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When times demand revolution, refinement will not cut it: The Economic Transformation discussion document

Kalim Rajab is a director of the New National Assurance Company, SA's largest empowered insurance company. He previously worked in the diamond industry, and was educated at UCT and Oxford. He writes in his personal capacity about SA, current events, film appreciation and culture. Catch him on twitter at @kalimrajab

Trevor Manuel might have a calming influence on economic blueprints that used to be laced with revolutionary slogans, but is it enough? Will it change anything, and even if his commission’s ideas are good enough, is there the will to implement them? 

What is Trevor Manuel’s real level of power and influence within the Jacob Zuma administration? Is he able to effect meaningful change in a portfolio which, while nominally at the centre of government, has neither the heavy artillery of a spending budget, nor large resources, nor proper accountability? 

Since he left the finance ministry in late 2008, the minister in the presidency for national planning and chair of the National Planning Commission has sought to come up with – and now implement – an overarching plan that integrates all government decisions into a coherent whole. 

Will it find traction in the year of Mangaung, or, in the words of Anthony Butler, not survive the “ideologically induced paralysis” that characterises the administration? Is it even accepted beyond a small coterie of technocrats who are clever but who have blunted powers? 

Though the commission may well advocate that the knowledge of teachers be regularly tested, for example, and that their pay be linked to performance, we all know this proposal is still-born while the competing voice of the South African Democratic Teachers’ Union shouts loudest. 

Luckily, though, the ANC’s Economic Transformation Policy Discussion document – due for discussion this week – presents the clearest indicator to date that actually, Manuel’s thinking actually is being heard in a wider sphere, and that some of it is influencing critical policy thinking. 

The discussion document certainly makes interesting reading. Gone are the days when ideological anachronisms and revolutionary prose littered the page: the 2012 iteration is actually quite measured, nuanced and at times realistic. Some sections, such as those on industrial transformation, climate change and especially the challenges of implementation, clearly have his influence to thank for their tone and perspectives. 

In other places, such as the discussion on industrial strategy, economic clusters and linkages, and backing government’s commitment to providing a stimulus to be directed towards productive growth, it’s not too much of a leap to see the hand of Manuel’s economic soul mate, Joseph Stiglitz, at work. No descriptions of the “National Democratic Revolution” here. 

There are other reassuring pointers that the level of discourse is maturing. The recurrent theme of the document is to smooth the edges of current government policy, not on radically tampering with it. For example, it introduces the concept of priorities and trade-offs, both quite pragmatic and real-world concepts. 

“While we are increasing the capacity of the state,” it reads, “we should realise (its) limitations and act in a more targeted way, so we need fewer and clearer priorities. The state has a huge array of instruments… we should use all these instruments, but recognise that multiple objectives blunts the effectiveness of these institutions. For example, in the past, the IDC had in its mandate, BEE, SMMEs, promoting exports, promoting employment, promoting industrialisation, promoting regional development, green economy and economic diversification. With a mandate this broad, the entity is likely to be ineffective and they cannot be held to account.” 

Later, when positing that the civil service needs to be autonomous enough to be insulated from political interference, it identifies the critical areas facing our mandarins being policy instability: “(with) every change of ministries, there is (a) policy review”, and remuneration – “while a long term approach to skills development is needed, a strategy to remunerate these people better without having to pay the entire public service more is critical. This is especially true in local government level.”

It even begins to question deeply embedded concepts. Why is BEE so unpopular, it asks ANC members to discuss among themselves, and how can it be improved?

This, then, is a discussion document that is pretty orthodox, speaking of refinement to the existing path chosen rather than outright revolution. Like a lot of ANC discussions, though, with its broad church of often conflicting interests and agendas, it has to tread a careful balancing act. So, what is often implied or hinted at is often as important as what is blandly stated. 

Yet, what clearly shines through is that the ANC’s Gear experiment of orthodox macroeconomic policy, which stressed deficit reduction and a tight monetary policy, combined with trade liberalisation, still lies at the heart of its economic policy.

A mature and useful document, then. But the question needs to be asked: in comparison to other countries we should be benchmarking ourselves to, does it reach far enough?

Malaysia is a middle-income country with many similar characteristics to South Africa. In 2010, South Africa was the 29th largest economy in the world measured by GDP. Malaysia was the 30th. Both have broadly similar GDP per capita levels, along with a diverse, multi-ethnic and multi-cultural population, which plays a large role in both their politics. S&P’s rating of South Africa is A, Malaysia’s is A+. Both have experimented with affirmative action to redress the wrongs of the past (in Malaysia’s case, to deal with the majority Malays and the minority, but economically privileged, Chinese community).

But in 2011, Malaysia launched the Economic Transformation Programme with the goal to transform it into a high-income economy by 2020. Managed by the Performance Management and Delivery Unit, an agency broadly similar in construct to our NPC, it was launched in challenging times for the export-orientated economy. Yet it was incredibly rigorous and detailed in its approach: 425 people from government and labour took part in its planning, along with an amazing 211 companies. That’s a sort of Economic Codesa that we in South Africa yearn for, but on steroids. 

The ultimate outcome was a comprehensive transformation plan, six overarching “Strategic Reform Initiatives” or incontestable policy principles cascading into 12 Key Economic Areas as the focus of attention, which in turn are serviced by 131 entry-point projects and 60 business opportunities. Each of these areas are assigned to lead ministries, with annual performance evaluation being done according to pre-determined and transparent criteria. Though initially disorientating in its level of granularity, at its heart was a simple idea: that in a crisis such as the world now faces, the only winners will be countries that are competitive. 

Competitiveness is founded on productivity, on innovation and on ease of doing business. Competitiveness allows the brightest to thrive and shine. It is the most sustainable way to create jobs, bolster the treasury and lift people to higher socio-economic levels. This idea is rammed home through intensive “laboratory” sessions, where the action plans are assessed and given the go-ahead to continue. In fact, this simple word has become the mantra for an entire economic plan. All energy is being focused on creating conditions where Malaysian companies and companies that operate there are competitive in order to survive. The word colours every paragraph of their plan – in the ANC’s 6,000 word discussion document, it appears seven times. 

And who actually creates the jobs and prosperity which flows from competitiveness? The ANC may have begun to admit it, but the Malaysians have embraced it. Go on to the ENP website and one is overwhelmed by the buy-in of an array of private sector companies and universities, from insurance companies to oil and gas, from telecommunications to retail to automotive. The private sector, the recipient of much of the benefit of the transformation, has committed to putting in about 60% of the required investment for the ENP.

Last year, Malaysia moved ahead of Germany, Japan and Switzerland on the World Bank’s 2012 “Doing Business Report” – achieving the highest GDP in its history. Job creation is sustainably up. 

Is our political, labour and business leadership courageous enough to chart a similar vision? Are they determined enough to stay the course, and not be distracted by short-term temptations? If they are, for a start our Economic Transformation Plans have got to go into overdrive compared to where they are currently. If they don’t, by 2020, when current contemporaries like Malaysia are “high velocity” economies, we’ll still be stuck in “fair to middling”, regardless of the calming influence of Manuel. DM

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