasury described the current economic trajectory as unsustainable and said it could only be turned around through “deliberate and concrete action.” The country also needs “a stable macroeconomic policy framework underpinned by a flexible exchange rate, inflation targeting, and credible and sustainable fiscal policy,” the Treasury said.
These are some of the other proposals in the paper:
- Allocate broadband spectrum to private companies through an auction, with a small set-aside for a government-controlled network. Competition should be allowed in Telkom SA SOC Ltd.’s infrastructure.
- Visa regulations should be amended to ensure a better balance between security concerns and the growth of tourism. The tightening of visa regulations is out of step with a global move and while other countries are typically making it easier for tourists to travel, South Africa risks falling behind, the Treasury said.
- Grant third-party access to the rail network to promote private-sector participation.
- All infrastructure projects of strategic importance should be developed in coordination with government, the private sector and state-owned companies to alleviate pressure on the balance sheets of these firms.
- Water demand will exceed supply by 2030, so the country needs a strategy for investment in water-resource development, bulk-water supply, and waste-water management and should apply lessons from the renewable energy independent power producers program.
- Small businesses should receive full or partial exemptions from certain regulations, including labor laws, to lower the startup costs and reduce the regulatory burden.
- Conditions for banking licenses should be made less onerous and banking regulations should be more flexible to new developments, such as the growth of mobile money
- Fuel-price regulation should be reviewed, particularly in terms of spot price benchmarks and where regulation has supported incumbents such as Sasol Ltd.
The paper is out for public comment until Sept. 15. What may further complicate Finance Minister Tito Mboweni’s efforts garner support for the 77-page document as policy is that it doesn’t mention three key ANC decisions: expropriation of land without compensation, nationalizing the Reserve Bank and investigating the use of prescribed assets of pension funds to boost inclusive growth.
While Treasury’s proposals are similar to those stated in previous development plans, it is unclear whether they will be supported or lead to coordinated policy action because they have not been issued by the government, Nema Ramkhelawan-Bhana an economist at FirstRand Bank Ltd.’s Rand Merchant Bank, said in a note.
“The proposals are a further demonstration of our country’s ability to conceptualize practical solutions but, at the same time, an expression of its failure to execute on seemingly well-thought-out plans,” she said
No strategy from Tito Mboweni he is for whole sale privatisation of Eskom. NUMSA will unite all workers to take to the street in a rolling mass action strike through section 77, defend all our SOES from dangerous Hyenas like Tito who must go back pension with all sterile ideas.
— Irvin Jim (@IrvinJimSA) August 28, 2019
Just read @tito_mboweni ‘s paper on proposed economic reforms. It’s largely great! If there is serious commitment to implement, then we really can get the economy growing, and create real prosperity! Will the enemies of growth in the ANC let this paper get anywhere?
— Geordin Hill-Lewis (@geordinhl) August 27, 2019
This is incredible: Fin Min @tito_mboweni predicts our economy will grow by close to 4% if a series of structural reforms are enforced.
— James de Villiers (@pejames) August 27, 2019
Comment from Biznews community member Lawrence McCrystal:
Your efforts to hear the other side (“audi altera partem” in Roman-Dutch law) are greatly appreciated by the vast majority of thinking South Africans. Well done and do keep it up.
Here, for what they are worth, are thoughts of an ever positive/ageing but still active economist who has lived through all the ups and downs of our beloved country for the past 83 years and always seen our positive attitudes and approaches triumph eventually:
The proposed plan announced by the Treasury for public comment is a huge step forward for our government which has hitherto been confining its attention to taking away from those who work hard to add value, imposing controls and restrictions on them at the same time, and wasting/stealing the money raised. These are the kinds of people to whom making the “cake” bigger is an alien concept. This announcement is such a joy to behold yet most commentators reported on have focussed on the negative reaction this is going to get from the tribalist/take from those who generate growth/control maniacs. Of course we know that but let’s get on the positive waves now all you people who want to see our country prosper and the ghastly poverty in our midst eliminated. Economic growth is the only way to achieve this.
We should be doing everything we can to overwhelm Tito Mboweni, the Treasury and, in the background, President Cyril Ramaphosa (and his advisors), with our supporting cheers and help. It’s what we have been hoping for over the past decade. This is a watershed and we’ve got to do everything in our power to make sure that the coming battle is won. So let’s all of us who favour the path of economic growth make our voices heard in support of this initiative in whatever way we can, and forget about party politics for the time being. I do believe that, if we can get the “Venezuela/Zimbabwe mindset” bunch on the back-foot, we who want see the huge potential of our people and our country released into the prosperity we are capable of, will win the day.
Blessings and best wishes.
Comment from Biznews community member Myles Fourie:
Dear Mr Tito Mboweni
I salute you, sir, for raising your head above the parapet…again!
To quote Carol Paton of BD and a exert from the Daily Maverick (Highlighting and emphasis are mine):
“The governing party and its allies were also caught unawares. Disruption was Mboweni’s intention. Almost nothing moves in President Cyril Ramaphosa’s administration, with urgent priorities announced as far back as February 2018 — like decisions on broadband spectrum and energy planning — still stuck in the works 18 months later. Policy discussions in the ANC and the alliance are similarly paralysing, with vested interests and ideology derailing and diluting rational government policymaking.”
