Treasury's economic turnaround plan lacks 'inclusivity', says BBC
ENGINEERING NEWS / 09 SEPTEMBER 2019 - 15.54 / MARLENY ARNOLDI
In reviewing Finance Minister Tito Mboweni’s 77-page economic growth policy paper, industry organisation, the Black Business Council (BBC) says the policy is lacking in inclusivity, specific detail and ambition.
Mboweni released the document, titled 'Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa' on August 27 and asked for public comments by September 15.
The policy aims to raise South Africa’s gross domestic product (GDP) growth rate by 3% a year over the next ten years – the current forecast for 2019’s GDP growth rate is 0.7%.
Unpacking the policy during a BBC-hosted discussion on Monday, economist Duma Gqubule said it was “dangerous” to only have one view, since there were three macroeconomic tools that could boost a country’s GDP growth in the short term – interest rates, the exchange rate (monetary policy) and government spending (fiscal policy).
However, he added that heterodox economists brought attention to a wider range of microeconomic policy tools that could be used to achieve macroeconomic policy objectives.
Gqbule believes South Africa will experience another recession next year and that Mboweni’s economic policy deals only with a limited number of issues in a limited number of sectors, while only focusing on supply-side reforms.
“The policy misdiagnoses the problems of the South African economy and prescribes the wrong medicine,” he statted, adding that not only would the policy have limited impacts in the short term, according to its own forecasts, but it was only aimed at creating one-million jobs in ten years’ time.
This while there are about 6.7-million people unemployed in South Africa and the population is currently growing at 1% a year.
Gqubule said the ideal is to create 7.5-million jobs a year to shift the needle on the unemployment rate, which currently stands at 29%.
Further, Gqubule questioned whether government could reduce Eskom’s debt, as the economic policy envisions.
One proposal in the economic policy is for debt-laden power utility Eskom – facing a declining pool of customers and rising tariffs – to consider selling coal-fired power stations to raise R450-billion, which is almost the size of its debt. The stations would then sell electricity back to the power utility at a predefined tariff.
Gqubele said it was “misleading” to imply that Eskom could sell power stations immediately to pay debt, because functional and legal separation could take about four years to complete, while the Medupi and Kusile power station projects needed to be completed first before they could be sold.
He added that 54 GW of generation capacity still needed to be added to Medupi and Kusile, which was only targeted for completion in 2023.
Economist Xhanti Payi, meanwhile, said the policy still embeded the belief that South Africa should create industry and then bring in people, but the opposite needed to happen – bringing people in to help create industry.
Payi noted that the policy discusses saving Eskom, but said it could have added how small businesses – which are necessary for desired economic growth – could generate their own power, instead of paying high electricity tariffs.
He added that the policy also did not speak about creating new markets, which was a key issue for small businesses.
“Government continues to write plans that are out of step with business requirements and what business identifies as opportunities. Stakeholder consultation, such as with the BBC, should not happen to correct documents, but rather happen during the creation process with original inputs from business.”
Payi also criticised government’s suggestion within the economic policy that it wanted to “modernise”, stating that it was too vague and too general to effect any modernisation.
BBC president Sandile Zungu expressed his concern about the short timeframe for public comment on the document.
He also mentioned that the policy did not feature black economic empowerment transformation imperatives, which was “disappointing”. Zungu said the use of language in the policy was also disappointing, referring to the majority of the population as “non-white” instead of black.
Zungu’s biggest concern was with the policy’s lack of inclusive input from small businesses.
“Government can not so soon after elections – where government affirmed that small business would be a critical component of how unemployment is addressed in this country and acknowledged that small businesses are part of sustainable growth – just ignore small businesses.
“Government did not consider in this policy the essence of what makes small businesses work, or not work, such as access to markets, access to funding, poor payment terms from bigger firms and big firms moving their supply chains with them wherever they set up, which removes opportunities for small businesses in these new areas.”
BBC and the economists agreed that the economic policy did not offer solutions for the majority of the population, which was why it had a low projected growth number over the long term.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER