Getting down to business

Armed with an overwhelming popular endorsement of its policies, the new African National Congress government is likely to stick with the social and economic development programmes it has put in place since it first came to power.

The only differences in its programmes and policies are likely to be ones of emphasis and pace, as the ANC uses its renewed political muscle to strengthen its efforts to implement those policies. Anticipating an ANC win, the Cabinet decided at its lekgotla in January that the government must “hit the ground running”, says spokesperson Joel Netshitenzhe. “It must scale up implementation to reach a higher growth trajectory.”

The muscle the election will provide may be needed.
The government’s latest efforts to fast-track black economic empowerment (BEE) and employment equity have run into resistance from conservative elements in the business community, especially from small- and medium-sized companies, which are struggling to meet the requirements of the new laws and regulations.

On the other hand, the ANC’s ally, the Congress of South African Trade Unions (Cosatu), which made a significant contribution to the organisation’s election victory, is going to expect the government to loosen its purse strings to ease the plight of the unemployed both through public works and through welfare.

Cosatu has long been pushing for the government to adopt a less conservative fiscal stance and increase its spending on social and economic development programmes.

The trade union federation—and a surprising number of mainstream economists—also want the Reserve Bank to be less restrictive with monetary policy by cutting interest rates and allowing more room for inflation, to stimulate the economy and allow it to create jobs. Although Minister of Finance Trevor Manuel sets the band for inflation between 3% and 6%, the Reserve Bank is charged with keeping annual price increases within the range. Reserve Bank Governor Tito Mboweni is often accused of focusing on keeping prices stable at the cost of the economic growth the country needs to make a dent in its unemployment problem.

The 2004 national Budget is perhaps a better indication of the government’s plans than the promises of politicians, especially in an election year. Manuel is widely expected to keep his position at least for the next couple of years.

In the 2004 Budget, detailed by the National Treasury less than two months ago, the government outlined its spending plans for the next three years. This medium-term statement of intent is an effort to avoid startling domestic and international investors who are of a nervous disposition and tend to take their money and run at the first sign of a surprise.

The Budget identifies the government’s priorities for the next decade as: increasing infrastructure and industrial investment; improving education, training and skills development; extending social security, income support and work opportunities; and the improved regulation of markets and more efficient public service delivery.

Netshitenzhe says the public service must be able to implement policies. Studies have shown that policies are being frustrated through weak implementation.

The priorities have been accompanied by the adoption of a slightly more expansionary fiscal stance by the government that has made provision for the deficit to expand slightly this year, although not enough to threaten the country’s standing with international rating agencies. In any event, South Africa’s deficit has persistently come in lower than expected, including in 2003, because of a combination of better-than-expected revenue collection and lower-than-expected state expenditure.

On the big issue facing South Africa—unemployment—the Budget makes provision for the election promise that the government will create one million job opportunities through an extended public works programme. Although the money is spread across a number of social, skills and infrastructure development programmes and poverty alleviation initiatives—in a very complicated way—the government claims to have earmarked R100-billion, over 10 years, for the extended public works programme.

The idea behind the programme is that temporary employment in public works programmes will give the unemployed an opportunity to develop some work experience and learn skills that will help them find permanent jobs or start their own businesses.

Running alongside this will be the government’s skills development programme that aims to place 500 000 learners with companies by 2006. The government has long insisted that the problem is not that there are no jobs available in South Africa, but rather that those who are unemployed do not have the necessary skills to secure those positions. But the vast numbers of unemployed, about six million people, suggests this is not quite the case.

The government is also set to use its political and economic muscle to fast-track its broad-based BEE programme, which will try to ensure that not only will equity ownership of South African companies shift to black hands, but that empowerment initiatives will draw as many black South Africans as possible into the mainstream of the economy by providing them with training and job opportunities. The Treasury has put R10-billion over five years aside for black empowerment initiatives, a piffling amount likely to see the government face a lobby from black business for more.

To tackle HIV/Aids, the Treasury has earmarked R12,3-billion over the next three years for the government’s comprehensive programme for preventing and treating the disease.

On poverty alleviation, the government is likely to maintain its opposition to the introduction of a basic income grant—on the grounds that it will become unaffordable to the state in the long term and encourage dependency among South Africans, who they would prefer to see secure an income through entrepreneurship and other sustainable initiatives.

The government is, instead, focusing on expanding its existing social welfare and grant programmes, such as the Child Support Grant, and its old age and disability grants. At present the government provides social grants to 7,4-million people, but this year’s Budget projects that by 2006 more than 10-million South Africans will be receiving grants, although this is also being frustrated in several provinces where officials do not even know the grant has been expanded.

While President Thabo Mbeki was on the campaign trail, many South Africans highlighted to him the failure of local governments to provide free essential services to those who qualify. Local government is marked by high (and in some cases inappropriate) spending on personnel—and is not yet a financially viable sphere. Part of the problem is that local governments raise most of their own revenue through municipal rates, among others, with little help from the Treasury.

In the 2003 Budget, the Treasury is boosting its allocation to local governments for infrastructure development and to help them accelerate the roll-out of the provision of free basic services, but not yet at a scale high enough to act as an effective poverty-breaker.

In its 10-year review, the government said that unless South Africa is able to crack its unemployment problem and lift the majority of the country out of poverty, it faces a future of social and political instability that will undermine future efforts at economic development.

Politically, not much is likely to change in the country. Although the Inkatha Freedom Party and the ANC have been involved in a no-holds-barred slanging match in the run-up to the election, both have been careful not to slam the door shut on any future chance of the two parties cooperating in the government.

The ANC’s instinct is still to hold its enemies close—so once the dust from the election has settled, they will most likely begin to try and find ways to work with the IFP in KwaZulu-Natal and in the national government. The IFP has said it is not principally opposed to the idea.

The ANC is also likely to make room for the New National Party in the government, if only as a symbol of unity between South Africa’s minority groups, many of whom the NNP claims to represent, and the African majority represented by the ANC.

However, given the size of the ANC’s victory and the increasing confidence South Africans and the international community have shown in its ability to run the country, it may be tempted to be less generous in trying to accommodate its rivals this time round.

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