ANC chief whip Mdumiseni Ntuli is a breath of fresh air. Speaking on TV as the ANC has an extended series of meetings to examine why it did so badly in the elections, he said the talks had focused on two issues. The first was that “something is radically wrong” with the state of the ANC in terms of the quality of membership and the quality of leadership. The second was “the failure of the economy”.
It should surely not take Ntuli long to put the two together, but ANC meetings are a strange beast. Sometimes the meeting, the discussion, is the actual work. No activity need follow. Ever since its days in exile it has been stuck between saying and acting. Maybe this time will be different.
The economy is not a playground and economic growth is not magic. It is the result of what you actually do. And more than two months since the election, President Cyril Ramaphosa’s coalition government has done virtually nothing but go through a series of set-piece meetings and ceremonies.
It is a blunt argument, but when you’ve promised your creditors to lower your debt-to-GDP ratio, and when paying your debt is costing more than your public health system, literally the only thing that’s going to rescue you is economic growth. Not conditional growth, with its conceits about black empowerment, gender equity, forcing companies to publish internal pay gaps and whatever else take precedence. Can you contrive a plain old muscular increase in our GDP or not? Last chance.
Emulsified through too much power for too long into a risible concoction of arrogance, ignorance, neglect and greed, for the past 15 years the ANC has always found a way to fall short. Fortunately, the math can help keep a genuine path to prosperity relatively clear.
There are only two ways to lower your debt-to-GDP ratio: you cut your debt and deliver austerity or you keep debt stable and grow your GDP. To do the latter you need investment. It’s what ignites economic activity, announces the arrival of a new employer, and raises productivity.
Until now Ramaphosa has set his investment bar dangerously low, attracting just enough in his first term in office to keep a sluggish economy ticking over. He needs to double his targets, at the very least. Investment into the right environment creates jobs, pays the taxes that pay for schools and hospitals, and pays off our debt.
The job of government is to make sure we are an attractive destination for investors. For years that’s been unnecessarily difficult, with a host of barriers keeping money out — BEE requirements are an obvious deterrent. Why would anyone put their money into a country which requires you to immediately hand over control of much of your investment to people you’ve never met? Why would a giant BHP want to buy Anglo American but specifically exclude its SA assets?
And if Ramaphosa is going to double his investment targets, where will the investments go? Foreign acquisitions of local companies don’t help, apart from a foreign exchange bump. We need new employers, new projects. There are two avenues — productive investments in manufacturing, farming, transport, tourism and energy — and enabling, critical investments in infrastructure.
The enabling investments need to happen before the productive ones, but the problem with building infrastructure here is that the government has no money. So a delicate balance needs to be struck between the state and private sector builders of schools and hospitals, roads, bridges, port expansions, pipelines and transmission lines.
Private contractors will want a return on what they contribute, and how the state raises its money as infrastructure owner is unclear. Amending regulation 28 of the Pension Funds Act to prescribe assets for infrastructure would be deeply unpopular and slow down a rollout. A funding model will have to be quickly found.
And still, despite Ramaphosa declaring in his opening of parliament that he wants to turn the country into a construction site, there is absolutely no clarity on what will be built. I asked infrastructure minister Dean Macpherson 10 days ago if there was a list of projects but have not had a reply. But it is vital, surely, for these guys to get the country behind some big, ambitious goals.
In 1992 the world watched in awe as the Spanish held the Olympic Games in Barcelona and the World Expo in Seville, and built their first high-speed train line between Madrid and Seville. In a year it did more to modernise the country than it had in all its history. SA now is a more complicated place than Spain then, but the truly alarming thing about Ramaphosa’s plans is that the statement of intent signed by members of the governing coalition, the GNU, commits them to aligning state policy with industrial policy.
However, with few exceptions SA industrial policy is a fiasco, driven by ideological fantasy, localisation, import substitution and “master plans” designed to protect a few big companies, your “winners”, instead of focusing on what we do best — we’re miners and farmers with a future in exporting and not our tiny local market. Tourism is also the equivalent of a natural low-cost and high-value export. All we have to do is welcome people to a clean and safe country.
Trade, industry & competition minister Parks Tau shows no sign of breaking with the central industrial planning of his predecessor, Ebrahim Patel, and if he doesn’t he’ll end up where Patel did — with a broken steel industry crying for ever more protection, chaotic poultry and an auto industry forsaken by electric vehicle producers. You can have all your “value chains” worked out to the last paper clip, but chasing your industrial dreams with an infrastructure build is a recipe for disaster.
We have just imposed a tax on imports of Chinese solar panels in the hope of growing our own solar panel industry here, which is typically absurd. China makes more than 90% of the world’s solar panels and all we have done is make our transition to the green energies that are going to be demanded by the world’s consumers more expensive. Heaven help us.
• Bruce is a former editor of Business Day and the Financial Mail.
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