South Africa

Analysis: No task team can fix the fundamentally flawed system

By Greg Nicolson 24 July 2013

One wonders where the government would be without its army of task teams. The ANC says investment and investment-creating confidence are the pillars to growing the economy and confronting unemployment, poverty and inequality. The state has the programmes, says the party. Now, it just needs another task team to coordinate them. If only that would correspond to reality. By GREG NICOLSON.

Less talk, more action. That was the message from African National Congress (ANC) Secretary General Gwede Mantashe on Monday. In an effort to avoid endless discussions on the economy, the ANC wants a new presidential committee to fast-track development by aligning state programmes. The party has conducted an audit of major state projects and identified infrastructure provision, rural development, energy sources, fuel sufficiency, ICT and education and skills development as priorities.

“Investment by both the private and public sectors and building confidence in the economy were considered as a priority to strengthen the economy,” said Mantashe. “The sluggish performance and low levels of private sector investment were a source of major concern, hence the proposed presidential task team.”

“Genius!” the ANC bigwigs must have cheered in their national executive committee meeting this weekend.

But will another task team boost the beleaguered economy? In the first quarter of 2013, SA saw disappointing year-on-year growth of 1.9% and the Reserve Bank has cut its growth outlook for the third time this year, down to 2%; business confidence is waning. Meanwhile, Stats SA’s quarterly labour force survey says unemployment is increasing. And, to cap things off, inflation is hovering around the upper limit of the Reserve Bank’s 3-6% target.

“We can’t debate until we are blue in the face, we must implement,” said Mantashe. Yet for a party that wants action, the ANC government seems to spend a lot of time talking. When the latest GDP figures were announced and doubts were raised, President Jacob Zuma deployed Deputy President Kgalema Motlanthe to lead a task team to talk to the mining sector.

As Ranjeni Munusamy wrote on these pages a year ago, “Government’s default response on every contentious issue appears to be the establishment of a task team to investigate or act on the problem.”

With every task team comes skeptics. “There is a very real risk that this will be yet another committee that doesn’t lead any real action. It could also be a threat to existing economic policy-making bodies like the National Planning Commission and the National Treasury,” responded Democratic Alliance (DA) Shadow Minister of Finance Tim Harris in a statement on the ANC’s plan. The proposed task team appears to have no clear mandate and looks like another move to “simply paper over the deep cracks in our economy without leading to any action by government,” he added.

According to the Grant Thornton International Business Report, released Monday, 67% of businesses are delaying investment decisions because of political certainty and 48% are looking at investing offshore instead of at home. There were drastic decreases in business confidence in 2013’s second quarter.

“There is no doubt that businesses are waiting for next year’s elections hopefully to bring stability and clarity on the future direction of our country,” said Deepak Nagar, national chairman of Grant Thornton SA. Strikingly, 57% of executives surveyed said poor service delivery had affected them negatively, with 80% of those citing state utilities – water, electricity, etc. – as the core problem.

There was some ope: 45% of respondents were optimistic about business prospects in the next 12 months, rating them higher than a number of their international peers. But the 5.4% yearly growth the National Development Plan calls for or the 6-7% growth the New Growth Path says is needed to sustainably lower unemployment appears, for now, a mere pipedream.

Andreas Wörgötter, head of division at the OECD’s economics department who supervised the OECD’s 2013 Economic Survey on South Africa, briefly summed up the challenges for SA’s economy: getting more people into economic activity, increasing environmentally and socially sustainable growth, and improving social cohesion.

“In principle,” said Wörgötter on the ANC’s proposed task team, “measures which build consensus behind reforms are welcome, because this helps improve implementation.” However, he warned, “Great care needs to be devoted to avoid falling into a ‘picking winners’ trap.”

How could we improve the economy? Wörgötter gave Daily Maverick four quick suggestions. “Reduce entry barriers on product markets and strengthen the regulation of network industries [such as electricity supply, telecommunications and railroads] in order to boost the entry of new suppliers, create jobs and improve the incentives for firms to innovate and become more productive. Improve the transition from school to jobs by better integrating employers in vocational and practical training. Reform legal extension of sectoral wage settlements and simultaneously strengthen the implementation of labour laws and minimum wage regulation. Increase spending for and efficiency of education to boost employment prospects of new labour market entrants. This would also help to reduce the strong persistence of income inequality,” he advised.

The DA has ideas of its own. It has criticised the government for focusing on state-led growth, comparing it to past failed economies in Eastern Europe and Africa, and lacking the policies and skills to implement reforms. It proposes “facilitating” rather than “directing” the country’s economic activity. The DA jobs plan suggests “a virtuous cycle of skills development, infrastructure and technology investment, improved productivity and increased employment” through simplified labour and tax laws, the youth wage subsidy, infrastructure investment, and a capable, cleaner civil service.

When it comes to the nitty-gritty, the ANC will point out that it’s no slacker. Look at the billions being spent on infrastructure, the attempts at change in the Labour Relations Bill, proposed new universities, the wide acceptance of the National Development Plan, the national green fund and new fiber-optic cables being laid. GDP has, at least, been rising while our main trading partner, the European Union, is still weakened by crisis.

The problem is that the ANC government’s initiatives on the economy aren’t showing results. Growth is low (let’s not compare it to the other BRICS nations). Confidence is down. We’re losing rather than adding jobs. The ANC, or some members of the party, believe they are on the right track, but with elections next year there’s no time to sit and wait for the results they hope will come. Launching a task team looks like something is being done. And increased coordination can’t really make things worse, can it? DM

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Photo: Young boys play in a rubbish dump in a township outside Johannesburg, January 25, 2009.  REUTERS/Siphiwe Sibeko

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