If President Cyril Ramaphosa’s new government of national unity (GNU) coalition were to listen to every piece of advice about what to do once it finally settles down to run the country post the 2024 election, it would get nowhere. Every man and his dog has urgent new policy counsel.
What is abundantly clear this early though, is that local and international investors are looking at SA through fresh eyes since the formation of the GNU, even though — perhaps especially because — it brought the one-party 30-year dominance of the ANC to a dramatic end. We are in a new place.
The promise of a more circumspect government has made our debt more attractive to the institutions that buy it. The earliest measure of this is that yields on SA bonds — the instruments through which we borrow money in local and international markets — have measurably fallen since the election. It means our repayments on debt fall, and that makes it easier for the government to lower the debt to GDP ratio. Both the rand and the JSE comfortably rode out a collapse in global equity markets 10 days ago.
And it is impossible to overstate the importance of the end of load-shedding. Eskom is back to doing its day job, and there has been so much private investment in renewable energy, and such a steep fall in demand for Eskom’s coal-fired power, that we are now, miraculously, over-supplied.
But the government now needs to get to work, and there are four things it absolutely has to get right, and quickly. It must walk away from policy that creates neither wealth nor jobs. And it must quickly decide what infrastructure to build and ensure it does every project with private sector participation. The transition to greener energy must speed up, and Ramaphosa must ignore the many pressures on him from inside and outside his new coalition and hold it together.
Stable government is vital. and while all the partners in the coalition bring real value to it, the most critical to Ramaphosa is the presence of the DA. In the few portfolios it now occupies, the DA is able to bring a policy rationality and intellect that has been missing from ANC governments for the past 15 years, and the markets are telling us they like it. Without it, the GNU probably fails. It is a burden both the ANC and the DA must live with.
The policy to drop is localisation, the idea that there are hundreds of products we import that we could make here. A big problem is that Ramaphosa fully embraced this when former trade, industry & competition minister Ebrahim Patel sold it to him. And the ANC is still in love with the idea that there isn’t anything we can’t make here.
Having made the attempt though, it was clearly misguided. Patel made ambitious master plan deals with big businesses to expand their own production or help smaller new companies, but he had to offer tough import tariffs to protect them in return. And not much happened except that the local prices of protected products increased. The de-industrialisation of the economy continued, as it has in most of our traditional trading partners.
In 1994 manufacturing contributed more than 21% to SA’s GDP, and it is now down to about 11%. In no similar economy anywhere is manufacturing creating jobs in meaningful numbers. The same is true for the US today, where manufacturing contributes just 11% to GDP, the UK (9.3%) and France (9.5%).
The fact that we have the same profile as far richer countries might make an interesting academic study, but it isn’t anything we can change. We are what we are and until the ANC makes policy to fit the facts and not its fantasies it will continue to get nowhere.
Fortunately, even left-leaning “progressive” voices in SA have begun to argue for a sea-change. Neva Makgetla, the American policy academic (and veteran Business Day columnist), argued recently that current industrial policy was simply not “fit for purpose”. The World Bank has just called for a sweeping overhaul of trade policy and a determined new focus on exports.
That surely has to be right. Exports earn foreign exchange and cost us little. Powerful incentives to export what we already make would dramatically improve our industrial position, strengthen the fiscus, create stable jobs and cement new footholds in the world.
To the extent that new infrastructure might make it easier to export, it would be welcome. But the notion now abroad in the ANC that infrastructure should in some way be dictated by industrial policy is just plain stupid. Ports and roads maybe, but people need water and electricity, decent housing and schools and communications and hospitals, whether or not we have any manufacturing at all.
And those needs are enormous. In 1994 we were 43.5-million people. Now we are 63.5-million and the old infrastructure is a miserable sight today. Both Ramaphosa and his new DA public works & infrastructure minister, Dean Macpherson, say they want to turn the country into one big building site, but the burning questions are how, when and who will lead?
Infrastructure is strewn all over the government — there’s a unit in the presidency, Macpherson has some, the Treasury has a big say, and Patel’s successor, Parks Tau, has yet to play his substantial hand. Yet leadership is critical. There’s plenty of money and talk of prescribed assets will kill a growing enthusiasm.
The world is in an infrastructure supercycle and we are again being left behind. We need to proceed quickly with the dozens of projects already approved and bring in private sector money to build and manage new assets until they devolve back to the state.
Chasing greener energy is part of the infrastructure story, but separate too. We too often mistake manufacturing green energy products such as solar panels, which would be nice, with manufacturing, mining or farming our traditional products using green energy, which is the only way we survive the future markets speeding towards us.
There is so much at stake, and so little time to make the right calls.
• Bruce is a former editor of Business Day and the Financial Mail.
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