The Elephant in the Room: It’s the economy, stupid!
- Yonela Diko
- 11 Jun 2017 10:32 (South Africa)
James Carville, a campaign strategist of Bill Clinton’s successful 1992 presidential campaign against sitting president George HW Bush, coined the term “It’s the economy, stupid” to put more emphasis on the 1992 economic recession in the United States and to highlight that the 1992 elections would rise and fall on the economy.
As we now know, Bill Clinton became the president of the United States, rendering George HW Bush a one-term president. Bill Clinton went on to become an “economy” president, creating the longest uninterrupted years of economic growth of the 20th century, creating over 20-million jobs and leaving an economy with a surplus. His success reflected the importance of the economy above all else in the daily grind of people’s lives as it is they are truly lived.
Bill Clinton’s presidency and Mandela’s presidency coincided and both Vice-President Al Gore and Deputy President Thabo Mbeki would be responsible for the details of their policies working together to carve the future that beckoned.
In South Africa, for every single year from 1999, our economic growth exceeded the 3% average growth rate and by 2004 the economy was growing by over 4.5% every year, up to 2007. This was the first time in South Africa’s history that we had four successive years of growth above 4.5%.
Successful economic management’s yardstick is measured (but not limited) by the rate of growth, improvement in unemployment figures, and levels of private sector jobs created. The reality, which the ANC has always been alive to (until the current administration), is that in no small measure, it is the overtly pro-business agenda pursued by Mbeki and his team (beginning with GEAR) that gave us the best years of sustained economic growth.
South Africa has never owed its economic success to demand management of the fiscus, but to its reputation as an economic dynamic and wise country which is/was a hospitable home for business. The ANC understood without a doubt the importance of the economy, making everything pale beside it. In 2004, the ANC went on to win a two-thirds majority in national elections.
The ANC has always appreciated at all stages of our development that being pro-business is but one side of the coin. The next question is what is the nature of that business. Is it white? is it oligopolistic? Is it collusive? Then we must address all those realities. We do not have to be anti-business because we don’t like how it looks. We must change it. The truth that is we want every South African to be in business. Businesses run the economy, they create jobs, they have lifted billions of people out of poverty in the country. You cannot be anti-poor and anti-business at once. Having every South African in business, in jobs, is how we fight poverty and how we heighten economic development.
It is 2017, and we are in recession after two consecutive quarters of negative growth. We have been downgraded by all three international rating agencies. The economy is not growing, people are losing jobs, companies are not investing, the country is in a terrible mood and disposition. What is this current administration doing wrong? The current administration has not shown great concern about maintaining this perception of a country hospitable to business.
Since December 2015, business leaders have strongly warned in dire terms of the dangers of switching tack on the economy, particularly on Treasury. The previous pre-occupation of building a progressively more tax competitive and business friendly economy has been lost with the current administration.
Former Finance Minister Pravin Gordhan succeeded in investor reassurances, proving to be beyond political expediency, with Treasury prevailing over the investors’ mood and disposition by portraying a business friendly message while tilting the yearly and mid-term budget towards the poor. Contrary to what the economists say, the divisions in the ANC and Tripartite Alliance are not the main cause of low business confidence. The question is how the ANC itself is squarely governing over the economy.
The ANC and its alliance’s divisions or differing of views are nothing new. SACP and Cosatu, in July 1998, criticised Nelson Mandela and Thabo Mbeki for the government’s Growth, Employment and Redistribution (Gear) macroeconomic programme.
Addressing the SACP’s 10th annual congress, Mbeki said, “None of us should go around carrying around the notion in our heads that we have a special responsibility to be a revolutionary watchdog over the ANC.”
Again in June 2007, Mbeki told the SACP, “The ANC has never sought to prescribe to the SACP the policies it should adopt, the programmes of action it should implement and the leaders it should elect.”
During all these times the SACP had always been contemplating carving its own path and contesting elections on their own. Mbeki was fully aware that despite the rhetoric, what was important was how the ANC, as the governing party, was handling the country’s economy.
Mbeki was fully aware that the pie, whatever view people have on it, is too small to be obsessed with sharing it; the obsession needed to be on growing the pie, at least in the first instance, because slicing the pie was a given. It was a necessity of our shared history which needed not be shouted on street corners as if it is being questioned or doubted. On that score Mbeki was clear. The ANC was not a socialist party pursuing a socialist revolution, the SACP should not try to tell the ANC what to do, said Mbeki.
More than the policies themselves it痴 the messaging as anything else which has always been important in these matters. If you look at all our budgets in the 10 years of economic growth and the years of both Pravin and Nhlanhla Nene, the biggest chunk of our budget went to health, social development and community and economic infrastructure. All these budgets were pro-poor. The messaging behind them however was of a Treasury that understood the importance of a pro-economic growth language (vis--vis) one of overtly being about redistribution as a primary preoccupation of government. All these budgets redistributed wealth but without the rhetoric and noise. Only the current epoch has made redistribution the core messaging of government (and the budget allocation is unlikely to change) and this has inevitably led us to low business confidence and a recession.
How do we get back?
The ANC needs to once again be unequivocal about its business friendly policies. Those friendly business policies must then be anchored by strong institutions, beginning with Treasury, SOEs, the economic cluster and all legal institutions. Currently our institutions are built around personalities and this makes all of us vulnerable. Our institutions must not be vulnerable to political expediency and personality cults. Long after all of us are gone, our institutions will remain, serving our people and our country.
Gareth Newham‚ head of the governance‚ crime and justice division at the Institute for Security Studies, says that support for the ANC has been in decline since 2004 as a result of growing mistrust by the people who voted for the ANC in large numbers in the past. Without confidence in our institutions, including the ANC itself, we are doomed. “DA and EFF are unlikely on their own to grow drastically to have a majority in the next national election in 2019‚” Newham says. He then puts the ball back into the ANC’s court. “The ANC’s biggest challenge is to elect a new leadership of people who are honest and not seen to be involved in corruption.” This speaks to the strength of both the ANC and its government institutions.
Economists have already stated that ideally, all the stars are aligned for a South African economy to thrive. Europe is growing, China is regaining its high growth trajectory, America has long recovered, and the commodities prices have been steadily rising; the only problem has been a South African government that is hostile to business or at least which does not pay much attention to the concerns of business.
It’s time for the ANC to put economic growth at the top of its priorities and begin the long and arduous task of regaining the confidence of South Africans back into our economy and our organisation. DM