On 28 August 2019, the National Treasury released a paper it deemed a policy perspective towards economic growth and reform for South Africa. As a perspective, it was separated into six thematic areas where specific sectors which are critical to the economic stability of the country are targeted, with supposed strategies to boost them to ensure substantial levels of growth and long-term employment opportunities.
The policy paper has been released for public comment, and there has been a tentative response to it as South Africans sift through it for a signal of hope from a regime that has had an aura of renewal around it since before its assumption of office.
Sadly, the perspective is as empty as the rhetoric of the “new dawn” itself. Characterised by the long and tedious use of English, it serves more as a diagnosis of the state of the economy, which is not something any South African is oblivious to, and as a pacifier.
Nothing new is offered in the paper, which simply reveals a lack of imagination and a need to give the perception that something is being done. The lack of imagination and appetite for independent economic stimulation is evident in the constant reference to the private sector and results in us reading a 77-page state surrender to capital.
It is, however, important to substantiate the disagreement and illustrate how any sane individual interested in economic development should look at this attempt at a policy perspective with despair and disappointment. As such, I will briefly unpack how toothless the paper is, and provide the alternative path that can be taken by a state that should be working towards development, not regurgitating failed policy perspectives that are not of its own and not to the benefit of South Africans.
The first theme is titled Modernising network industries, and it covers the reform measures needed to improve the economic outputs and functionality of key parts of sectors such as Eskom, the water sector and transportation. At the centre of the minister of finance’s proposal for the ailing Eskom is a phenomenon known as unbundling. This means that Eskom’s functions such as energy generation, transmission and distribution will be split up into subsidiary entities and as the paper itself alludes, sold off. This is vaguely described as a process that is in line with international trends, which are not accounted for.
Under the auspice of an Integrated Resource Plan, Mboweni suggests that this unbundling occurs in favour of purchasing energy from independent power producers (IPPs). This lack of understanding of the grave dangers of surrendering state capacity to generate, transmit and distribute energy to the private sector, leaving Eskom as merely a front as a state-owned entity is alarming.
Unbundling is coupled with an admission of the need to increase electricity tariffs to sustain Eskom and the loss of jobs that will occur as the state sells off its coal stations. How this dependency on the private sector for the public good, increase of electricity tariffs and job losses was rationalised as a strategy for economic growth is known only by the authors of the paper.
Admittedly, Eskom has been in crisis, but this has not been due to how it has been structured but to how it has been managed by an inept state that now admits it does not have the capacity to run entities and wants to leave us at the mercy of the private sector. The authors of this paper have made a wrong diagnosis and consequently have arrived at an incorrect solution.
Although the paper suggests that unbundling will allow for emerging power producers and alternative modes of generating energy to gain prevalence in the energy sector, the fact is that the sector is not bursting with emerging companies. It is a saturated industry monopolised by companies that are infrastructurally superior and as a result, will be plagued by evergreen contracts. Suggesting that privatisation will be considerate of transformation objectives is simply misleading.
Eskom must be capacitated to build its own renewable energy division which will consider solar, wind, water and nuclear energy as a means of generation. The coal stations of Eskom must not be sold as they remain necessary sources of energy. Rather, there must be state intervention into the sourcing of coal in SA and how this coal is sold to Eskom at prices beneficial to the state and the citizenry. The route of IPPs will lead to long-term expenditure that enriches a private sector which, unlike the state, has no moral obligation to act in the interests of the citizens.
The attitude towards another theme in the paper, Transport, is no different. Mboweni suggests granting third-party access to the core railway network, introducing competition between port terminal operators and warehouses. He suggests that the planning, financing, development and operation of freight terminals should be conducted jointly by the private sector logistics companies and the rail operator. If the state is so incapacitated it cannot conduct this business alone, or wants to bring the private sector on board so desperately and at such a scale, how much leverage power will the private sector have over profits, operations and ownership patterns?
The ministry is suggesting we enter into economic relations with the private sector on what are seemingly unequal terms, which is the hallmark of capitalism and its relations with Africa.
There is an inexplicable belief in the goodwill of the private sector, as well as an assumption that the willingness to invest by the private sector has been curtailed by barriers of access to state-owned entities and state-regulated sectors. We can open up our entities, lower tariffs and “reduce red tape”, as the paper says, but if the private sector does not want to invest then it will not invest. This is due to an inherent fear markets have of African economies around the propensity for policy uncertainty, but also simply because of their greed. The solution to a burdened fiscus cannot then be that we simply hand over the little economic sovereignty we have left.
It is irresponsible for the state to want to ease its fiscal burden by letting go of its entities. We will end up having a state that is not in fundamental control of the operations of these entities, with key operations run by the private sector which will leverage more ownership from the state than the state leverages investment from the private sector.
The ministry extends its logic of privatisation into the water sector, inexplicably lauding a success of the IPP model in the electricity sector. In perhaps the shortest insight in the entire paper, the minister simply suggests that there must be regulators independent of the state that oversees water provision and price setting. Is South Africa incapable of fulfilling the basic and fundamental task of regulating water provision, to the extent we look to capital to do this?
The paper does not have economic growth in mind, but is drafted to soothe the anxieties of capital. It is apparent there is no link between economic growth and the suggested interventions. At no point do we see practically how jobs will be created, or how economic decline will be stopped. All that is illustrated is a desperate and misguided faith in the goodwill and capacity of the private sector, without any state-inspired initiative to tackle our economic challenges.
In terms of patterns of ownership, there is a lack of decisive and deliberate policy to alter the existing status quo. To address the monopoly incumbent businesses have on certain sectors of the economy, it is suggested that barriers of entry for smaller businesses must be lowered so as to create a conducive environment for competition. This is a fundamental value espoused by free-market capitalist states. That open contestation of the terrain is the best model for economic growth, and all the state has to do is try its best to give smaller businesses an opportunity to compete – this will change how markets are structured.
The ministry does not seem to be concerned with changing existing ownership patterns in existing industries. There is no suggestion of increased taxation on established business and lowered tax rates for new-entry businesses. No undertaking that the state should prioritise emerging businesses when conducting transactions to boost not only investor confidence in them but public confidence as well. The perspective leaves existing businesses unscathed; their collusion to manipulate pricing and tax avoidance are not noted as a concern to the growth and stability of the economy. There is no legislative advisement on how to address these problems.
The paper comes full circle in its acknowledgement of the need for export-oriented trade to boost the economy. It is cyclical in the sense that a critical advisement is that there must be infrastructural development that focuses on industrialisation to ensure competitiveness in the trading arena. The only suggestion of how to achieve this is through the modernising of network industries, which entails unbundling and privatisation. Evidently, the only way South Africa can be competitive in the global arena is if it is dependent on the private sector which already participates in this arena to fulfil its developmental objectives.
A simple logic of politics is that those who oppress or exploit you will never give you the key to your own freedom. This is a critical loophole in the economic recovery perspective we have been provided. It lacks an appreciation of the politics that govern modern economies, it lacks politics in general, and it is out of touch with the policy perspectives of the party that is supposed to be governing the state.
States are not developed by dependency on external investment. Inward industrialisation and the building of state capacity to produce and manufacture, and export goods and services are the key to creating jobs and boosting the economy. The plan is a perfect demonstration of neo-liberalism. It gives us no insight into how jobs will be created in an era of digitisation or how SA will undertake an independent path to development.
This economic recovery plan is not a path to recovery but one of enslavement to capital. It is not a policy perspective directed to the South African public, but one directed to those who paid millions of rand to ensure their interests were advanced and protected. DM