There are lots of ideas about the economy — but no action
The president has made all the right public noises about SA’s plight, and experts have many economic plans, but policy tardiness continues
That SA is not short of ideas or plans to revive and grow its moribund economy is clear. There have been any number of economic plans from the government, the private sector and other social partners, and a plethora of experts have offered potential solutions to SA’s problems. But the main problem has been, and remains, a failure to implement.
Business leaders have, on occasion, complained about policy inconsistencies and regulatory uncertainty, pointing out how, for example, government departments appear not to speak to each other, let alone co-ordinate their efforts for the common good. A typical case of the left hand not knowing what the right hand is doing, or plans to do.
President Cyril Ramaphosa has made all the right public noises, talking about the country’s worsening jobless and poverty rate, widening inequality, poor business and investor confidence and rampant corruption. These are well-known issues; the evident malaise manifesting across the economy. Covid-19 has merely brought to the surface what has always been there — the deep social and economic fault lines in SA, one of the most unequal societies in the world.
Economic recovery will only start in 2021, at best, with modest GDP growth of between 2.5% and 3.2%, compared with predictions of a GDP contraction of 8% or more for 2020. Frighteningly, some economists estimate the economy will need three to five years to fully recover and begin to make a dent in chronic unemployment that is currently at a 17-year high and predicted to rise to as much as 35% before the end of the year.
Investor confidence is at a low ebb and was muted even before the lockdown. Investors have one major complaint: the government is good at talking and making the right noises, but woefully dismal when it comes to taking decisive action. The so-called investor strike, with corporates alleged to be sitting on cash and near-cash deposits exceeding R700bn, is a tragedy in a country that is desperate for job-creating investment.
What can be done? The government has to start walking the talk and embracing the economic recovery plan endorsed by major business organisations, such as the Black Business Council and Business for SA. The latter estimates that more than 1-million people could lose their jobs this year alone. That means deepened poverty and inequality, and worsening unemployment, which feed into crime affecting already impoverished households.
It is all very well to admit that mistakes have been made, and launch commissions of inquiry to bring wrongdoers to book; it is another to do something about it
To make matters worse, there is concern about the government’s worsening fiscal headroom to provide a cushion to both companies, and the poor and unemployed. Government debt as a percentage of GDP could rise to more than 81% this year and the consolidated budget deficit to 15.7%. This grim situation shows that time is not a luxury the government can afford. Truth be told, there is no time left.
There is significant opportunity to use the lessons and experience of the devastation caused by the Covid-19 lockdown to reset the economic trajectory for SA. Now, more than ever, is the time for Ramaphosa to seize both the political and economic initiative to demonstrate decisive leadership and ensure urgent, co-ordinated delivery from all social partners working together to grow the economy.
There are plenty of low-hanging fruit: focus on the small and medium enterprise (SME) sector, which has the potential to create jobs at a lower cost than big companies, many of which are cutting jobs anyway; accelerate infrastructure spend, which would revive the labour-intensive but ailing construction industry; develop the green economy; expand local production and reduce the country’s dependence on imports, some of which have destroyed local industries and jobs.
Why it is taking the government so long to issue more telecommunications spectrum, which could potentially result in lower data costs for both businesses and consumers, remains a mystery. One can only imagine what this could unlock in terms of access to connectivity and support for SMEs that often struggle with connectivity and cheaper access.
Then there is the stalled multi-billion-rand infrastructure projects at both the provincial and national level. This has directly affected the stagnating construction sector, which has never really recovered since the boom period when the government funded the construction of 2010 Fifa World Cup soccer stadiums and associated infrastructure.
Agriculture is another potential game-changer in the drive for both economic growth and employment creation, because, by its very nature, it is both long term and labour-intensive. The sector was left relatively unscathed by the impact of Covid-19, principally because people need to eat and commercial food production will always be a winner.
The government needs to provide security of tenure and ensure it retains confidence in the agriculture sector, balancing the uncontested need for land reform and protecting food security. Supporting emerging black commercial farmers should be a priority, considering that the average age of large-scale commercial farmers is in the 60s, the country needs to develop a new breed of successful commercial farmers.
Other than government policy tardiness, the other obvious challenge is the woeful inadequacy of Eskom when it comes to ensuring reliable and cost-effective power supply. Eskom has been allowed to lurch from crisis to crisis during the past 13 years, and there are no indications that load-shedding will end any time soon. If anything, the most optimistic estimates are that SA will continue to experience power cuts for the next two to three years, unless generation capacity is stabilised or new energy sources are identified.
Eskom has thus become one of the major threats to sustained economic recovery and growth. This means facilitating and encouraging the involvement of the private sector, through public-private sector partnerships, and providing incentives to make the development of renewable energy sources a priority.
These are issues that require leadership at government level. It is all very well to admit that mistakes have been made, and launch commissions of inquiry to bring wrongdoers to book; it is another to do something about it.
As the country settles into alert level 2 of the national lockdown, which has seen most sectors of the economy going back to work, the government can speed up policy implementation, talk less and do more. Companies want to invest, but will not approve big-ticket projects in an environment of policy delay, a lack of trust between government and the private sector, corruption and unreliable power supply.
With more than 10-million unemployed in SA, a youth unemployment rate of 55% and more than 30-million in poverty, SA faces a social time-bomb. Ramaphosa and his team can etch their political legacy by being the change the country now needs. People are expecting no less.
• Kamhunga is a former financial journalist now working in corporate communications.
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