Opinionista Yonela Diko 17 July 2017

Gigaba must not be desperate: Stick to ANC Resolutions

Malusi Gigaba has just released what is dubbed an “inclusive growth action plan” which covers areas requiring interventions, with responsible authorities and target dates. This is easily a script from Maria Ramos’s playbook, “If you can’t make it work, sell it, call it ‘non-core’ and then boast cash flow reserves.”

ANC government decisions of late reflect a government that is traumatised by its past decisions, their impact on the public mood and disposition, the negative reactions of the markets, that one is sensing a sense of paralysis, reactionary ad hoc decisions taken that are not governed by any philosophy or ideology. The ANC is desperate and it’s disheartening.

The 53rd congress of the ANC resolved that government needs to increase state ownership in strategic sectors and to improve the effectiveness of the existing State-Owned Enterprises (SOEs). Government would have to marshal our SOEs with a view to make them one of the key instruments for a developmental state.

The overarching theme of the economic resolutions under the economic transformation at the 53rd Congress was that a developmental state is one where government is at the centre of industrial and trade policy and a key driver of the economy, as opposed to leaving the economy to Adam Smith’s invisible hand and hoping for market forces to deliver us from evil.

The ANC moves from the understanding that a state-owned company can both be profitable and effective. Unlike a private company, its profits would then be ploughed back into the fiscus to expand in other people-centred endeavours and not be given to shareholders to spend in the Maldives.

In this term therefore the task of the ANC government is to make SOEs work and be more efficient. The ANC did not resolve to sell them in part or bring in the private sector to co-run them. Not only was the task to produce more State-Owned Enterprises but the blueprint was stated in how to improve the current ones and it did not include selling off anything.

This tendency to move away from ANC resolutions for political and economic expediency has plagued Gigaba, who has drifted from his radical posture to begging the industry to come out and play. Moving away from ANC resolutions however makes a mockery of ANC conferences and the aspirations of creating a National Democratic Society, ensuring that we are forever trapped in the world created by illiberals.

Two weeks ago, again Gigaba chose expediency when he decided to challenge the proposal by the Public Protector, Busisiwe Mkhwebane, for the Reserve Bank’s mandate to be expanded, so that beyond maintaining currency and price stability, it must also include employment and economic growth.

Gigaba justified his actions by saying “the Reserve Bank does not protect the currency for its own sake but rather to ensure balanced and sustainable economic growth”. Again this is an ignorant and self-serving answer of the establishment. The ANC does not only need people who can lose themselves in the business crowd by regurgitating what they think the business community wants to hear but leaders who can change how business relates with government power.

This is again odd because page 25 of the ANC resolutions at the 53rd congress under Economic Transformation says, “South Africa requires a flexible monetary policy regime, aligned with the objectives of the second phase of transition. Without sacrificing price stability, monetary policy should also take account of other objectives such as employment creation and economic growth. In this regard, government should engage with the new wisdom developing on macroeconomic policy around the world in response to past failures and the global crisis.”

Here are the facts. The current mandate of the Reserve Bank, which is simply “inflation targeting”, is irresponsible and mischievous and here is why.

When you raise interest rates to lower inflation, you unfortunately also lower employment. High interest rates mean people will pay more for their bonds, cars and other interest-related expenses, leaving them with less money to spend on other consumables. When you take money out of people’s hands and out of the economy it means less will be spent to expand businesses, to open new branches, employ new people, and even the existing branches may have to cut people or close down. This means Reserve Bank Governor Lesetja Kganyago takes decisions that affect both inflation and employment but does not want the responsibility of employment. That is however why today’s US Fed’s monetary policy is governed by a dual mandate: first, to maintain stable prices, and second, to achieve full employment – the definition of which is debated by economists, but which is generally considered to mean an unemployment rate between 4% and 5%.

Of course the biggest problem today, of Gigaba and President Zuma’s administration, is that they lack credibility, which presents them with a false choice and compromises ANC developmental goals. The ANC has always appreciated that the battle of ideas between the theoretical and practical underpinnings of the democratic developmental state and the neoliberal paradigm sits at every site of struggle in our society, whether it’s at universities, businesses, communities and in the lenses through which media sees the country’s development.

In this tussle, neoliberalism remains the more dominant force, hence without credibility the ANC will struggle to overcome it through a developmental state paradigm and the illiberals will use every tool they have to discredit any ideology that does not entrench the existing imbalances. The answer however is not to give in and adopt a neoliberal posture in order to regain your lost credibility.

The ANC took comprehensive resolutions in 2012 and Gigaba must stick to them. DM