The medium-term budget speech will most likely be remembered for the endorsement of the new inflation target the SA Reserve Bank has long been calling for.
Since 1999 SA has worked based on 3%-6% being the guiding light under which the Bank was instructed to operate. This simply meant that whenever inflation exceeded 6%, all the panic buttons necessary to cool the economy would be activated.
The most explicit of these instruments — interest rates — is equally a source of pain for those who owe and want it to be as low as possible and a source of hope for those savers who want it to be as high as possible.
Recently, the Bank has gone on a public call asking for a revision in favour of a lower target and a narrower range. The problem with such utterances is that the political principals led by the minister at the National Treasury, Enoch Godongwana, believed that such a call is a policy position for politicians to formulate and for the Reserve Bank to implement.
The idea of unelected bureaucrats superseding the elected representatives of the people does not sit kindly with politicians, and ANC politicians in particular, given their predilection for the political tendencies and practices of yesteryear. The concession by the finance minister endorsing the new target was a rare retreat, in which scientific pragmatism prevailed over political posturing.
The tightrope associated with policy changes is that one has to understand whether a policy position has been given enough time and resources to be fully tested and its limitations and successes understood.
The foray into the rare domain of sensibility was also replicated in the concession by the finance minister that one of the ideas once mooted as a solution to the issues bedevilling the public transport system of the country — the public transport network grant, which was meant to enable various cities to move towards better-capacitated and integrated transport systems — has simply not worked out and should be abandoned in favour of something else.
The tightrope associated with policy changes is that one has to understand whether a policy position has been given enough time and resources to be fully tested and its limitations and successes understood. Historically, the gravitation towards taking too long to conduct assessments and make a call on which way to go has resulted in more money being thrown into a poorly understood and ineffectively implemented idea.
When the plug is pulled too soon, the accusation is that policy inconsistency means long-term effects are not really understood, and even new ideas are greeted with scepticism, as no-one knows how long the implementation and evaluation window will be. For a country that has a dedicated department of planning, monitoring & evaluation, the inability to define planning, implementation and evaluation horizons is surprising.
In the conversation regarding the revision of the inflation target range, the government has not engaged in a process of articulating its understanding of the impact and consequences of the proposed revision. Rather, its attraction seems to hinge on the consensus that low inflation is probably more good than bad.
While the science of that is obvious, the problem looms with the question of what happens when the trade-offs that need to be addressed are more complex and intersectional. To have a government that has limited capacity to formulate opinions that canvass the range of issues associated with such critical public policy pronouncements is concerning.
The most recent reference point of this problem — the conversation and confusion regarding the VAT increases proposed earlier this year — illustrates how problematic it is for a state to have such limits. If this persists, technocrats will increasingly take on the role elected public representatives should ideally champion. If nothing else, this would be an interesting development for democracy.
• Sithole is an accountant, academic and activist.
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