Finance Minister Malusi Gigaba sounded very confident during his media conference just prior to his mission to the US for the spring meetings of the World Bank and to meet Moody’s rating agency and other key foreign investors. He was hoping to reassure Moody’s that the government was determined to stick to its tried and tested policy of fiscal discipline and macroeconomic stability notwithstanding the public pronouncements by the President about a highly punted and recent shift to "radical economic transformation".
His newly engaged adviser, Prof Chris Malikane, added more credence to this shift by publishing what one might call the most radical economic policy shift in the post-democratic era. In the nature of how things really work in the current administration, his adviser could never have been appointed without prior clearance with the President. Now he claims the adviser has been "reined in" and told to keep quiet and give him space to do his work. Read this to mean, "I appreciate and like your opinions but please don’t voice them because the market will be hostile."
But to understand this floating shift in economic policies we need to go back to the beginning of the post-apartheid transition period.
The Mandela administration inherited an incredibly nasty legacy from the apartheid government, with shocking levels of radicalised structural poverty, income and wealth inequality, unemployment and a bankrupt state. The post-apartheid democratic government was morally obliged to respond to these challenges through a comprehensive set of social welfare grants and other benefits, such as rolling out free housing, access to electricity and water, etc. These are parts of the good story to tell in respect of poverty alleviation and social justice.
Confronted with the economy that was in crisis at the beginning of the transition period, the ANC-led government has, over time, introduced a series of growth strategies to deal with these challenges.
First, it was the Reconstruction and Development Programme (RPD) in 1994, designed to provide some degree of macroeconomic stability at the onset of the transition. This was followed by Growth, Employment and Redistribution (Gear) in 1996, criticised as opening the door for the ANC’s current neoliberal economic policy. Now we hear about the nine-point plan.
The central theme of a market-led economic policy within the framework of fiscal discipline and macroeconomic stability underpinned Gear and is a central feature of all the other ANC growth policies: the Accelerated Shared Growth Initiative for SA (AsgiSA) of 2007; the Industrial Policy Action Plan of 2009, as revised; the New Growth Path of 2010; and the National Development Plan of 2012.
These varying strategies, over a short period of less than 10 years, signify policy incoherence and gridlock by an administration that was overwhelmed by the inherited challenges.
The debate about inequality and other inherited socioeconomic challenges from the apartheid system required the following questions be raised: did the liberation alliance movement really have a credible transition strategy going into the negotiations that matched the avowed mission of the "social democratic revolution"? What were the critical elements of this purported "revolution" and what benchmarks were set to evaluate its progress? If our constitutional democracy and the electoral system that underpins it represents the reversal of political power relations, what benchmarks were set in the transition strategy to represent "corrective justice’ in economic power relations?
The response of the ANC-led government should have been anchored in policies that provided for mass low-cost employment in retail manufacturing, and a major boost in informal employment or self-employment, in combination with broad social-security support. This should have been the response of a government driven by a high level of consciousness for social justice as a political philosophy and that was also manifestly pro-poor in its policy outlook, as the ANC has often claimed to be.
The reality we must confront is that about 22-million adults do not have matric and only 34% are employed (Statistics SA; 2015). Yet this has not resulted in a fundamental shift and rethink of the assumptions underpinning SA’s economic policy and strategy. Instead what we have is a development policy and strategy that has put a high premium on formal job creation in a paradigm of technology and skills driven growth trajectory yet our labour market conditions require jobs that can benefit our large, under-educated and unskilled labour force.
The core of the problem is economic growth. What we need to understand and accept is that it is business that creates jobs. The critical incentive is to create the environment and business confidence levels for domestic investment to grow in order to attract foreign direct investment. The ratings agencies do not form a negative impression about our economic situation only on the basis of their own analysis. They rely on the opinions and perceptions of the local investors and financial institutions. This is the area we have neglected and the finance minister is facing a daunting task. The irony, as we understand, is that no business leaders accompany him on this trip. It speaks volumes!
The most critical task facing government at this moment is how to build a credible and sustainable social contract with business and labour in order to improve investor confidence, following a reckless and thoughtless decision by an unwise president to replace trusted leadership at Treasury. This can be achieved in the short term and the ANC knows exactly what needs to be done to achieve this objective.
In the aftermath of the electoral losses experienced by the ANC in the 2016 local elections and following the much publicised mission of reflection and self-correction, we now see Jacob Zuma assume adventurous leadership in new policy terrain that has exposed serious fissures and fault lines in the ruling party. His intention was finally expressed in his reckless Cabinet reshuffle that has landed us with the feared junk status that we, in fact, deserve because of incoherent policy failures, collapsing SOEs and a cancerous patrimonial state.
At one level the question is whether the push was motivated by the electoral loss and its effect on the future prospects of the ANC or whether it is a result of self-preservation on the part of Jacob Zuma as the reality of certain political realignment approaches in 2019. The outcome will bring about life-changing prospects that arise from the criminal charges that he is certain to face. At another level the question is whether the prima facie case of "state capture" developed by the past public protector is the main motivator. All evidence points to the latter.
What is clear, though, is that whereas the prior post-apartheid democratic administrations focused on fiscal discipline and macroeconomic stability while pushing for growth, the Zuma administration was singularly preoccupied with building a thriving network of a patrimonial state. And they have succeeded spectacularly when measured by the collapsed governance in the SOEs and malfeasance and corruption that is everywhere.
The principal reason is that Jacob Zuma came to power as a compromised person. For a complex entity such as the state, ethical and moral values are a precondition for success.
• Motsohi is a Strategy Consultant at Lenomo Strategic Advisory Services
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