EDITORIAL: Economic slump should instil a sense of urgency
Contraction has stunned economists
Forget about broadening the mandate of the Reserve Bank to include politically charged goals like job creation. President Cyril Ramaphosa should use this week’s worst quarterly economic slump since 2009 to instil a sense of urgency on his newly assembled team to forcefully remodel the country’s failing economic structure.
Brand Ramaphosa helped the ANC roll to a national election victory in May, riding on promises to jumpstart the economy that has hardly grown in the past decade since skidding with the rest of the world in the wake of the 2008 financial crisis.
But this week’s contraction — at -3.2% — stunned economists, who had pencilled in half that, and, in all likelihood, must have come as a thunderbolt to Ramaphosa. Granted, he has taken steps to reinvigorate the economy. But he hardly has anything to show for it.
PODCAST | Business Day Spotlight - Policy uncertainty, and a plummeting GDP cause economic upset
Clearly, Ramaphosa’s steps are insufficient, face opposition from unions and a faction allied to his predecessor Jacob Zuma within the ANC and underscore the party’s own underlying thinking not to be seen as too business-friendly lest it makes chunks of its frustrated and dwindling electoral support easy pickings for the ultra-left EFF.
Alongside this week’s shocking GDP numbers, Ramaphosa should use May’s worst ANC electoral performance as the basis for an argument with his party and labour movement comrades that his liberal agenda needs nothing less than foundational, unpopular and undoubtedly painful decisions, particularly on power utility Eskom and SAA.
Eskom’s workforce is bloated. Forget the World Bank’s assessment that some of Eskom’s earnings flow to salaries of about three quarters of staff that should not have been hired in the first place, the debt-laden utility itself acknowledges that it needs to slim down.
Breaking up Eskom without addressing overstaffing sets us up for yet another false dawn. It would be undeniably painful to see thousands of Eskom’s staff out of work. It is a far worse to keep those jobs if it means elsewhere in the country millions more are unable find work because SA business leaders have no confidence in the economy.
Unlike Eskom, SAA is not crucial to Ramaphosa’s economic revitalisation agenda. It’s time to make a call on the fate of the company that loses money on a full flight to Cape Town, for example. If last week’s acceptance of the resignation of CEO Vuyani Jarana, whose turnaround plan of the airline had the backing of the government, is anything to go by, SAA’s future as a state entity is uncertain.
Fix it or sell it, decide, and face the outrage of labour or left-leaning elements with the three-way alliance that includes labour and communists, or get thank yous from millions of people looking for concrete signs of a new dawn.
Comments this week by Ace Magushule, who oversees the day-to-day running of the ANC, that the mandate of the Reserve Bank should be broadened to ensure that roughly 6-million people are put into jobs is a hopeless attempt at shifting the responsibility of the government to craft coherent policies that make it easier for businesses to hire people.
And here’s a low-hanging fruit, Mr President: fast track the licensing of much-delayed radio frequency spectrum to mobile operators.
Few dispute the economic and political logic of freeing up the airwaves to allow MTN, Vodacom, Telkom and Cell C to deploy high-need networks that are going to slash the cost of internet data. Cheaper data means happier consumers and lower input costs for small businesses that may use that extra cash to expand and create jobs.