I wanted to laugh when I saw the ANC has produced a new 10-point economic turnaround plan. Instead my stomach knotted. Nothing is better guaranteed to backfire than a multiple-point ANC economic plan.
The comrades had primed the media. “‘Big bang’ plan to turbocharge SA’s economy,” breathed the Sunday Times on its front page, reporting that the plan, which includes the reforms in electricity and rail that President Cyril Ramaphosa already has under way, would also include a 25% tax on exports of chrome ore and cheaper electricity.
“ANC rolls the last dice,” said Business Day’s front page lead on Monday after an ANC national executive committee meeting at the weekend. The newspaper had reported weeks earlier that the export tax on chrome ore — which when smelted is a vital ingredient in the production of stainless steel — was in the offing.
Back in May it carried a warning from Ashley Nyiko Mabasa, from the office of the deputy minerals minister, that the local ferrochrome industry “is in a state of profound collapse”. Some 34 of SA’s 59 chrome smelters had shut down or shifted production in a decade, he said.
SA’s share of global ferrochrome production fell from 39% in 2009 to just 26% in 2019. The main problem cited has been high electricity prices. You would have thought the ANC economic planners might have noticed earlier.
Now trade, industry & competition minister Parks Tau has ordered the International Trade Administration Commission (Itac) to issue permits for the export of chrome ore, citing an increase in illegal chrome ore mining. The tax, if it ever happens, will follow.
Typically though, the ANC is not only late in appreciating a gathering crisis but its response will probably do more harm than good. The unintended consequences of poor ANC policy have dogged the country for decades, but have done almost nothing to dent its confidence in its ability to manage economic complexity.
Typically though, the ANC is not only late in appreciating a gathering crisis but its response will probably do more harm than good.
Only in its universe could imposing more bureaucracy on a struggling industry and then hitting it with new taxes even begin to make sense. The fact is that we have lost leadership in the global ferrochrome industry and are unlikely to get it back.
Expecting Eskom to service every large consuming industry with subsidised prices is also absurd. What happens when international steel or aluminium or stainless steel prices fall and the industries cry out for even cheaper power? It’s tough out there. You’re either competitive or not.
Our industrial policy is profoundly broken. Many of the “master plans” Ramaphosa gushed over five years ago have already failed. We produce fewer cars now than we did when the plan was to double production. The steel master plan is a disaster. Poultry too. Textiles is only partially successful.
The problem is that government talks only to Big Business when it makes its plans and ignores the small businesses using steel or aluminium to fabricate products. This is where the jobs are, but they don’t count for the ANC because the jobs are often not unionised.
As government struggles to protect its BEE policies it risks creating even more mess. A few months ago Tau began touting a new R100bn empowerment fund, but can’t find the money from local companies. Business Day has reported that a broad levy — 3% of turnover — may be imposed on all companies employing more than 50 people. But what if the 3% of your turnover is more than your profit?
It’s the end of the road in more ways than one. Ramaphosa’s reforms are both tentative and painfully slow. Little wonder though, when you look at his cabinet and advisers — there’s not a businessman or woman in sight.
• Bruce is a former editor of Business Day and the Financial Mail.
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