The headlines on the State of the Nation Address (SONA) were somewhere between muted and dismissive.
No one is left with any expectation that the government can do anything to achieve economic growth.
It wasn’t just that President Cyril Ramaphosa presented a SONA that gave us no confidence, it’s that Ramaphosa was dishonest.
For instance, he claimed that ‘our country is still an attractive investment destination for both local and offshore companies’.
This is patent nonsense. Ramaphosa (again!) promised to implement expropriation without compensation, and press ahead with the Expropriation Bill. He also promised to accelerate Broad-Based Economic Empowerment.
International companies have identified BEE as one of the major impediments to investing in South Africa, and the threat to property rights is not remotely attractive to investors.
Experience on the ground makes it unarguable that our desirability as an investment destination is zero.
Ramaphosa patronised us by telling us, at length, what the dreadful consequences of unemployment are. Does he honestly think we don’t know that it is the policies of the ANC that have ensured no growth and therefore no employment?
Our research shows that in 12 years there have been minus 400 000 new jobs. Contrast this against the ANC’s promises of many millions of jobs. But none of us is surprised; this government’s policies cannot ‘create’ employment.
Ramaphosa pats his government on the back for the Presidential Employment Stimulus as being ‘one of the most significant expansions of public and social employment in South Africa’s history’.
‘Job opportunities’
The evidence? By the end of January 2021, over 430 000 job opportunities had already been ‘supported’. ‘A further 180 000 opportunities are currently in the recruitment process.’ These ‘job opportunities’ are temporary and unlikely to transfer any meaningful skills or training to obtain real employment.
These opportunities are in education, arts and culture, global business services, early childhood development and small-scale and subsistence farming.
‘It involves environmental programmes such as the clearing of alien trees, wetland rehabilitation, fire prevention and cleaning and greening across all municipalities. These programmes are about real lives and real livelihoods. Nearly half a million people are now receiving an income, developing new skills and contributing to their community and the country’s economy,’ the president said.
These are the equivalent of holiday jobs and this claim of enhancing ‘livelihoods’ is puffery.
He mentioned the sugar master plan (one of many ‘plans’), signed during the lockdown, ‘with a commitment from large users of sugar to procure at least 80% of their sugar needs from local growers’. Ramaphosa said the implementation of the plan in 2020 increased local production and saw a decline in imported sugar, ‘creating stability for an industry which employs some 85 000 workers’.
‘Support for black small-scale farmers is being stepped up, with a large beverage producer committing to expand their procurement sharply.’
This plan is for the very industry that the government virtually destroyed through imposing the sugar tax. Has this plan restored health to the sector?
The clothing, textile, footwear and leather ‘masterplan’ of late 2019 has seen ‘the industry investing more than half a billion rand to expand local manufacturing facilities’.
Cannot compete
We cannot compete with China and Vietnam for the manufacture of cheap clothing. We shouldn’t waste time and money trying. We can only produce clothing in niche markets.
When minister of trade and industry Ebrahim Patel was General Secretary of the South African Clothing and Textile Workers’ Union, he played a significant role in destroying the Newcastle textile industry by pushing for Chinese factory owners to implement bargaining council-determined minimum wages.
As minister of economic development (from 2009), his approach to industrial policy was intended to move the clothing industry towards a more capital-intensive, sophisticated end of the market. Lower-wage, more labour-intensive production was not his plan.
Ramaphosa then told us about the government’s progress in implementing the Economic Reconstruction and Recovery Plan, launched in October 2020.
One of the four priority interventions was ‘the rapid expansion of our energy generation capacity’.
After another month of episodic break-downs and unplanned maintenance, together with images of a fire at Kendal power station, we have absolutely no faith in the ability of the government to meet our energy needs.
Liberation of the energy sector is crucial, but it’s all in the hands of minister Gwede Mantashe. Say no more.
Sheer common sense
We all know, barring the SA Communist Party, the EFF and the union movement, that as a matter of sheer common sense the economy will improve in the hands of a free market. That clearly is not the advice Ramaphosa is taking in the Union Buildings.
Kate Philip, supporting the Project Management Office in the Private Office of the President in the design and coordination of the Presidential Employment Stimulus, helps us to understand why nothing is being done to grow the economy.
Philip’s thesis is that unemployment is the single biggest cause of income inequality in South Africa, and that the consensus is that high levels of inequality slow down growth.
‘High levels of inequality also means that any growth that does take place tends to reinforce existing unequal patterns of distribution. As one of the most unequal societies on the planet – that’s us they’re talking about.’
She says that ‘the received wisdom in South Africa is still that we need growth in order to address poverty and inequality. The reverse is in fact true. We need to address poverty and inequality in order to unlock inclusive growth.’ That requires systematic and deliberate policies that shift patterns of distribution, to put resources in the hands of the poor.
Rather than a binary choice between pro-poor policies and growth policies, redistributive, pro-poor policies are growth policies. ‘Until this lightbulb goes on in policy circles, we are trapped in an economic death-spiral. An employment stimulus – at the requisite scale – is a crucial instrument within that redistributive agenda.’
She praises the ‘holiday’ jobs programme as reaching ‘every poor community in South Africa. This translates directly into spending in townships and rural economies, thus boosting demand in ways that create local market opportunities. So, while some critics of the stimulus have argued that the funds should rather have been spent on small enterprise support, this misses the point.’
Doesn’t seem to understand
The government is dispersing grants left, right and centre. These amounts are way too small to create businesses. Philip doesn’t seem to understand that in a labour-intensive economy the vast majority of people need opportunities to train and work for others before they can consider creating their own businesses.
In the same week, Trudi Makhaya, who is a special economic adviser to Ramaphosa, wrote in Business Day of the pessimism about South Africa’s economic prospects: ‘Too many South Africans aid and abet this narrative. The assumptions, conspiracies and prejudices that fuel doomsday narratives in the radical trenches or in cloistered boardrooms wear down business and consumer confidence.’
She said: ‘When we are considered at all in global platforms, we are spoken of as a nation slipping into post-liberation dysfunction.’
But, she argued, the ‘recently adopted Economic Reconstruction and Recovery Plan attempts a healthy balance of demand and supply side measures to heal the economy from the effects of the pandemic (and pre-existing conditions) and to set it on a path of structural transformation’.
So we’re being unfair to the president by viewing his economic plan as nonsense. Notice how she inadvertently concedes that ‘when’ we are considered by the international community, which is almost never, we are considered to be ‘a nation slipping into post-liberation dysfunction’. Exactly.
If this is the economic theory motivating Ramaphosa, we expect nothing to improve.
Perhaps the speech can best be summed up by this tweet:
‘@MlindeliMM – He should have just sent us a voice note’
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