No big business, no radical economic transformation, says Mcebisi Jonas
Fired deputy finance minister Mcebisi Jonas says big business is vital for achieving radical economic transformation — as is political support for the Treasury.
There is no doubt SA’s economy is in need of radical transformation, he says, but the current understanding of what that entails is too abstract.
He gave details of his understanding of the concept in his address at the Mapungubwe Institute for Strategic Reflection (Mistra) annual lecture.
"There is scope for using our core economic institutions more broadly to drive economic change towards a more cohesive strategy of inclusive growth," he said.
There was consensus that SA’s economy was in need of a serious overhaul, he said. Inclusive institutions were needed but elite interests prevented that.
"Our key economic institutions like National Treasury and the South African Reserve Bank have remained sound institutions," he said.
Noting that there were several interpretations of radical economic transformation, he said that while there was nothing wrong with President Jacob Zuma’s definition, it was too abstract to be implemented.
Jonas defined radical economic transformation as "progressive structural change in the fundamental features of SA’s political economy".
SA had a seriously underperforming, mixed economy, with entrenched inequality because of its colonial and apartheid past. "All of this must change without jeopardising [investment]." SA was only partially industrialised and the private sector was dominated by large-scale capital, he said.
SA was also integrated firmly into the global economy.
The services sector dominated, particularly the financial sector, which needed to become more open to fixed investment. Education was necessary, particularly because the public sector was generally very weak with low levels of accountability.
These fundamental issues were "mutually reinforcing. We can’t address one without addressing the others," Jonas said. "We must accept that inevitable truth that we need big business," he said.
Transformation was capital-intensive, and required policy certainty and a more competitive cost of doing business. "Dealing with corruption and the effectiveness of the state becomes a prerequisite for black economic empowerment."
He said fiscal authorities such as the Treasury, the Reserve Bank and the South African Revenue Service (SARS) needed political support in order to fulfil their constitutional mandates. "If there is any crisis that we’ve had over the last couple of years … it is the growing decline of political support for National Treasury."
The budget deficit for 2017-18 is R148bn or 3.4% of GDP while government debt is R2-trillion or 50% of GDP.
He said that against rating agencies, "we have no chance".
"I’m not sure that the gravity of this situation is understood."
Jonas said the green shoots of growth had been destroyed by the recent downgrades to SA’s sovereign credit rating, and this put radical economic transformation at risk, particularly if the Treasury were weakened.
The space for radical economic transformation was at the microeconomic level and improving spending.
"I agonise [over radical economic transformation] because the term has lost credibility. We need to recast it as a genuine programme of inclusive growth."