Taking stock
By Cees Bruggemans
When we forthrightly take stock of our country strength & weaknesses, it is easy to identify the factors which will make us a 5% growth economy, transforming us out of recognition.
It is called the National Development Plan, as originally envisaged rather than what is being done, or not done, in its name (as too many seem to feel it is open to a free-and-easy interpretation).
It is, unfortunately, even easier to identify the things that are preventing this high achievement outcome from being achieved, which can be summed under headings such as active public failings, deliberate disruptions, blind sleepwalking and private shortcomings.
And that is before we come to the policy idealism, popularly inspired.
What is most disconcerting is that many of these debilitating features aren't easily corrected in a fractious democracy. Too many now hold varying views on these many things to hope for a quick fix.
That should be a sobering thought.
The "active public failings" come in three areas, all of them by now well known, namely infrastructure, education and industrial relations.
We now lack energy reliability, yet our modernity demands it. It could take a decade restoring, if the right decisions are henceforth made. Given track record, that isn't a given, but it can be a promise, given the right leadership.
It isn't as if there isn't a promising generation waiting in the wings.
Then there is insufficient port and harbour capacity, and rail infrastructure. Well, fix it.
The collective bargaining process is not functioning as envisaged in the Labour Relations Act. This may be the understatement of the century, but again the message is a simple one. Please ensure that it does. Somebody. Anybody.
We are no longer an industrialising economy, but in many respects a post-industrial one, with an increasingly sophisticated economy, and a tertiary (services) sector contributing over 60% of GDP.
Such an economic engine needs adequately trained manpower to keep growing. And it needs a lot of such skilled labour to keep expanding rapidly. Yet the skill base is distressingly low, the shortage of trained manpower chronic. A reflection of an education system failing in adequately providing in the needs of society.
And an immigration policy suffering from good intentions poorly executed.
The "deliberate disruptions" are at sector, and even company levels. There are many who will offer examples, but two stand out in a larger context.
One is the heavy regulatory mindset towards mining, which seems to operate on the basis of "regulate them to death" rather than seeing mining as desirous of a cooperative relationship with the state.
The other is agriculture, where land ownership is the main contention, and where there appears to be a conceptual clash between land reform (involving redress and justice) as opposed to agricultural production (efficient adequate food supply).
These disruptive interfaces create producer uncertainty and inhibit new fixed investment and job creation.
The "blind sleepwalking" is most often shushed, made off as not being disastrous at all, indeed instead a miracle of well-intended, good policy.
So, for instance, there is the rapidly expanding social grants system, now with 16 million recipients and yet to reach any ceiling on a 53 million population.
Those championing this extensive social safety net quote the World Bank, on the extent to which it has allowed us to reduce our stark Gini inequality through a most effective transfer system, preserving the social peace.
This is undoubtedly true. But equally there needs to be recognition that if unchecked, further extensions of this elaborate welfare system might start to threaten our macro sustainability.
In particular, we seem to be accepting as a matter of course high fiscal (budget) and current account (saving) deficits, yet these are machinations of the devil, creating global dependencies and a financial fragility potentially deeply undermining our national health.
The same can be said of an unsustainable rise in public sector employment, far too often unproductive and lacking in capacity, detracting value rather than adding it, eroding the resource base earmarked for social delivery, and in its own right threatening fiscal sustainability.
These tendencies feed into a rising public debt burden (GDP ratio), in turn via deteriorating credit ratings inviting higher debt costs and exposure to greater financial instability, along with the current account exposure, regarding the risk of capital flow and Rand currency shocks, and these in turn hitting inflation, interest rates, the banking system and asset markets generally.
This is a non-physical way of threatening our modernity.
Private shortcomings probably include high household indebtedness, the absence of a strong household savings culture, and sometimes a lack of domestic competition in highly structured product markets.
The intense consumptive nature of SA society, and the productive ability of its private sector, aren't features easily undone, keeping average household savings low, while the absence of genuine threats (deep hardship memories of war devastation, hyperinflation, financial failure, economic depression) make it difficult to in-calculate the necessity of future provisioning.
Domestic competition can be encouraged through regulatory safeguards, but also by allowing more global competition. Instead, the policy inclination has again become one of protecting.
As to popular ideals, society is not downplaying its historic demands, regarding more widespread participation. This involves land, employment, business ownership.
Instead of acknowledging that a high growth environment will allow such structural transformations to occur, or occur more easily, policy-assisted, the absence of a high performance environment is adding to the pressure to simply force these demographic issues, colliding with vested interests and their constitutional safeguards.
In the process, for many participants there is yet more uncertainty to cope with, detracting from the intended objectives. This aside of the skewness of outcomes, favouring select elites rather than achieving broadbased upliftment in a high performance environment.
These are some of the things that keep us occupied as we struggle to keep going in some respects, while in others sleepwalking into yet bigger problems, all the while keeping popular demands upper most in mind, rather than putting a broadbased high growth performance central to all our doings.
Inspiration
Professor Tito Mboweni "Going nowhere slowly: prospects for the South African economy" Special Lecture Department of Economics, University of Stellenbosch 11 May 2015