OPINION: Mboweni's economic plan likely to flounder on rocks of mistrust
While Tito Mboweni must be commended for the initiative of producing a new economic blueprint, the reality of the economic challenges facing the country cannot be ignored, writes Thami Ntenteni.
"Each generation must, out of relative obscurity, discover its mission, fulfil it or betray it." – The Wretched of the Earth, Frantz Fanon
The post 1994 generation inherited an economic system of which the superstructure was based on the ideological foundation of exclusivity and white supremacy. The racial factor and the historical experience of the black majority are unavoidable when proposing solutions to correct this "historical injustice".
It is therefore not idealistic to suggest that the historic mission of the post 1994 generation is the building of an egalitarian society and the eradication of poverty using an economic base of which the solid foundation is inclusivity. It is indeed the tragedy of post-apartheid South Africa that some elements, emerging from within the ranks of the formerly oppressed and exploited, saw access to the state as an opportunity to raid and loot its coffers for their own personal enrichment.
By their actions these elements chose the path of betrayal as opposed to using state power as a lever to correct the historical injustices of the past. Needless to say – this has had a devastating effect on the economy but above all has exacerbated and intensified the misery and suffering of the poor.
The ANC's discussion paper entitled, "Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa" prepared under the leadership of Finance Minister Tito Mboweni must be welcomed as part of the monumental effort to rediscover and fulfil the historical mission of the post 1994 generation.
Long-term problems not being resolved
In a presentation made to the ANC NEC in September, Minister Mboweni identified the following challenges:
- The growth outlook has worsened significantly since the February budget review and GDP growth contracted by 3,2% in the first quarter of 2019.
- We would have to achieve growth of 4,8% in the remaining three quarters to reach the 1,5% annual growth rate forecast at the time of the budget.
- Our long-term problems are not being resolved due to unemployment that's too high, inequality and poverty being on the increase, a low savings rate and falling export competitiveness.
Mboweni then makes the important point that "there are no quick fixes to growth" and that "confidence only translates into growth if followed by concrete actions".
While Mboweni must be commended for the initiative of producing the paper, the reality of the economic challenges facing the country cannot be ignored. It is not the intention of this article to critique or present a holistic analysis of the discussion document as this will be done over time and informed by the "concrete actions" taken. Instead, the article will focus on the structural and systemic challenges of the state of our economy which Mboweni also identifies.
Let us therefore start with the low rate of savings, high unemployment, inequality and poverty as well as the unequal distribution of wealth in this country. Besides the fact that all these are a residue of the apartheid years of policies which prevented the majority from participating in the mainstream economy, they are also a product of the failures of the democratic government, not least amongst them being corruption and various acts of malfeasance that are being ventilated in the various commissions including the Zondo commission. There is also a symbiotic relationship between the low levels of savings, unemployment, inequality and household debt that afflict South African household.
According to Stats SA "South Africa's unemployment rate increased to 27.6% in the first quarter of 2019 and to 29% in the second quarter of the same year. The Quarterly Labour Force Survey states that "there are 6.2 million unemployed people between the ages of 15 and 64 years in South Africa". The jobless rate has not fallen below 20% since at least 2000 and has been largely due to sluggish economic growth (and) and the fact that gross domestic product hasn't expanded by more than 2% a year since 2013.
Swimming in a pool of debt
This situation is exacerbated by the fact that South African consumers are swimming in a pool of debt.
Fin24 reports that "credit extension to the household sector grew by 4.6% on average in 2018 to R165bn compared to only 2.6% in 2017 or R156bn".
It is therefore logical that South Africans are only surviving and maintaining themselves through debt. How then does Mboweni expect that people should be saving when a large proportion of young people who are supposed to be economically active are unemployed and depend largely for their survival on their grand-mothers social grants?
How can there be any savings when people are living from paycheque to paycheque and at the same time servicing their debt?
The South African economy and Mboweni are facing a conundrum and seemingly do not have the courage of their convictions to deal with transformation, unemployment, economic inclusivity and the promotion of growth. There is more talk and overreliance on attracting foreign direct investment. According to the South African Reserve Bank "direct investment inflows increased to R70.7bn in 2018 from R26.8bn in 2017".
And yet "the accumulated profits or reserves held by the top 50 firms on the JSE have risen from R242bn in 2005 to R1.4 trillion". This is according to research done by the Centre for Competition, Regulation and Economic Development.
The research makes the startling revelation that "this analysis, however, excludes some of the largest companies on the JSE that also have other listings on foreign stock exchanges and receive a large portion of their revenue from outside South Africa – such as British American Tobacco, Glencore and Naspers". A senior researcher at the centre Thando Vilakazi states that when these firms are included "the figure is closer to R3.1 trillion".
A vote of no confidence
The research found that this "is problematic in South Africa in the context of low domestic savings to fund investment, failures in financial markets – and banking in particular – in financing emerging industries and businesses, and a perceived and factual lack of finance and investment in general".
This is despite the fact that, these large firms (excluding the large internationalised firms) have been fairly profitable in recent years and have exhibited high retention rates – which illustrates the proportion of profits retained by a company. Despite this profitability, investment has been low.
It is not clear whether the government and Mboweni have factored in this anomalous behaviour by South Africa's corporate citizens. It seems to suggest or imply a vote of no confidence in the country and its leadership by the corporate citizens.
Any attempt by the post 1994 generation, having discovered its mission to build an inclusive egalitarian society, economic inclusivity and poverty eradication without the participation of the South African corporate citizens is likely to flounder on the rocks of mistrust, the absence of commitment and finally force the angry and bitter majority to come to the conclusion that this generation has betrayed its mission. When that happens, all the efforts of the Tambo-Mandela generation to avoid a national calamity and conflagration shall have been in vain.
- Thami Ntenteni is a veteran and stalwart of the ANC. He writes in his private capacity.
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