ANALYSIS

Growing the economy in fractured times – never simple, never easy

By Stephen Grootes 6 June 2018

President Cyril Ramaphosa delivering the keynote address at the 20th African Renaissance Conference at the Inkosi Albert Luthuli International Convention Centre (Durban ICC), KwaZulu-Natal. 24/05/2018

On Tuesday Statistics South Africa released data showing that our economy had contracted by 2.2% in the first quarter of 2018, when compared with the final quarter of 2017. The numbers obviously appear to take the wind out of the sails of the Ramaphoria ship, and menacingly present just how stark the problems in our economy are. It is also more proof, not that it’s needed, that the time has come for the representatives of the various constituencies to come together to find a way to get the economy growing.

Unfortunately, it appears that it could be much more difficult for these constituencies to agree now, than it would have been 24 years ago.

It really is almost impossible to overstate how different our country would have been, how different it would feel, if our economy had grown at the same rate that China’s economy has grown over the same period. So many of our social problems would have been much easier to deal with, from avoiding the devastation wreaked by the huge unemployment rate, all the way to proper resourcing of police stations, to crime-related matters to possessions, and even violent crime itself.

For our country, like everywhere else, growing the economy is everything. While Tuesday’s figures came as a shock to most people, the Treasury still predicts that our economy will grow by 2% through the year.

In April, consumer confidence figures were at their highest ever. In Business Day this week, the development economist Dr Neva Magketla has penned a thoughtful piece about exactly how difficult it is to know whether our economy is growing or not (and she makes specific and important reference to how poor the data from the apartheid era and the 1990s is, and how that makes it almost impossible to actually compare the situation now).

In other words, we could well find that these numbers are just a blip (particularly considering that the agricultural sector showed a big decrease, after a bumper year following heavy rains that came after the worst drought in a century).

All of that said, there is surely no more pressing demand on our country, and on our government, than to find a way to grow the economy. The closest our economy has come to growing at the rate needed was during the Thabo Mbeki era. While some of that was surely related to the way the economy was opening up following apartheid and the fact that investors were coming here for the first time in years, much of it was also due to the resource boom in the global economies. While our resources are still in the ground, much has changed, which means that we cannot use them in quite the same way these days, especially not as profitably as we did in the past.

At the same time, the incredibly difficult and slightly awful question has to be asked: what do we have that no one else has? The answer is of course, our people, but a survey has shown that our children, with some exceptions generally for the children of elites, are not being educated as well as children in other countries.

At the same time, and perhaps more important in some ways, the constituencies that make up our country, and their leaders, appear to be further apart than they were in 1994. Back then, there was at least goodwill. Crucially, government and the ANC had a large well of legitimacy from which to draw. Legitimacy allows you as a government to make a decision that is not immediately popular and to have it respected. Without that legitimacy, people tend to frustrate the implementation of that decision. In the case of businesses and the middle classes, certainly the governments of Nelson Mandela, and to a large extent Thabo Mbeki, had that legitimacy.

But the other thing those leaders had was a coherent ANC to work with. Since that time, and coinciding with the start of the Zuma era, but not necessarily because of it, the ANC itself has started to lose coherence on economic policy. As has been lamented before in this publication, the party appears to be unable to make proper economic policy. So often, at party conferences or national general councils, the Economic Transformation Commission fails to provide a full report-back to reporters, precisely because nothing has been decided.

At Nasrec, the situation was different, if only because there was such contestation, and economic policy was a political playing field within the larger prize of winning the ANC leadership. This makes it much harder for any ANC deployee at the Presidency or Finance Ministry to shape any kind of policy. Instead, they are mostly forced to go for the clever muddle-through, which explains why our budgets are so often praised by people across the spectrum. They don’t make fundamental changes, they just manage the current situation.

At the same time, other forces in society which used to be more united than they are now have started to fragment. There was a time when Cosatu came close to its dream of “one sector, one union”, now it has split. It’s emerged that at the current talks before the Public Sector Wage Bargaining Council, some of the Cosatu-affiliated unions have signed a deal with government, but others have not. At the same time, the Public Servants Association is served a notice to strike over the deal.

Meanwhile, the SA Federation of Trade Unions, Saftu, is led in the main by metalworkers’ union Numsa. It has made plain its opposition to what you could call the “mainstream” economic policy that has been followed by the ANC up until this point. As there is no one unified voice for workers, just this point alone will make negotiations harder.

Meanwhile, at what could be called an extreme of our politics, there is the attitude of players like the Economic Freedom Fighters. On Tuesday their deputy leader, Floyd Shivambu, followed up his previous xenophobic behaviour by saying that he did not want to accept testimony from Treasury deputy director-general Ismail Momoniat, because he was “undermining Africans” by repeatedly testifying on behalf of the Finance Ministry.

It could appear that some players such as Shivambu simply want to disrupt, or to find ways to undermine people who would make a meaningful contribution to South Africa, solely on their racial identity. As former president Jacob Zuma discovered, the power of disruption can be immense. This surely will not make it any easier to come up with any kind of coherent economic policy.

People like the EFF and Saftu would have every possible economic motive to simply not accept any kind of deal that was agreed to by the ANC. They would not be alone. The DA would know that its voters, while wanting a deal, would also be wary of anything that involves giving up too much of what makes them middle class. If land were part of a deal, for example, they would be likely to oppose that strongly.

However, even in such a fractured society with antagonistic politics, any kind of deal should not be written off, and improvements in economic policy could still be expected. President Cyril Ramaphosa has to face voters in 2019, he has the best possible motive to do something to get the economy moving – jobs creation will be one of the defining issues of those polls.

He may also have the political nous and legitimacy with the major constituencies that count, business, labour and of course government, to get some kind of agreement. He has also spoken of a “social pact” involving the major players. It was front and centre in his first formal speech as ANC leader in January, but he has not said much about it since. It is possible there is something going on in the background.

But at the same time, it would appear that all of the leaders involved in these talks have constituencies that they cannot abandon. It would be difficult, or probably impossible, for them to conduct these negotiations in public. This could be a time when in fact the public is only allowed in for the final round of negotiations, when in fact the real business has already been done.

Growing the economy has to be the priority of everyone. It is simply the agreeing on the “how” that will be hard. DM

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