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In search of a lost economy

South Africa’s National Treasury published a discussion paper on Tuesday 27 August, proposing a dramatic shake-up of the country’s economy.

The document says its proposals could lift GDP growth by 2.3 percentage points over 10 years and create more than a million new jobs.

With growth in Africa’s most developed economy all but stalled – at an IMF-predicted 0.7% for 2019 and official unemployment stats at an alarming 29% – anxious eyes, and many words, have been cast at the ANC-led government for signs of a policy-led economic stimulus. Finance Minister Tito Mboweni’s ministry has come up with a response called “Economic transformation, inclusive growth, and competitiveness: towards an economic strategy for South Africa”.

The ANC itself has been wracked by party infighting, while ongoing revelations of political skulduggery have sunk ordinary South Africans into a gloom that’s seen the property market and the rand exchange rate slump. But the governing party is the only agency that can change this malaise, so this unheralded discussion paper is being pored over by analysts far and wide. South Africa might not play the African leadership role it once did, but its economy is still mightily influential and its fortunes vital to the continent.

From the start, the document injects a note of urgency: “South Africa’s current economic trajectory is unsustainable: economic growth has stagnated, unemployment is rising, and inequality remains high.”

What follows is often surprising, but always within the bounds of possibility. It is merely a set of suggestions, but all the pressing matters appear to have been thoroughly researched – prompting Intellidex analyst Peter Attard Montalto to describe it as “incendiary, but marvellously evidence-based” to news website Daily Maverick.

The proposals face opposition from vested interests in the South African economy – notably the trade union establishment – but will get significant backing in many other quarters.

It might look like just another wish-list, but concerned South Africans will be hoping the political will can be summoned to transform it into actual policy. It will surely spark interest outside the country as well, with the likes of potential investors and African leaders watching developments closely.

The major proposals:

* Lowering the petrol price and making it more stable.

* Overhauling the visa system to open doors for immigrants with critical skills – and foreign tourists with critical cash.

* Making banking licence rules less onerous, to allow greater flexibility with

new developments, such as mobile money.

* Slashing government red tape by 25% over five years by setting up a Red Tape Assessment Unit to review all legislation restricting business and growth.

* Selling off Eskom’s coal-fired power stations to bring in R450 billion (nearly US$30 billion) – equating to the power utility’s current debt burden, which some experts reckon threatens to collapse the entire economy. The auction sales would include all binding obligations, such as employment contracts, coal-supply contracts and agreements to buy power at predetermined tariffs.

* Stirring competition in retail by outlawing exclusive leases for supermarkets in shopping malls.

* Removing control of the electricity transmission grid from Eskom and transferring it to an independent, state-owned operation. This entity could buy spare power from outside sources – such as private producers and off-grid householders and companies powering themselves via solar or wind systems.

* Exempting small business from some labour legislation, such as sector wage agreements. Another idea is to amalgamate various SMME funding schemes into one, simplified operation.

* Releasing broadband spectrum to mobile telecoms operators and forcing Telkom to open up access to “local loop”, last-mile copper lines from the phone network to homes and businesses.

* Getting metros to run big-city trains and buses and integrate them into land-use planning. Taxis can be brought into the “subsidy net” to achieve greater formalisation of the industry. Cutting transport costs by 17% in 10 years is the target.

* Opening up the railways to private hauliers.

* Boosting agriculture with specific interventions in water and trade policy, with an aim of boosting exports by R6 billion (US$400,000).

* Setting up Special Economic Zones to experiment with new growth-enhancing policies on a small scale.


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