South Africa: The New Dawn Must Be a New Deal

Photo: GCIS
President Cyril Ramaphosa with Finance Minister Tito Mboweni ahead of the Budget 2019 Speech.

The New Dawn cannot be a continuation of the same failed macro-economic policies with a few adjustments, as suggested by the tone and narrative emerging from the processes being lead by Finance Minister Tito Mboweni. This was one of the key conclusions of an Institute for African Alternatives (IFAA) conference of high-powered economists from all schools of thought, writes RENEE ROUX.

They also resolved to add their voices to the calls for a compact or a series of compacts to confront our multiple economic crises, and break the policy logjams which prevent South Africa from embarking on a sustainable and inclusive growth path.

These logjams are to be found at multiple levels: within government, between government and business, between state and civil society, between organised labour and business, as well as between business, regulators and consumers/investors. There was a unanimous call for a more rigorously researched and negotiated medium- to long-term package of strategies than those that lead to GEAR, etc., which aimed to speedily integrate our economy and make it competitive in global markets.

Policies and incentives should guide investment into strategic and productive sectors, including township and rural industries.

They agreed that policy mismatches have increased, and have been associated with deepening inequality, unemployment and poverty. There is an urgent need to align fiscal and monetary policy, and these with the stated goals of industrialisation, rural development, reduced reliance on commodity exports and expensive capital imports, etc.

In light of the disappointing outcomes of liberalisation strategies pursued since the late 1990s, and the subsequent frustration felt by parties, participants also agreed that nothing short of a comprehensive social compact and a planned transition to a more balanced economy will lead us out of the maze.

This was not the usual group of left and "progressive", ANC-aligned economists who have been toiling at finding appropriate responses to numerous challenges, and timidly lobbying key decision-makers since the early 1990s with the same critiques. Nor is their call for a statist solution. In fact, they recognise that while leadership is willing, the state is too weak to lead such a process. Business, on the other hand, says it is ready for "real" negotiations, and this opportunity should not be missed.

Economists and other intellectuals need to "sharpen their pencils", challenge their roles in reproducing narrow economic approaches and binary debates, and actively intervene in their many spheres of influence. The aim is pluralistic and multi-disciplinary approaches to our socio-economic challenges, to break down the policy silos that exacerbate log jams and prevent co-ordination where it is most needed.

IFAA, which has been grappling with African alternatives to neo-liberal developmental models for decades, particularly since its tireless Director, ANC veteran Ben Turok, retired from parliament .At the age of 91 he convened and chaired this high-powered and diverse group of people who rarely have a day to spare in their busy schedules.

Though concerned by our current malaise, this meeting was clearly an achievement, and a relief, for Turok. Not only was it extraordinary that a non-partisan group of economists from all schools of thought agreed that fundamental structural change is needed. It was also remarkable as economists are not often found making what amounts to political statements collectively.

These are deeply concerned South Africans, rather than roving consultants, and they understand how non-delivery in turn becomes a rallying point for populist demands and relations of patronage and corruption throughout society, which in turn further erodes institutions, accountability, trust and ultimately the chances of improving economic outcomes.

After inputs and rigorous discussion on the state of the economy and "economics", the difficult discussion followed about what can be done to achieve this kind of deal in our diverse and complex society. Like all deals, explained Turok at the press conference that followed, there has to be give and take on all sides.

Constrained by time, participants could only highlight a few possible bottom lines for now. Corporate tax cuts and well-considered incentives will probably be needed to prevent further capital flight and stimulate the right kind of direct investment in new sectors, small- and medium-enterprises included. All the economists agreed it is imperative that investment reduces unemployment, poverty and inequality, and may require a possible moratorium on retrenchments and constraints on executive pay.

Urgent intervention is needed to rebuild the capacity to source and produce capital equipment locally. Policies and incentives should guide investment into strategic and productive sectors, including township and rural industries, infrastructure and housing.

International experience has shown how much research and other preparatory work is involved in building compacts, and all parties at all levels have to be committed for redistributive pacts to work

Turok reflected on a series of challenges: How do you roll back deregulation if your regulatory capacity is in tatters? How do you encourage middle classes to share their medical savings with the poor in an ailing health care sector? How do you bring institutional investment into badly run public and private corporations in order to build necessary social infrastructure, whilst still protecting workers retirement savings?

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