The Covid-19 lockdown pushed South Africa deeper into recession, and might – had the president been bold – have given a boost to serious, deep structural reforms. Crises often give the spark to growth-enhancing structural reforms, but not so far in South Africa.
As a start, steps should have been taken to sell off Eskom and other loss-making parastatals; the civil service should have been trimmed; restrictive labour laws changed; and the government stance on expropriation without compensation (EWC) reversed. These are the sorts of changes that stand a good chance of boosting investor confidence and growth.
But political support for such measures is narrow and the minimal pressure from business groups and many economists does not help. United against change are much of the African National Congress (ANC) and its union allies.
More of a push on these sorts of big reforms might have come from the National Planning Commission, an advisory body to the Presidency, which is nominally independent. Its tasks are to draw on a panel of economists to devise national plans and goals for the economy and engage the public on these.
The last National Development Plan was approved by the Cabinet in 2012, but – with South Africa in steep decline – the Commission called for a ‘course correction’ in a proposal released late last year, and held a public discussion on this last week. The plan’s 2030 development targets of full employment and ending poverty looked unrealistic back in 2012; now they are a pipe dream.
A ‘course correction’ is urgent, the Commission warns because ‘South Africa could veer towards an economic spiral’.
The Commission falls a long way short of calling for a new policy direction and, through side-stepping and omissions, fails to give a boost to a course correction. It is largely showing who pays the piper. There is much in its proposals that is sensible, but it does not go far enough in pushing some points and forthrightly stating its advice.
Core message
Its core message is that a course correction should include the building of a capable state, and improving education and training.
The burden of the state on the country is well stated by the Commission. It points to staffing government departments and state enterprises with people unsuited to their roles. Then there are the problems, it says, of ‘excessive political interference in operations and appointments’ and a civil service wage bill that is ‘not aligned to public sector performance’.
But that is what so much of ANC rule has been about – cadre deployment, empowerment, interference by ministers, and often massive corruption. The Zuma years were not an aberration, but rather involved corruption on a far greater scale than before or after. It is through the state that the ANC is able to exercise its power and patronage. With little or no hope of the election of a new and different government, there is slim chance of improving governance and achieving a capable state.
The Commission says that no country has developed in the absence of a capable state and private sector confidence will remain low without one, but what is to be done if there is only a remote chance of capability emerging? One answer is to reduce the state’s role to the very basics, and allow the private sector far greater scope.
The government has long spoken about the problems of poor service delivery and has had various campaigns to try and energise the civil service. Creating a capable developmental state and improving education are key to boosting productivity, but are longer-term projects. So, underscoring the need for a capable state is easy and non-confrontational ground on which the Commission can play.
The Commission seems to recognise that improving the state will take years, but does not fully deal with how we should live with an incapable government. But, within the proposals for a course correction, the Commission suggests, ‘any proposal involving regulatory or policy intervention should require government to explain why the current legal frameworks and rules are not sufficient’.
That could at least delay government adopting new and potentially damaging initiatives.
Good example
On this, it wants the government to explain why EWC is required. ‘Clarity on government’s intention in respect of land ownership is a good example’ of an issue where explanation is required, says the Commission.
To raise capability, government needs to massively shift its processes online. The Commission’s call for government to be buyer rather than implementer of the digital system has great merit. Nearly three years since Cabinet approval for this, there is little to show.
On its other priorities, education and training, the Commission wants a course correction to ensure ‘a results-oriented mutual accountability system’ for schools and school principals, better teaching of reading in the early grades, and internet at all schools. That is all good, but will probably involve developing a tougher backbone to take on the teaching unions.
Indeed, political backbone may well be the key element for the creation of a capable state.
The Commission’s diagnosis of the contributing factors to poor economic performance are valid: the large government budget deficit, poor service delivery, the crisis at state enterprises, corruption, inability to invest in and maintain public sector infrastructure, and poor municipal management. All these reflect the need for greater state capability, but also the urgency of bypassing the state and finding private solutions. No mention is made of the drag on the state of empowerment policies and the consequences of giving preference to what are often higher-than-market-related bids.
The report does recognise the need for a greatly enlarged private sector, and the price of negative investor sentiment toward South Africa. But, in what is a glaring omission, EWC is more alluded to than fully confronted in the report.
Failing state-owned enterprises are mentioned, but, bar the need for more capability, discussion of alternative solutions such as privatisation are glaringly absent.
Adaptive and responsive
The Commission addresses mass (and growing) unemployment, but no mention is made of how South Africa has an entrenched system of job destruction. The Commission says it wants a more flexible labour market – ‘a labour market that is more adaptive and responsive’ – and makes proposals aimed at helping young people get into the labour market, appropriate regulation for small business and reducing tension and conflict between employers and employees.
That goes some way, but no mention is made of how bargaining council wage settlements, the result of negotiations between big unions and big business, are then imposed on entire sectors. That imposes unaffordable salary settlements on small businesses, who then have no option but to lay off workers. And why is there no proposal that the minimum wage paid by the government Public Works programme should be extended to the private sector?
The National Planning Commission has lost a chance to stand up for a fundamental course correction which could make a lot of difference by at least giving impetus to a new agenda for policy. Instead it has fallen short in serving the public interest and gone for something easy and non-confrontational.
[Picture: Gerd Altmann from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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