/OPINION: Mbowenis economic plan likely to flounder on rocks of mistrust

OPINION: Mbowenis economic plan likely to flounder on rocks of mistrust

2019-10-10 05:00

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.

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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.

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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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