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The business of running South Africa: Who should manage the economy?

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Mandla Lionel Isaacs is a political economist, public policy analyst and Mason Fellow at the Harvard Kennedy School of Government.

On Wednesday, our attention turns to the finance minister and the Budget Speech. Increasingly, after the stagnation of the last decade-plus, the question on most minds entering each Budget Speech is: Is this the year things start getting better?

The finance minister has traditionally been the face of economic policy in our politics. What is widely underappreciated is that many of the levers of economic policymaking sit outside his control. Improving our development trajectory requires alignment between fiscal, monetary, industrial, trade, energy, minerals, immigration and technology policies, among others. Where these should be coordinated and mutually reinforced, too often they have worked at cross-purposes. 

Imagine being the minister of trade, industry and competition over the last 14 years, trying to convince global manufacturers to build plants in South Africa, while Eskom could not guarantee reliable electricity (Public Enterprises). Treasury has long urged for export-led growth while Minister Ebrahim Patel favours import substitution. Overly restrictive immigration management (Home Affairs) has held back efforts to attract tourists, skilled workers and entrepreneurs.  

Our ministers enjoy the control of their fiefdoms, and can easily deflect blame for slow progress or non-collaboration on key reforms onto the bureaucracies they oversee. In the economic cluster, ministers meet as equals and have no power to force cooperation from one another. The cluster has ballooned to an unwieldy 20 members. 

As this month’s State of the Nation Address has sparked debate about whether the Presidency’s growing advisory apparatus is too large or duplicative of line ministry functions, it is worth reflecting on some of the ways in which countries around the world pursue coherent economic management, as we seek to strengthen our own. There are at least three prevalent models of economic management worth examining: finance minister-led, minister of the economy or economic “super-ministry”-led; and president-led. 

Where the finance minister leads economic policy, this depends on formal seniority over other economic ministers – such as in the UK where the portfolio is one of four Great Offices of State – or the political support of the head of state, as was the case during the Mbeki years with Trevor Manuel. Manuel’s stature was based on Mbeki’s trust, his Struggle credentials, economic nous and force of personality. During the 2000s, and with healthy public finances during the commodity boom, Manuel used his control over the national purse strings to direct economic policy to a larger degree than his successors.  

This model may work best in rich countries such as Germany and the UK where macroeconomic policy is the primary tool for influencing economic growth, and muscular industrial policy is less critical, having already reached an advanced stage of development.  

The then-president Jacob Zuma, responding to the ANC left’s long-standing desire to wrest control over economic policy from a Treasury perceived as conservative (or worse, neoliberal), fragmented economic policymaking with the introduction of the Department of Economic Development. President Cyril Ramaphosa seemed to be building towards a Mbeki-Manuel-esque partnership with Minister Tito Mboweni for a couple of years, but this couldn’t be sustained as Mboweni wanted to return to private life in Magoebaskloof. 

The economic super-ministry model seeks to maximise policy alignment and resolve the problem of economic ministries pulling in different directions by consolidating finance, trade, industry and other key sectors under one economic super-ministry, as in France. The French minister of the economy, finance and recovery has five ministers of varying ranks attached to him covering a range of economic policy areas which in our system are standalone ministries. 

Another intriguing variation of this model is that of South Korea and Singapore, where a deputy prime minister is given official responsibility for coordinating economic policy. The deputy PM has the seniority to enforce coordination among the economic ministers. Given these countries’ policy coherence and long-term development success, this is a model we should seriously consider. Of course, doing so successfully would require a more technocratic lens in selecting Cabinet members. 

Ramaphosa expressed his desire to reform the Cabinet in his first State of the Nation Address in 2018, but did so only partially, reducing the number of ministers from the Zuma peak of 36 to 28 currently, in line with Mbeki-era levels (29). Some expected Ramaphosa to go further in consolidating ministerial portfolios but he held back, perhaps due to the risk associated with implementing such fundamental change within the fraught internal politics of the ANC.  

In the third model, the president oversees economic policy. The US is the most prominent example of this. The US president is the face of that country’s economy, supported by a Council of Economic Advisers in the White House and the Treasury secretary. The president takes credit when economic fundamentals are strong – growth, job numbers, the Dow – and absorbs public ire when they are weak, as Joe Biden is currently discovering with high inflation weighing down his public approval ratings. Unhappy voters don’t particularly seem to care that the inflation has largely been driven by pandemic-related supply chain disruptions outside of Biden’s control. Indeed, one advantage of the economic super-ministry model is that a minister of the economy can absorb citizens’ discontent in difficult times, and can be reshuffled. Or fired. It may be that the president-led model is best suited to the US, where economic strength is the norm and economic storms are infrequent. 

Still, it is understandable that Ramaphosa has taken greater control over the economy. Aside from cleaning up public governance, resuscitating inclusive growth was and is the focus of his presidency. After a decade of economic malaise and hardship, citizens want better opportunities and living standards, and business wants favourable conditions in which to trade and invest. The success of his presidency hinges on his ability to lead us out of our economic morass. 

Ramaphosa first looked to Mboweni to be his partner in driving reform, but the governor was ambivalent about committing to staying in government for the long haul. Finance Minister Enoch Godongwana, while a steady policy hand, perhaps does not yet have the tenure and institutional knowledge of the government economic apparatus to drive strong coordination across the cluster. Ramaphosa ultimately decided major Cabinet reform was too risky politically for the time being. The President appears to have concluded, if you want something done right, do it yourself. DM

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  • What South Africa needs is a free market economy run by a strong free market proponent. The Korea or Singapore models fit that description. I have been to both of those countries and they hummmm economicly. Something very good can come from them.

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