“However, there is a reason that the ANC has not been able to make economic policy for nearly two decades, and that reason has not disappeared. It is to do with the very structure of the party, its bid to be a broad church and to appeal to everyone. (You, Mr Mboweni are the exception) This is not a problem or a structure that can be done away with easily, or quickly, or ignored. It will come back again and again…and again and again! This is precisely why Mboweni has in reality gone over the heads of the party and appealed to the public at large. He will be aware that the vast majority of those who are unemployed aren’t that interested in ANC or Tripartite Alliance processes around consultation. They simply want jobs. This plan, then, at the very least gives him a document to point to, to say that something is being done, and he is the person doing it, and people should back him. Business is already doing this (and by implication, also now backing Ramaphosa after some signs that his alleged lack of action may cool that support). When Mboweni first published these proposals, some of the first commentaries suggested that he was trying to push people into two camps – those who will support fact-based policymaking, and those who follow ideology blindly to the ends of the Earth (or just to Venezuela).
So far, that analysis seems to be holding up. The next big move on this is likely to come from Cabinet. DM”
The unemployed want jobs-there is so much low hanging fruit in the plan.
The first 3 sentences of your executive summary espouse SA’s crisis:
- South Africa’s current economic trajectory is unsustainable: economic growth has stagnated, unemployment is rising, and inequality remains high.
- The government should urgently implement a series of reforms that can boost South Africa’s growth in the short term, while also creating the conditions for higher long-term sustainable growth.
- These growth reforms should promote economic transformation, support labour-intensive growth, and create a globally competitive economy.
Here are some of my thoughts:
- Agriculture-very pleased to read about positive things happening at the Land Bank-the multiplier effect of Agriculture is MASSIVE and the benefits address commercial, social, rural, less-skilled, health and economic needs
- Renewable energy-FDI is primed for this industry and provides so many jobs
- Improving educational outcomes throughout the educational lifecycle, with a particular focus on early childhood development (which presents the greatest return on educational investment) and enhancing the relevance of education systems by better aligning learning outcomes to labour market needs. BRILLIANT-OUR CHILDREN ARE THE FUTURE
- Tourism-deploy the army to protect tourists around the country (we need to declare war on crime as we are not about to go to war with any other country), sell SAA to Emirates who can set up a Southern Hemisphere node on an equivalent to their Northern Hemisphere node
- Litter is a scourge in South Africa-imagine how many jobs could be created overnight to deal with this plight. It can be a catalyst for national pride and change like the “broken windows” campaign in New York …it only requires a spark to get a fire going!
- Broadband Spectrum-break the Telkom monopoly that has stifled businesses of all sizes for decades – I am delighted that you have ruffled their feathers. They have bullied for far too long!! ALL SOUTH AFRICANS need to be involved in the 4th Industrial Revolution-there is no time like NOW to embrace this revolution-we CANNOT afford to let this opportunity to slip by!
- Roads damaged by heavy trucks where goods should be railed-coal mines should pay where they have damaged
- Basic Infrastructure where maintenance has been neglected for years eg Bridges, sub-stations, water towers, post offices etc.
- Privatization-“deploy the good bank/bad bank model that was used to good effect during the global financial crisis, especially in the US. Using such a model, SOE assets and liabilities would be separated into new, “good” SOEs holding assets, with the old, “bad” SOEs holding debt. The government would sell equity stakes in good SOEs to private investors and recapitalise their remaining assets using government capital and new SOE loan debt. Some of the loan debt could be turned into equity once the new, good SOE start to perform. The funds raised by selling off stakes in the new, good SOEs would in essence mean that they use these funds to buy out the assets from the old, bad SOEs, which, in turn, use the funds to extinguish the old, bad SOE debt”-courtesy of Professors Burger and Calitz
- WATER-imagine the chaos and mayhem if SA have less water than required in or before 2030 (this is my biggest fear as the ugliest of humanity will be exposed!) Bring in the experts both locally and internationally.
- Lifting of visas and lifting restrictions on foreigners with skills are very good initiatives
- Cut the red tape for doing business and provide lower barriers to entry immediately – a simple survey to the business community will identify what needs to be cut. SMME’s are the lifeblood of the future of this country
- Incentivize the public/businesses for exposing corruption. If each percentage of VAT generates R20b/annum then for every R50b/annum of corruption that is exposed and eradicated, SARS will reduce VAT by 1%. Corruption is valued at being at least R150b/annum….just imagine if all of this was eradicated, SARS would be able to reduce VAT by 3% (or widen the net for zero-rated essential goods-my preference as it obviously benefits the poor the most) and still have an additional R90b/annum that they currently don’t have
South Africans want action and clear-cut plans of when, where, what and how-just get started as opposed to deliberating! Start with the urgent priorities that the President announced in his SONA of February 2018 (yes, 18 months ago).
Another exert from a letter by Martin Lombaard to BD:
“the answer is in first-year management textbooks: plan, then organise, execute and control. Nothing happens if you stop at the plan. I sincerely trust this is not just another plan that tell us of the “dream city” and millions of new jobs. Organise, implement and control, my dear sir! In the end you will be judged by the result not the dream. We as humans look into the future to motivate and to give direction to our lives. If you destroy the horizon — as the ANC did in the past 10 years — that which we as South Africans hope and aim for, you will never reach your three objectives. Viz Economic transformation, inclusive growth, and competitiveness”
Don’t get bogged down by medium term and long term plans at this stage with the exception of dealing with ESKOM and Water.
Don’t EVER give up on the good fight!
A very concerned, semi-retired father of 2 teenage daughters.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.