GNU needs to sober up; no economic growth without policy changes

The Democratic Alliance (DA) has set clear goals for economic growth and reducing unemployment in the Government of National Unity (GNU). Despite some improvements, such as a stronger Rand and falling bond yields, RW Johnson says there are no solid plans for long-term growth. To achieve its goals, the DA must advocate for major policy changes and urge President Ramaphosa to abandon initiatives that could jeopardize economic stability.

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By R.W. Johnson

The DA has been very vocal from the beginning of the GNU that the whole purpose of its participation in government is to see an increase in economic growth and a reduction in unemployment. ___STEADY_PAYWALL___ These, John Steenhuisen repeatedly tells us, are the party’s KPIs: key performance indicators. That’s all well and good, but how exactly should this be achieved?

Certainly, we know that the GNU brought about a major improvement in the national mood, a strengthening of the Rand, falling bond yields, making the national debt much more affordable and leading to a stock market boom. This is all very well, but these things are completely consistent with low or no growth and a resulting rise in unemployment. An improvement in the national mood could lead to a somewhat higher investment pace from domestic companies, but all have had more than a decade of pitifully low growth and declining real per capita incomes, an experience that makes people cautious .

Moreover, they all lived through nine years of Zuma’s state takeover, with its corruption, incompetence and the dismantling of almost all key state institutions. This has happened to the country because of the ANC, which is widely regarded by the business community as an unpredictable wild animal. At this point it is more passive and behaves less horribly, but at any moment it can return to the very harmful behavior of yesteryear. Imagine the presidency of Paul Mashatile, with the Alexandra mafia in power and Panyaza Lesufi’s Gauteng populists in charge. Such a prospect makes everyone shudder, but the fact is that it may now only take three years.

David Makhura, one of the more thoughtful ANC leaders, was very frank: “If the GNU fails, we’re all done for.” When you think about it, this is a significant admission: the ANC has brought the country to the brink of collapse. So I find it quite surprising that leading South African businessmen – who are undoubtedly working extremely hard to help the government – ​​are talking of a growth rate of 2% or even 3% as early as next year.

To begin with, the GNU is compiled in a lax manner. Ideally, there should be a good agenda and an agreed action plan with targeted results – all of which should have been shared with the public. Instead, all of that is missing. Meanwhile, there are no signs that ANC ministers are working harder or faster than their previous extremely slow pace. Obviously for them it’s just a continuation of business as usual. And in the absence of clear agreement, the prosecutor was repeatedly surprised: first, that they would not get anything like the right number of ministries; second, that Ramaphosa would continue with NHI and BELA despite the DA making it clear that they had red lines on both; next, that the Gauteng ANC should be allowed to exclude the DA from power-sharing; and now that the ANC would take action to get rid of a DA mayor who was successfully cleaning up the capital.

Moreover, Ramaphosa – in the case of the Ministry of Justice – has still not raised the obvious point that the combined national effort of a GNU is incompatible with corruption. So far, the solution to every problem has been for the DA and ANC leaders to get together for a chat, which simply means Ramaphosa mollifies Steenhuisen until next time.

The big question is where will this big growth spurt come from? We are still far from that. The mining industry is still stuck, waiting for a cadastral system and the Mining Charter actually makes new investments impossible. The ports and railways are still in shambles – the worst in the world – and the promised repairs are taking forever. Eskom has improved its performance and kept the lights on, but it is demanding a slew of massive electricity price increases that will destroy growth and close many businesses. Home Affairs has been working vigorously on the visa issue – but even tourism has problems: strengthening the Rand will damage the country and the ongoing disaster of Durban beach closures is working against that.

And it’s not like the DA’s ministers will make much of a difference. It’s possible that streamlining domestic affairs and making them more efficient could add a percentage point or two to growth, but it’s harder to see how public works or basic education can do that. In theory, agriculture could be an important growth point, but this would require all kinds of policy changes. We should abandon many of the hopeless land reforms, encourage private farming in large parts of the Eastern Cape, abolish communal land ownership, and so on. There are no prizes for predicting when such changes might occur.

