Massively increased levels of public investment lie at the heart of Deputy President Phumzile Mlambo-Ngcuka’s plans for accelerated and shared economic growth. But its ambitious 6% target for economic growth has been scaled back to 4,5%, at least for the next five years.
The Mail & Guardian has seen a confidential powerpoint presentation of Mlambo-Ngcuka’s strategy, which was approved by the Cabinet two weeks ago. However, it is still in draft form and under review by business and labour, who must endorse it before it is finalised.
President Thabo Mbeki appointed a task team in August, comprising ministers in the Cabinet economics cluster and headed by Mlambo-Ngcuka, to devise a plan to achieve a growth rate of 6%. But the task team has backpedalled to a rate of 4,5%, roughly the current rate of economic growth, and the intention now is to focus on the ratio of job creation to economic growth.
The 6% growth mark is seen as being attainable only between 2010 and 2014. The Reserve Bank has also cautioned that a 4,5% growth rate is more feasible in the short term — roughly what the National Treasury modelling predicts.
Briefing the media in Parliament this week, Mlambo-Ngcuka was reluctant to provide details, saying her team couldn’t ‘operate in a fishbowl when [it] is still in the engine roomâ€.
‘We have plans, but the plans are not enough. How many jobs will this lead to? How many project managers do we have in the country, where are the artisanal skills? How fast are we moving on environmental impact assessments that tend to constrain infrastructure investment?†she said.
However, the presentation makes it clear that the government sees the cornerstone of the strategy as a major public investment plan, melding existing policies, infrastructure projects and budgetary allocations, with improved coordination between state departments. The presentation shows that Mlambo-Ngcuka’s task team originally envisaged a 55% boost to R320-billion in infrastructure expenditure over the medium term.
But the National Treasury is already ahead of her, allocating R370-billion over the next three years. This will push public sector capital investment as a percentage of gross domestic product from 5,2% last year to 6,7% annually for the next three years.
A University of Cape Town study for the Presidency pegs the current ratio of employment creation at 0,76% for every 1% of economic growth.
Mlambo-Ngcuka aims to increase this to at least 0,8% — a goal that is seen as more achievable over the short term if some resources are directed to increasing labour intensity, rather than designing industrial strategies that reward capital intensity.
Improved coordination is the strategy’s mantra. The presentation proposes a Joint Council on Priority Skills between business, labour and government leaders, which will address, among other issues, the skills crisis at the local government level.
It also suggests a review of Cabinet’s committee system, ‘to take into account the major emphasis in the government’s strategy in the current phaseâ€, notably human resources and infrastructure development.
In a move likely to be welcomed by business, Mlambo-Ngcuka’s team proposes the establishment of a Regulatory Impact Analysis System to review the effect of the country’s regulatory and governance environment on growth — a mechanism that the Democratic Alliance and business organisations have urged for some time.
The plan details in percentage terms how state investment will be distributed. About 50% will go into bolstering capital investment in the three government spheres; 5% into public-private partnerships; 3% into development finance institutions and 40% into state-owned enterprises.
The presentation floats various other initiatives to remove constraints on growth, including a review of import parity pricing, currency stability, establishing an industry body for the call-centre industry, ‘unblocking the international supply of beads†to bolster the informal economy and creating a unified national forum for the craft industry.
At present, education gets short shrift. The presentation lists the well-known R1,5-billion recapitalisation of further education and training colleges and the plan to increase maths and science graduates from 24 000 in 2004 to 50 000 by 2008. Real increases in education spending, however, are marginal.
Education Director General Duncan Hindle said that his department had cautioned the Treasury that education’s share of government spending would decline in percentage terms over the Medium Term Expenditure Framework period, and would only recover to current levels by 2008.