Ministers still refuse to set a timetable for privatisation and the lifting of exchange controls, writes Lynda Loxton
The government dug in its heels this week in the face of mounting criticism about its economic policies and refused to give firm timetables for the key contentious issues of privatisation and the lifting of exchange controls.
Despite tough questioning from local and international media during the special parliamentary briefing week, Finance Minister Trevor Manuel and Trade and Industry Minister Alec Erwin insisted the “basic economic fundamentals are sound” to meet the targets of 6% growth and a deficit of 3% by the turn of the century.
Standing in for Public Enterprises Minister Stella Sigcau, Erwin said the government did not plan to produce timetables on what state enterprises it planned to privatise. Each institution was being dealt with on a case-by-case basis and finalisation depended on negotiations with the unions.
Manuel, meanwhile, was happy with the way the economy was going: “By all accounts, the basic economic fundamentals are sound.
“All indications are that we remain on track for 3% growth this year. Although there has been a slowdown in manufacturing we have a very buoyant agricultural sector and non-gold mining sector.
“Even gold is making a contribution to the domestic economy because of the rand gold earnings. So on expected growth, we are on target. As the figures of both the Consumer Price Index and Producer Price Index show, it is also very true to say that inflation is fairly firmly under control, notwithstanding the depreciation of the rand.”
But, no matter how sound the fundamentals, the markets remain jittery about the fact that the government is not demonstrating its confidence by moving fast on exchange controls and privatisation.
Manuel countered this by saying the International Monetary Fund supported the gradualist approach “and they draw on a range of international experience”.
He agreed that the government faced a “perceptual problem”, but he did not believe it should deal with this “by changing decisions week by week. You can only deal with perceptual issues by retaining a focus on the long view.”
That meant getting the right systems and structures in place to ensure lean and efficient government, to correct structural weaknesses such as inefficient and uncompetitive industries and create market friendly policies.
Whether this approach is right or not remains a moot point, but although it might be slow and ponderous, it is gradually showing results.
Deputy Finance Minister Gill Marcus also outlined some of the systems being put in place. She said the budget council and the national budget committee had just completed two weeks of presentations and had agreed to prepare budgets for 1997/98 in line with the 4% deficit target.
`The budget committee will take its initial recommendations to the Cabinet in September, while the next budget council meeting in October will consolidate the national and provincial recommendations,” she said.
This process had highlighted several issues. Reprioritisation within budgets still needed more attention while it was clear that the Constitution had created new bodies, commissions and obligations that needed funding.
“We urgently recommend that this be costed and an approach taken that fits in with what we can afford,” she said.
At the same time, white papers developed by various departments “tend towards policies that do not take sufficient account of the resources available”.
The finance department was thus re-organising itself, setting up a Budget Office with a unit responsible for medium-term expenditure planning.
“We plan to provide at least a three-year Budget horizon so that we move away from year-on-year budgeting without a vision of where our spending priorities will be,” she said.