So unless a miracle happens, the DA will probably soon realize that economic growth has not taken off and unemployment is still rising. If the DA wants to avoid that, it must push for major policy changes regarding Ramaphosa. But first they must prevent Ramaphosa from making the situation worse. BELA would clearly trample on the constitutional rights of Afrikaans speakers and NHI would more or less blow up the entire country: most businessmen would leave, as would more than half of all doctors, and NHI’s costs would crash the budget. . The Public Prosecution Service must be firm: the red lines mean that if Ramaphosa continues these measures, he will force the Public Prosecution Service to leave the government. If he really doesn’t want that, he should change NHI and BELA.

If they can overcome these admittedly steep hurdles, the DA could be moving on two very different fronts. One of these would simply be to accelerate reforms. Transnet, for example, is still creeping towards a situation where there will be some private participation in operating the railways and where a Philippine company can play a role in operating part of the Durban port. But this is all hopelessly too slow. Many of the rival ports in southern Africa have long been privately owned. This has led to large-scale investments, enormous increases in tonnages delivered and profits made. The result is that these ports are now taking more and more business out of South Africa. There is a real urgency in implementing what should be a complete – not partial – change.

Second, the DA should advocate for a major policy change. In recent years, a whole series of major companies have left South Africa: Barclays, HSBC, BNP-Paribas, Anglo-Gold Ashanti, Total Energies, Shell Downstream SA (with its 600 petrol stations), BP Aviation Fuel, Fitbits (a Google subsidiary ), General Motors, Chevron/Caltex and Rolex. This is an extremely worrying indication that more and more large corporations are actually deciding that doing business in South Africa is simply too difficult or not worth it. It is both essential and urgent that this trend is reversed. And it is simply not good enough for Ramaphosa or Mashatile to put on some kind of roadshow to entice investors with honeyed phrases. It won’t work. Ask yourself: if you were a London investor, how convinced would you be when Mashatile (of all people) grins as he declares that “South Africa is open for business”. For heaven’s sake.

As Ramaphosa’s recent meeting with Elon Musk showed, foreigners are rightly wary of BEE laws that effectively require them to give away 30% of their businesses. And studies have shown that BEE regulations are the biggest barrier preventing European investment in South Africa. And South Africa’s competitors elsewhere in Africa do not have the same BEE requirements.

Ramaphosa tried to persuade Musk with syrupy talk about ‘coming home’, but appropriate action is needed. Accordingly, the government should lift all BEE requirements for foreign investments of a certain size. This would also imply the abolition of the Mining Charter. It should be enough that foreign investors would create many thousands of jobs, re-industrialise the country and make it clear that South Africa was not retreating into the heart of darkness. It would be a dramatic gesture, showing that the government was determined to attract foreign investment and was willing to sacrifice ideology to do so.

The model is the automotive industry, which BEE has always completely rejected. Instead, carmakers have committed to sourcing most of their inputs from black-owned or BEE-compliant companies. The government has accepted this compromise: it means many thousands of jobs, a large export industry and large-scale import substitution, as South African motorists buy locally produced cars that they might otherwise have to buy abroad.

Overall, Ramaphosa needs to step away from the cloud of good feelings he is under and focus his thoughts on the simple fact that the ANC has put South Africa in a dire situation. He now has a heaven-sent opportunity to turn things around, but he needs a real sense of urgency. He cannot afford to continue threatening the collapse of the GNU by signing pieces of legislation that he knows his coalition partners cannot tolerate. The logic of a GNU is that all such legislation must be agreed in advance by the parties in the coalition. Instead, Ramaphosa continues to act unilaterally as if the ANC has an overall majority. Moreover, he wants that urgency to be reflected in the speed of reforms. It will soon be 2025 and Ramaphosa’s presidency will end in 2027. There is no time to lose. And finally, he must listen to constructive reform proposals, even if they are not part of an ANC conference resolution.

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