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ANALYSIS: Three quick and simple moves that could be economic game changers for South Africa

DAILY MAVERICK / 13 JULY 2020 - 05.30 / STEPHEN GROOTES

As President Ramaphosa’s government negotiates the near-impossible array of dangerous developments that are delivered daily by the Covid-19 pandemic, the ANC is having important conversations about the future of the economy. Here are some points that could have a long-term positive impact.

While much of the ANC’s discussion on the future of the economy has focused on the possibility of changes to pension laws and regulations, there is a crying need for far-reaching changes to the way our economy is managed. There are three big interventions that government could make relatively easily right now:

  • The introduction of a permanent Basic Income Grant;

  • The establishment of an “employer of last resort” scheme that would see households being guaranteed some income from work; and

  • The proper rollout of free, or near-free, high-speed internet.

Unfortunately, only one of those measures is included in the current economic proposals of the ANC, namely, the “employer of last resort”.

It’s a hugely difficult job to chair the ANC’s sub-committee on economic transformation. As Gwede Mantashe put it, “Economics is the very essence of politics”, and the ANC is the broadest of broad political churches. This is why the committee has discussed important economic issues only in the broadest of terms. This has led to the real arguments sometimes taking place in the implementation phase, or not at all.

While making economic policy by a broad-based committee may not produce results, in this treacherous moment dramatic action is precisely what is needed.

That said, there are some important suggestions in these proposals that give an indication of the balance of political forces in the ANC.

For example, the presentation document mentions that there should be measures to increase the “localisation of manufacture of wind and solar technology and increase BEE participation in the sector”. This suggests that there is a strong push for a major change to the way our electricity is produced. Industry observers and critics of Mantashe as energy minister, who is sometimes seen as a proponent of the coal industry, may believe that this is a sign that the politics is moving against him.

But there are other measures that the document calls for which seem oblivious to the real world. It is correct in calling for more spending on infrastructure – this is obvious and necessary, and has been for many years. But it also stresses that there should be more attention given to the infrastructure backlogs in municipalities.

That may be true. However, the City of Joburg’s new budget (passed by the ANC with the support of the DA and most other parties in the city) appears to cut spending on infrastructure. Considering that it has to cut spending somewhere and there is an increased demand for its daily services, what other options are there? The same situation will surely be faced by other councils too.

One of the major discussions our nation urgently needs is whether there should be a permanent Basic Income Grant. There is convincing evidence for such a measure, and almost no argument against it.

The government giving people money would:

  • Ensure they do not starve;

  • Provide an important linkage with the state for many people who currently receive almost nothing from government;

  • Reduce the potential for acts of frustration and violence against the state; and

  • Increase social solidarity.

But in the end, it boils down to this: It cannot be argued that the rich should not help the poor have enough food.

Also, the argument advanced against a Basic Income Grant, that it would lead to dependency and reduce the incentive to find work is much weaker than it was in previous decades; in today’s job-saturated economies with increased productivity and automation there are often simply no jobs to find.

There is unlikely to be any better moment to introduce a Basic Income Grant. South Africa is in dire need of good news, and the need for such a move has never been so acute. We should not forget that literally every cent of the money spent on income grants will go straight back into the economy – for purchasing food and other basic goods.

And yet, there appears to be no mention of such a measure in the ANC’s proposals.

While it might be that the ANC regards this as part of another sub-committee, if a Basic Income Grant does not fall under “economic transformation”, then where could it possibly fall?

One of the measures that is mentioned that should be seriously considered is a suggestion that government becomes an “employer of last resort”. This phrase is included in a presentation on the proposals. (Curiously, it is not in the official document.) It talks about the need for programmes to “create mass employment opportunities, such as expanded public works programmes, linked to increased infrastructure investment and maintenance, through which there will be a progressive increase in employment levels and an extension of the kind of skills designed to equip those involved for future employment and economic participation.”

All of this is true, and was recognised many years ago through the Expanded Public Works Programme (EPWP).

But the very idea of government as an “employer of last resort” could be another game changer.

This should be the new “war effort” of government. To ensure that every citizen, and emerging business, have access to the world. It would provide a positive change to the lives of many. All it needs is for the government to accept that internet is as much an infrastructure issue as bridges and dams.

In India, several states have experimented with this, where they promise a job for several months of the year to every household, making it much more likely that at least some of the breadwinners will be able to get a job in the future.

But it will be important to ensure that employees in these jobs understand that the job is not permanent – there have been instances where employees in the EPWP have protested, demanding that they be allowed to stay in their jobs until retirement.

Then there is the issue of a final game changer: a guaranteed access to a free, or very cheap, and fast, reliable internet service.

The first ANC leader to promise this was Thabo Mbeki, when he was president. And still it has not happened.

The ANC says in its document that there should be an “expansion of broadband roll-out by the state, especially in the rural and township areas”.

This is not difficult with today’s advanced technology, and relatively cheap. It is cheaper to provide proper broadband internet than it is to build new roads or railways, which are also in bad state of repair

It can be done in cooperation with a properly incentivised private sector. Already the privately-owned companies have put fibre networks into residential areas across the country. It should not be too difficult to incentivise them to install fibre networks in townships. Certainly, that could be done faster and more efficiently than by a state-owned entity, considering the recent history of these companies.

This should be the new “war effort” of government. To ensure that every citizen, and emerging business, have access to the world. It would provide a positive change to the lives of many. All it needs is for the government to accept that internet is as much an infrastructure issue as bridges and dams.

A change to the economy is required urgently and these three measures are not rocket science. Together, they would make a massive difference, enable many more real-life moves and encourage countrywide entrepreneurship. You want real economic transformation? Start now.

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LINK : https://www.dailymaverick.co.za/article/2020-07-13-three-quick-and-simple-moves-that-could-be-economic-game-changers-for-south-africa/?

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