Enoch Godongwana: Gigaba’s visa to stay, external factors causing downturn

ANC’s Head of Economic Transformation Enoch Godongwana says the country’s budget will have to be re-prioritised to support infrastructure programmes. Speaking to Tim Modise, Godongwana says the economic downturn is due to external factors and the country has limited room to counter the slowdown. He also says the stringent Visa regulations are necessary and will not be reviewed. Godongwana says more support should be given to the agricultural sector as the country faces the worst drought in 22 years.

Mr Enoch Godongwana thanks very much for talking to us here on Biznews. I appreciate your time. The NGC has met. Decisions have been taken, but some of them are controversial and others will argue, even unworkable. Just talk me through a few of the important decisions on the economic front.

Maybe you can tell me what people mean when they say it’s unworkable because we’ve been very careful in costing some of them. Let me just tell you what the objective is. Firstly, the objective is to deal with the youth unemployment and design a strategy for those who are not in employment, education, or training. We’re calling on all South Africans including business to work with us and craft an incentive, which would incentivise business to work with us in the training and development of their skills. That’s the first thing. I don’t think it’s impractical and unworkable. The second set of issues is on the manufacturing sector. Clearly, what we are saying is that we need to restructure the incentive package currently in place and review it in order to direct it in directions that are going to be labour-intensive companies. For me, that is not a practical resolution. The fourth set of issues…

Now I’m not looking at the resolution, but we’re then saying that to finance all these packages we’re talking about (and there are a whole range of packages), we needed to reprioritise the budget first. Secondly, it is to mobilise resources. What people are then calling a controversial issue is the notion of the wealth techs. We have not said that we’ll call for the implementation of the wealth tech. A number of people are saying South Africa should consider wealth techs. In light of that (as the OECD), we should consider investigating that possibility. We’ve not said we’d implement it. I was quite careful at the press conference. I even said to Zanele, “I know you’d like to take this as your first page, but be careful. Here’s the wording”.

I want to talk you through a few of the points that would be regarded as unworkable, and these things are being said against the backdrop of the economic growth having slowed down remarkably. There’s also talk of us about to enter a recession as an economy. One of the things that’s come up repeatedly is the labour laws in the country and many businesspeople saying that the laws are such that it makes it difficult for them to employ people. That is why they would rather limit their exposure to employing up and coming young people.

Tim, what did these people say we said about the labour laws?

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Well, I suppose that at the NGC it should have been something, which is considered.

That’s specifically the problem, Tim. That’s why, at the end of the resolution, we are calling for a job summit, but preceded by intensive work so that job summits should not be a talk shop. The perception is that we’re talking past each other. Let me just give you indication for instance, on what is happening with labour laws. If you look at the world competitors’ reports, labour laws have always been one of the areas considered to be impacting on business in South Africa but after the long strikes in the mining sector, this thing has come up to be the top, which is a perception in my view. However, perceptions sometimes can be reality that’s why we are addressing the issues that causes that. The first issue is the length of the strike we have never experienced. The second set of issues is the violence associated with that. That matter, as we speak, is being attended to in Nedlac, so that we should change legislation, to give effect to these concerns.

Are the young…?

I’m taking you to a point where I’m saying business must take it and be aggressive, in addressing this matter completely, in terms of proposal. Not in an abstract way of saying general and Labour Law, they are a problem. To say what are these specific issues in the Labour Laws that need to be addressed?

What about the training and the quality of education that young South Africans receive – that’s one area where there are concerns that they’re not being trained in the right skills.

That’s precisely why. Our first resolutions talk to that matter. It says the young group of young people who are not in employment, not in education, not in training and, therefore what we needed to do – there’s no point in taking them and flatting SATS, if the same thing is not talking to the skills required by business. In other words there must be a relationship between that training and the requirements business have, and that’s why then we are saying two things. First, is the relationship – is that relationship. Secondly, business themselves must take the responsibility for training but we have to incentivise them to do that.

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A couple of things have emerged as well on the agricultural.

Let me just say, Tim. There’s been that perception that it’s a perception, which is saying we are taking resolutions, which are not practical. We have tried to be as practical as much as possible in this regard.

Let me talk about agriculture. One of the resolutions says the farm workers must be given 50 percent, or thereabouts equity, by the farmers, themselves and they’re saying, but it’s going to be difficult for them to do that.

Look, I think on that matter the person who chaired that committee is Minister Nkwinti. It’s a different one but it’s a different one and it didn’t fall within our committee. We did say something on agriculture though, in our committee. In our committee, we referred to the fact that we are witnessing a drought in that sector, which is unprecedented in 22 years. Clearly, what we need to do is to show our support in that sector, in the form of finding how we assist agriculture, both commercial and emerging farmers, in the form of implements and equipment. From our side, it’s the support measures, which we talked about. I know there was one committee that dealt with that, which was rural agriculture and land reform, which Minister Nkwinti said, “I would like you to pursue that matter with it.”

The other matter is that of the confusion or policy confusion. It appears especially in the tourism sector but it’s also in other areas. Let me deal with tourism first, where the argument is that the visa regulations as pursued by Home Affairs are working against the tourism objectives of the Tourism Department. Therefore, there seems to be confusion as to what should happen first. We are told that numbers have declined and that sector is shrinking.

Let me just say that the sector is shrinking for a variety of reasons. There’s no doubt that if you look at the figures now, on tourism, really they’re not impressive. No one can deny that but what is the… Let’s look at the visa regulations. What are these regulations intended to achieve? These regulations are security measures for a variety of issues, including child trafficking. That’s a noble objective, in effect, so when you talk about a country – a country has a number of objectives. Tourism is but one. It cannot be taken as a solution from the security of the country and then criminality that takes place, in the form of child trafficking. What we are trying – what we then said in Conference, while that objective is a noble one – we need to balance that objective, with the balance with the interest of promoting the country and tourism. Therefore, we supported the initiative with the Deputy President.

The Government is taking under the leadership of the Deputy President. To my knowledge, there was a meeting yesterday precisely with all the relevant parties, under the leadership of the Deputy President to try to craft a balanced resolution in this regard.

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Well the Business Unity, South Africa’s CEO, for instance Ms Khanyisikle Kweyama, complained recently saying that there was a lot of policy confusion from the government, and this would be an example of that. That business felt excluded, almost unwanted and not even consulted on these things that even when business alerted government or the ANC to these problems. The ANC was reluctant to attend to the problem, so how do you explain the way the visa regulations are being perceived by the tourism sector and what should the tourism sector do about this matter?

Well, the tourism sector, let me just say there is an appreciation by government that the regulations – the objectives, as noble as they are. They have unintended consequences. Are you with me, Tim?

Yes, I’m with you.

The objective is a good intention but we have unintended consequences. In this regard, government has taken the initiative under the leadership of the Deputy President, to strike a balance in achieving this thing. I don’t know why that would be saying it’s a government, which is insensitive to them. Let me just take you back. In the run-up to the NGC, I had a consultation with a number of business organisations, and I heard submissions from a number of business organisations and we’ve taken those submissions and discussions seriously.

Another…

For the first time in our history, we have had that interaction where we’ve had broad consultations with a number of business associations, a number of NGOs, which is part of what we tried to achieve.

Well, we also have energy constraints, right. The business community is saying that with the kind of challenges that Eskom is facing, at this time, that we’re headed for trouble and we will not see any useful growth from this economy. What resolutions did you come up with and what is your thinking of increasing the energy generation and distribution capacity, first of all.

Yes, a couple of things. We too are saying is that we have to move fast in creating and increasing more capacity. We have to ensure that the fixing and maintenance of the existing fleet and, secondly, we have an ailing fleet, which some people argue we should be decommissioned. Our argument is that we should bring in the private sector to work with us in refurbishing some of those old power stations, while we are expanding the existing capacity. Again, we have what is called a renewable program, which is lauded as one of the best in the world, so there’s no reason people are saying we are not working with the private sector on the energy stuff. Perhaps it might not be the one that all of us are happy with, so we would agree with the private sector that the pace at which we are doing this thing is not the one we would welcome. That’s what was said in the NGC. We want to move with speed in expanding this capacity.

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That’s what the ANC wishes for. Practically speaking, what is going to be done to make sure that…?

What is going to be done is we’ve agreed, one of the things we have said that a part of the problem is that at development stage capacity is when you have an economic centre, which manages and coordinates economic management, of course government. Therefore, the NGC said that’s what we should be looking at, in the President’s office, so that there should be no competition. We avoid capped issues amongst Ministers, and put the interest of the country above board, so a resolution is that that’s the work, which we should be doing in government.

Now, with all the challenges that are there in the economy and the fact that the results are there for everyone to see – a high unemployment rate, low growth in the economy. What to your mind, as head of Economic Transformation, do you think needs to be done now, in the short term, to improve the performance of the economy and to create opportunities?

Look, it’s an unfavourable environment. A number of these things are beyond our control. For instance, the global crisis, which is imparting on global demand in general, is something beyond our control. The commodity crisis, which are imparting on the mining sector and therefore, spilling over into other sectors is also beyond our control. What we should be looking at – I mean, we also have a serious drought, which people are saying is one of the worst in 22 years. Those are things beyond our control but what is within our control, in order to stimulate some of the sectors, which will help the economy more, and improve our competitiveness on a longer time – is put money into the infrastructure. Again, that will do it within a limited fiscal space. That’s why we are saying we have to really, prioritise budget, away from consumption spending, to put investment.

How do you think, and I’m looking for a message, if you will, to the business community, generally, local and international?

Our message is we are going to first track the infrastructure project and lift some of those infrastructure projects, which can be a catalyst for stimulating demand. That’s what we said in our resolution and then that means we have to reprioritise the budget to achieve that. If we lift those, they will have an impact on structural skills. They will have an impact on mining. They will have an impact on construction, so our point is that in the immediate – that we have control over that issue. It is something which all of us can do. Another thing we need to be doing is skilling the people. Those are the immediate things, which are within our control that we need to be embarking upon.

Are you confident about the economy in the medium term?

Look, there are strong head winds. There’s no doubt about that but I think I’m confident in the South African economy. There is resilience over time, which we think if we are putting the right things in place – we will be able to turn it around.

Thank you very much for talking to us, Mr Enoch Godongwana.

Thanks very much.

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