Raymond Parsons
The highways of economic policy matter greatly, especially for a developing country like South Africa. So it is right that stakeholders and analysts have been lavish in their praise of the president’s review of successes in the economic field and of his government’s objectives regarding the future of its economic programmes.
These have correctly been greeted as key elements of last Friday’s State of the Nation address – Thabo Mbeki’s first. This aspect cannot be emphasised strongly enough, especially in contemporary South Africa, where too many present and potential participants in the productive sector seem not to have noticed that the country has been forging ahead in material terms.
The sooner the Jeremiahs can be persuaded to shake off the deep-seated scepticism about our short-, medium- and longer-term prospects, the better for everybody.
But the president is more than just the custodian of economic verities. And it is because of his wider role that it is appropriate to ask whether, at this stage of his five-year term, to give three cheers for Mbeki, or only two?
There are still some questions about how single-mindedly certain economic strategies are being implemented, both at the macroeconomic level and as they affect individual firms and micro-businesses. Then there are matters to do with competent administration and delivery, some far removed from economic policy formulation, which have an impact on everyday life and economic outcomes. These can be critical among factors building or eroding morale, investment, and all other good things that go with these fundamentals.
Governments are as much accountable for delivery on their programmes as they are for making plans and devising structures surrounding them. Which brings us face to face with the fact that delivery in many public spheres remains woeful and the question is what should be done about it.
Just as he did not utter the term Gear (through committing himself to its components), the president omitted to use the word “delivery” – and in this instance also failed to offer any broad assessment of where performances have been lacking, and why.
Instead, in identifying various new structures and processes, such as the International Investment Council, the president was nothing if not true to form. A general caveat is necessary. In this country we have a propensity, as soon as we hit a problem, to create a new structure, the overall impact of which may serve to weaken policymaking and implementation rather than strengthen it. It then leads to demands for better “co-ordination”. More structures are required for this purpose, of which the end result may only be to clog up the arteries of decision-making.
The investment council may be an exception. It could provide a useful window on to the thinking of foreign investors to back up what local business is saying and in helping to make South Africa a more attractive investment destination.
Even so, what local business is doing by way of direct investment and market development, including export performance, is what really stands to count with newcomers. And this is a prime context in which we should take heart with the president that South Africa enters the 2000s with stronger economic fundamentals.
If we can never escape our vulnerability to external bubbles, swings or shocks, at least the “fragility” of recent years is now beginning to recede. International experience reminds us that, while economic growth is hard to achieve, it is easy to forfeit.
Whatever the situation may prove to be in the months ahead, the bigger danger for South Africa at this juncture is not the world economy but that we will score “own goals” or shoot ourselves in the foot. Mbeki’s strictures on the Volkswagen episode were only too necessary.
And it is not the private sector alone that deserves to be admonished. To become, not “a leading emerging market”, but the leading one over the next few years, there are still some critical improvements to be made or decisions still to be taken. This is with reference to crime prevention, labour market reform, speeded-up privatisation, tax reform, and further relaxation of exchange controls.
For some of this, further signposting now awaits Trevor Manuel’s budget speech on February 23. Not all of it may require further drastic overhauling of existing legislation. Much may be achieved by effective administration. The tangibles of the budget may be decisive in achieving a top investment rating from the Standard & Poor Agency in due course.
The budget may also throw additional light on inflation targeting. Successful inflation targeting could bring more coherence to our economic policies. It also implies greater accountability for the Reserve Bank and more transparency in its operations. But transparency is also required for the process by which inflation targeting is decided.
Certainly there is need for proper consultation with stakeholders before the government makes the final decisions. We must try to get it right the first time round.
Perhaps the president’s address succeeded in persuading people that plans do exist, with implementation likely to be forthcoming. Be that as it may, his speech left no doubt that Mbeki well knows that he has embarked on a marathon, not a sprint.
Raymond Parsons is a professor in the department of business economics at the University of the Witwatersrand. He is also the overall business convenor in Nedlac