Riyaz Patel
The Head of Economic Policy at the African National Congress (ANC) said Sunday that Finance Minister Tito Mboweni will meet with the governing party’s top six leaders over his economic recovery plan for the country, released for public comment Tuesday.
Enoch Godongwana confirmed the meet during an interview on eNCA.
Godongwana said Cyril Ramaphosa knew about the contents of the paper, in response to a question on whether the president was consulted over the document and supported it prior to its public release.
He said a lot of people in the leadership of the ANC also knew about its contents.
“Everybody has got the document, I suspect it is the timing of the release and the proper consultation on that timing, then the release itself [of the document],” Godongwana said.
“We all agree that there’s a crisis and that crisis needs [us] to build confidence in SA, and also the fact that we are likely to get ratings agencies coming our way, and that the finance minister is going to have the Medium-Term Budget Policy Statement in October. So, we need what is called an economic story,” he added.
“This paper is going to cause political fall-out as a result, but we think that is its disruptive purpose, and if it can mobilise and solidify a more robust evidence-based debate on policy… as well as additional pressure from business on the president for reform – then it will have been a success,” said Peter Attard Montalto, head of capital markets research at Intellidex.
Montalto noted that the paper does not mention the National Economic Development and Labour Council (NEDLAC) or uses the term “developmental state.”
As predicted by Montalto, the “sudden” release of Mboweni’s proposed economic recovery blueprint drew strong criticism from the ANC’s alliance partners who accused him of failing to consult with them before the document’s public release last week.
Congress of South African Trade Unions (Cosatu), called for the withdrawal of the draft economic strategy document, saying the paper was an attempt to exploit the fiscal crisis by pushing a right-wing agenda.
“What I can confirm is that Mr Mboweni and I will be appearing before the top six tomorrow. I’m not sure what the agenda is but I know it is about the document,” Godongwana said.
The document, titled Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa, was unexpectedly released for public comment on National Treasury’s website last Tuesday.
“This paper has been circulated amongst ministers for around a month, and the understanding was originally that it would be published closer to the mini budget (in October), but some acceleration appears to have occurred suddenly this week – all down to politics we believe,” Montalto said.
Johann Els, chief economist at the Old Mutual Investment Group, described the plan as “generally positive,” saying it should be viewed positively by the markets.
Mboweni said the paper was a detailed examination of the structural reforms that could reverse the downward trend in the country’s growth potential.
Godongwana said the debate over the proposed economic strategy was critical as the country urgently needed to frame its own economic narrative.
In the paper, Mboweni envisions the state relinquishing its near monopoly of electricity, port and rail services; relaxing rules to make it easier to do business; and privatizing assets to stabilize its finances.
Mboweni further favors maintaining a flexible exchange rate, inflation targeting and sustainable fiscal policy, according to the National Treasury document to released by late Tuesday.
The document further outlines that Eskom could sell some coal-powered plants to raise R450bn (roughly the size of its debt) and allow households to sell electricity back into the grid–at a predefined tariff– as part of a restructuring of the state-owned power utility.
Some of the proposals contained in the paper conflict with recent calls from within the ANC and its union allies for the government to play a more interventionist role in stimulating the economy, as well as tackling rampant poverty and a stubbornly high (29%) unemployment rate.
“It’s a rehash of everything we’ve published before.“
Former Statistician-General Dr Pali Lehohla
Former Statistician-General Dr Pali Lehohla has also criticised Treasury’s document aimed at spurring economic growth, saying it “failed to talk to the country’s triple challenges of poverty, unemployment and inequality.“
Lehohla described the strategy paper as a rehash of old proposals with no fresh ideas on how to kickstart the economy and create jobs.
“It’s a rehash of everything we’ve published before. There is nothing new except that we have a crisis of Eskom. That’s why it’s placed disproportionate attention on the crisis of Eskom,” he said.
Sinawo Thambo, the Provincial Chairperson of the Economic Freedom Fighters Student Command in the Western Cape, dubbed the document a “77-page state surrender to capital.”
“Nothing new is offered in the paper, which simply reveals a lack of imagination and a need to give the perception that something is being done. The lack of imagination and appetite for independent economic stimulation is evident in the constant reference to the private sector and results in us reading a 77-page state surrender to capital,” Thambo stated in an op-ed piece.
The board of Business Leadership South Africa has, however, backed National Treasury’s new economic policy paper, saying it crystallizes the way forward for an economy “on the edge of a precipice.”
The organisation, which represents big business in SA, said it was encouraged by the clear direction given by Mboweni in the economic strategy paper aimed at stimulating SA’s sluggish economy.
“South Africa is on the edge of a precipice and the problem has been the lack of clarity and decisiveness on some of the key issues articulated in this paper,” said BLSA.
