In the light of recent developments it has become more important than ever before that South Africa needs to embark on a programme of radical economic transformation.
South Africa cannot continue with these recent revelations that:
* The revenue shortfall will hit R50.8bn and the deficit will increase by 30% more than the 2017 budget target, to 4.3% of GDP.
* More worrying is that our gross national debt is projected to reach 61% of GDP by 2022,
* 9.3-million unemployed people and the millions more living in poverty, in vain seeking a path to a better life.
* Eskom’s reserves are at R1.2 billion whereas they should be at R20 billion.
* In stark contrast to our continental neighbours and trading partners our growth rate is at 0.7% five times lower when compared to their average growth rates of 3.6% in 2017.
* New reports of corruption and state capture involving the President, his family, cabinet members and “that family” are revealed almost daily.
* A president and minister of energy who are hell bent on implementing a nuclear procurement deal. Finance Minister Malusi Gigaba seams to become more compliant and move closer to Zuma and Mahlobo every time he speaks on the subject.
* The governing party is at war with itself in the run up to its elective conference at NASREC in Johannesburg starting on 15 December 2017.
When all these issues are combined there is the perfect recipe for a failed state. Whether corrective action is taken will, to a large extent, depend on the outcome of the ANC elective conference.
However, irrespective who is the next leader of the ANC don’t hold your breath that the correct action will be taken to encourage investment, create jobs and eliminate poverty. Party unity is and will remain the major priority of the new party leader and as Zuma has told us before the ANC comes before South Africa.
What government needs to do urgently is to demonstrate that South Africa is open for business and new investments. I first outlined these proposals in Political Perceptions in June 2015 (edition 9) based on many of the policies proposed by the DA.
In my opinion those proposals were necessary in 2015, now they are urgent, therefore the ANC government must:
* Immediately request the Chief Justice to appoint a Commission of Inquiry into Corruption to investigate all the allegations of corruption in government departments and State Owned Enterprises.
* Immediately find an equity partner for SAA and list the airline on the Johannesburg Stock Exchange as soon as it complies with the JSE regulations.
* Start the process of selling off sections of Eskom to help to recapitalise the entity that it can operate as a going concern.
* Fast track the establishment of small, medium and micro enterprises through Offering tax incentives to individual business mentors who shepherd new enterprises, offering tax incentives to individual business mentors who shepherd new enterprises;
* Amend the Promotion and Protection of Investment Bill, The Private Security Industry Regulation Amendment (PSIRA) Bill, the Mineral and Petroleum Resources Development Act and the Expropriation Bill and the Mining Charter to reaffirm the countries commitment to property rights and Constitutionalism all issues that would-be investors will not compromise on;
* Scrap the Licensing of Business Bill and Private Security Industry Regulation Amendment Bill as neither serve the goal of job creation;
* Target job-killing Red Tape by tabling and passing the DA’s private member’s bill on mandatory regulatory impact assessments of proposed legislation and regulations.
* Reduce the size of the cabinet with fewer departments of state, a smaller more efficient government with only 15 cabinet members rather than the current 37.
In the longer term South Africa needs to adopt policies that will prove that we have:
* A government that acts honestly, transparently and that leads a crusade against public sector corruption and wasteful expenditure making State Owned Entities leaner, more efficient and citizen oriented.
* An effective criminal justice system that inspires both confidence and belief of all South Africans with a government that obeys the law and protects the Rule of Law. A system where the average citizen trusts not only the judicial arm but also the police (SAPS) and the National Prosecuting Authority.
* A competent, highly equipped police force where all families feel safe not only in their own community and in the country as a whole.
* A quality education system in which each generation is better educated than the previous. Where emphasis is placed on literacy and numeracy especially during the first five years of school and where educators are properly trained and have the correct skills.
* An annual economic growth rate of 8%, a business-friendly reputation and is a hub of innovation. Where fairness and justice and unemployment has been substantially reduced from its current 27,6%;
This will create a South Africa in which families are the core unit around which individuals prosper. Where a sense of community prevails, where people care for one another and where all citizens feel empowered and positive about the future. Where citizens can make it if you work hard – your destiny is determined by how much you make of opportunities. Where the reformed education together with increased economic growth means increased opportunities exist for individuals. For those unable to take advantage of these opportunities, a sustainable safety-net will still exist.
After a recent visit to South Africa by a delegation of the IMF they reported that the IMF thought it unlikely that economic growth would pick up next year. In an ‘end-of-mission’ statement the delegation’s head Ana Lucía Coronel said:
“Despite South Africa’s institutional strength and favourable global conditions, increasing domestic political uncertainty and stalled reforms point to a challenging economic outlook,
Some sectors, including agriculture and mining, are certainly generating growth, but other key activities have stagnated or declined, as investment decisions are being postponed or abandoned.”
Unless the ANC government realise that the current politicians are not running the country properly let alone trying to run the economy matters will continue to decline at a rapid pace. We are currently on the precipice of a further sovereign down grade which could see the countries local debt downgrade to ‘junk’ status with disastrous consequences that could take decades to reverse.
Genuine Radical Economic Transformation is therefore a necessity NOW! Government needs to leave business to the businessmen, and stop trying play nanny with the economy.
Real Radical Economic Transformation can only be realised through economic growth and not through redistribution. What the ANC government is trying to do is cut the ever decreasing cake into smaller pieces to share and in so doing creating more poverty and eroding the tax base.
This week we have already seen signs of our economic decline when:
• Ratings agency Fitch kept both South Africa’s local and foreign currency credit ratings unchanged at BB+, one notch below investment grade, with a stable outlook.
• Standard & Poor’s downgrading their sovereign credit rating with a long-term foreign currency rating of “BB”, and a long-term local currency rating of “BB+”, with a “Stable Outlook”. Effectively taking the countries grading back to where it was in 1994. and
• Moody’s affirming their sovereign credit rating with a long-term foreign currency rating, and long-term local currency rating, of Baa3, with a “Negative Outlook”, but triggering a “review for downgrade”, which should be completed sometime after Main Budget 2018.
This does not seem to be important to the ANC, in a television interview on ANN7 on Friday 10 November Dhlamini Zuma had this to say:
Her priority was to transfer wealth from the white minority to the black majority, who are generally much poorer. Those who opposed the policy were mainly white people or members of the black elite who want to preserve the status quo, she said.
“If we have to choose between our people having a better life and investment, that’s not a choice,” she said, when asked about whether her policies could scare away businesses.
In light of the pending economic meltdown this ANC government would be wise to remember Bill Clinton’s election slogan in 1992 “The economy, stupid”! They must forget old failed ideologies and concentrate on what is best for South Africa.
Unfortunately, I am not holding my breath.
Until next time…
This newsletter is published by Clive Hatch former Leader of the Opposition in the Mpumalanga Provincial Legislature and former Mpumalanga DA Provincial Leader. These views are my personal views and do not represent those of any other person or organisation.