Sunday, June 7, 2009

Zuma will have to disappoint allies to create prosperous SA

After all, it was as recently as January that then president Kgalema Motlanthe told the World Economic Forum SA would be able to grow at 4% on the back of strong infrastructure spend.
The expenditure remains — it was front and centre of Zuma’s maiden state of the nation address. But since then SA entered a deep recession — the first an African National Congress (ANC) government has had to confront. Now we will do well, even heroically, if we achieve zero growth by year end.
As I pondered the import of Zuma’s prescriptions for our economic ills — which seemed to be drawn largely from the casebook of John Maynard Keynes, now enjoying a global surge in popularity — I thought of previous presidential debuts I had witnessed.
In February 1990, FW de Klerk made a speech of thermonuclear intensity — the effects of which are still with us today. He overturned the 350-year-old racial order of SA. In May 1994, Nelson Mandela set the tone for his inclusive rainbow presidency — although in his case “the medium” (or his persona) was the message. In June 1999, Thabo Mbeki also set the seal of his presidency with a root-and- branch attack on his opponents, describing the official opposition Democratic Party as no less than the “pedlars of a soulless theology ... who define some races as subhuman”.
Zuma’s speech detonated no bombs of change, but equally his constant referrals to the frail Mandela, seated and smiling above him in the gallery, perhaps signalled a decisive break from the isolationism which characterised the Mbeki era. Zuma explicitly reached out to the broad spectrum of SA — from rural dwellers, to Afrikaners and explicitly to the opposition, “in the spirit of putting SA first”, he explained.
Zuma’s promise remains hugely ambitious given the cramped fiscal space in which his presidency commences: an expansive developmental state, without rollovers, purged of corruption and premised on performance targets centred on the creation of 4-million “job opportunities” within five years, over 10% of which will be rolled out by year end.
While the president took a swipe at under- performing teachers and honestly faced glaring deficiencies in the culture, management and performance of public services, he offered little of comfort to the private sector, or the hard-pressed tax-payer. Obviously, Zuma’s core constituency is the 11-million, largely poor, South Africans who gave him his mandate. But as Anthony Altbeker reminded an Institute of Race Relations conference only last week, just 400000 South Africans, most of them far from rich, provide half the personal taxes in the country. And the taxpayers, overall, fund the 13-million South Africans who receive government welfare grants.
The only sustainable path is obviously to increase the number of taxpayers, not widen the pool of beneficiaries.
In the 10 priority areas touched on in the speech there was scant recognition for the role of enterprise as the driver of growth. In New York recently, Prof Niall Ferguson sounded an important warning: “It is very easy to forget, in your iron indignation at the failure of the market, where the true mainsprings of economic growth lie. The lesson of economic history is very clear. Economic growth does not come from state-led infrastructure investment. It comes from technological innovation, and gains in productivity and these come from the private sector, not the state.”
Indeed SA’s private sector remains, in key areas, globally competitive. Our much-admired banking sector, for example, ranked 15th in the latest World Economic Forum Global Competitiveness Survey. In studied contrast has been our slide down the Human Development Index, on the measurement of “living a long and healthy life”. We have dropped a vertiginous 36 places in just 10 years. It remains a moot point whether improvements in life chances can be delivered on the back of a state machine which, in key areas, is broken. Perhaps this means that private sector solutions are required for public sector problems, not the reverse.
Zuma did not enter the snakebite territory of demanding restraint from the public sector unions — either in terms of lowering the inflationary wage demands, or in the arena of relaxing the rigidities of the labour law, especially for first-time job seekers. The government is sitting on a welter of reports which all point precisely in this direction.
At the conclusion of the speech, Congress of South African Trade Unions chief Zwelinzima Vavi took time off from threatening a season of strikes to describe Zuma’s effort as “bold and brilliant”. Yet if Zuma is to create “the prosperous nation” he promised he will need to disappoint, not enthrall, some of his key allies.

*published in the Business Day 5 June 2009

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