Nigel Bruce
If there is any area of agreement between business and labour in this country it is that the government’s macroeconomic policy, Gear, is not working. The growth, employment and redistribution strategy has produced some favourable and essential financial ratios (such as a low deficit before borrowing) and forced greater efficiencies by removing protection, but neither the 6% growth expected of it, nor more jobs, nor a discernible reduction in poverty have been achieved.
Certainly Gear is moving the economy in the right direction, but much too slowly. We missed the boom in our main trading partners. The lower growth expected worldwide after the terror attacks of September 11 will simply aggravate our inadequacies. Having lost a million jobs since 1994, we face now the prospect of an even faster reduction in employment.
Yet it is meet, right and government’s bounden duty to succour the poor, give them sustainable jobs and foster peaceful prosperity. If Gear is failing to do that, despite the favourable economic fundamentals the government claims, the sensible thing is to seek an explanation in a wider context. Where is the blockage occurring?
Gear in its disciplined conception is not the problem. There is enough experience elsewhere to indicate that the alternative a populist government spending splurge would have had us by now in the jaws of the International Monetary Fund and the World Bank.
So neither President Thabo Mbeki nor Minister of Finance Trevor Manual can claim extraordinary perspicacity at having introduced Gear. They had no alternative. Where they have failed is in delivering sufficient trade union support to enable the policy to be implemented in full, which is essential for its success.
The unions are directly responsible for the lack of implementation of a significant part of Gear, namely privatisation. As a result, initial investment interest has dissipated and been replaced by growing scepticism. Now the events of September 11 have effectively put paid to privatisation in the immediate future.
At the time Gear was imposed and it was done in an authoritarian manner the African National Congress component of the ruling alliance clearly believed that the support of its union allies could be won through a socio-political agenda favouring black interests.
The labour market was made more rigid and racist, and affirmative action legislation was introduced, expensive black empowerment policies were adopted and given spurious economic justification. The cost to business especially small business where job creation is most potent has been incalculably high.
The communists decided, when Gear was introduced, to sabotage it. They have, I guess, been more successful than they dreamed of then.
Nor has rising crime and corruption, an Aids pandemic and a manifest decline in government services been conducive to investment confidence. All these have combined with morbid political and economic events in other emerging markets, particularly in Zimbabwe, to persuade investors that African electorates are windy about a fundamental economic reality: that economic growth is created by adding value through entrepreneurial endeavour.
This misconception is encapsulated demotically in the spurious view that whites came and stole economic resources from blacks who are now justified in taking them back. The impact on investment sentiment, especially abroad, is devastating.
Not only Robert Mugabe’s depredations but Mbeki’s response to them and the legislative trend in South Africa tend to reinforce this interpretation. A capital gains tax and the move to preclude foreign investment in security services are examples. This, in turn, drives out potential revenue in the form of disillusioned taxpayers and the skills needed to underpin higher economic growth.
The reality is that we are not going to get the investment that would have given us the levels of economic growth that would be salutary to government, business and labour without major sacrifices having to be made by all three. In short, if we carry on like this we will all become progressively poorer and more politically unstable.
The sensible thing to do is for government, business and labour to engage over what each needs to sacrifice to reduce poverty, create sustainable jobs and foster economic growth. It might be possible to delay privatisation if the unions agree to limit wage increases and government agrees to maintain the purchasing power of incomes by cutting taxes. Business might agree to pay more for certain services so that government spending can be reduced while poverty relief is increased.
The process of negotiation would provide opportunities for the dissemination of economic education through the communication of opposing views against a need to achieve a common purpose. Some other countries, notably Ireland, have achieved such a consensus. The result has been 10 years of a 10% growth rate, full employment and further increases in investment as taxes are brought down to a 12% target.
My perception from Parliament is that business engages far too little with government and labour over matters of policy, other than tax and industrial relations. Opportunities are constantly missed to educate and persuade parliamentarians of economic and business realities. Trade unions are always present and arguing for amendments in proposed legislation. Business, if present at all, is usually all but mute.
Problems over the implementation of Gear are, of course, predominantly the responsibility of the government. But it seems to me that business’s failure sufficiently to engage in a broader dialogue with the government and labour has contributed to a polarisation of interest that has detracted from the achievement of a common purpose. That is what needs to be changed now.
Nigel Bruce is a Democratic Alliance MP