‘Bold and dispassionate platform’

Ferial Haffajee quizzed the Director General of the treasury, Lesetja Kganyago, on the International Panel on Growth’s policy ideas .

How would you characterise the set of recommendations from the Harvard Group? Doable? Contentious? Likely? Highly unlikely?

None of the above. They are bold and dispassionate. They are supported by rigorous research and a comparison of South Africa with other developing countries.

They asked basic questions and over a two-year period also asked more pointed and often difficult ones. Questions we refuse to ask ourselves because we want to be too nice to each other.

The team challenges a number of shibboleths by recommending major changes to black empowerment; suggesting a wage subsidy and the relaxation of labour laws for first-time employees; declaring that trade policy is not robust enough; that we should be brave and dump exchange controls, that we phase out expensive tariffs — Are we ready to jump these hurdles?

In economics, you can’t be evangelical. Proposals must be evidence-based. You can’t formulate policy from the rooftops. South Africans may find it difficult [to hear what the International Growth Panel is saying] but counter-arguments must be based on a similar analysis with the hallmarks of evidence and rigour.

You will not see the policies being acted on over the next few months because we want a debate on this issue and have put the recommendations on the table. It will be an intensive process.

But will it be an inclusive process?

Like all good bureaucrats we could have put in place a Cabinet memo and implemented it once approved. But we want to build national discourse about these things.

There isn’t an agreed position even within government, so a rigorous debate is essential.

The economists say we should be running a bigger surplus. As you know [from when Minister Trevor Manuel tabled a budget for a small surplus in February] this is highly politically contentious in a poor country where deep need stares us in the face? Is it a palatable or sensible proposal?

We can also say it’s harder to run an economy at such high interest rates. Policy is about trade-offs. What the recommendations say, in a nutshell, is that if you don’t like high interest rates, take pressure off monetary policy.

The recommendations suggest a real surplus to shore up funding plans —

Beautiful economic ideas can die at the altar of politics. You can undermine plans by failing to protect the poor and the vulnerable. Well-considered economic reform programmes end up faltering because you fail to take cogniscence of the vulnerable and of the need to protect them in the transitory phase.

Is this what happened during the Gear years (the controversial previous economic policy called the Growth Employment and Redistribution Strategy)?

South Africa has run a tight fiscal ship without having to compromise on social programmes.

The central thesis of the economic minds assembled is that we need to get more people working, urgently. This finally recognises the link between unemployment and growth whereas the treasury’s view has been entirely more sanguine on employment, which is that it’s getting better and isn’t quite so bad.

The treasury has not been sanguine about unemployment. [We have always said] the only way to deal with poverty is to create jobs.

The economy has come to the point where it is facing skills needs that won’t sustain growth in the long run.

Laced through the recommendations are critiques of policy gaps and gaffes that have hurt our exporting potential.

The nice thing about being a bureaucrat is you get to put ideas on the cards of politicians. We have grown on the demand-side of the economy, which should have told us we would run into constraints.

For a small developing country you don’t grow and grow sustainably by producing goods only you consume; you produce goods that rest of world can consume. Our export performance has been pedestrian compared with other emerging markets.

The fact is that jobs in export markets absorb low-skilled workers. Ask China.

How do we make ourselves a trading nation?

Through trade and industrial policies. Those fall within the competence of the department of trade and industry. If you read the recommendations they say that industrial incentives must be used for self-­discovery, for new firms to be created in the tradable sector.

They do not say we should not have incentives, but when we create these, the important thing is to evaluate, evaluate, evaluate. You’ve got to constantly ask yourself if they are yielding [the required] outcomes and if they are failing, we should can them.

I can smell trouble with the recommendations on BEE. The recommendations suggest that ownership, as a criterion, is downgraded to be of the same value as procurement, enterprise creation, training and employment. This, of course, will not sit easily with the mandarins for whom the BEE all is ownership and equity. The symbolic purpose of BEE is to create more and more Patrice Motsepes, who make it to the cover of Fortune magazine — real-life symbols of the coming of black power to more than just the political levers of the country?

Should we be giving more [BEE] marks for being export-oriented? For creating jobs. The recommendations talk of a balanced scorecard and say that, in practice, it’s not balanced enough. I don’t think it would have been possible for a South African to raise these issues [about BEE] or for a BEE businessperson or a white businessperson to raise. That’s the benefit of having outsiders giving us a dispassionate appraisal.

The economists say that immigration policy needs to be radically liberalised to bring in skilled workers who will create jobs. It’s been the same story for 10 years. Are you hopeful that we will ever becoming a skills importing nation leveraging off sunshine and lifestyle to attract people here?

I’m not Mr Msimang [Mavuso Msimang, the Director General of home affairs]. The clarion call in South Africa is that we should train our own, and that’s correct. But do you wait until you’ve trained your people or bring in people? Every skilled job that is filled carries or fulfils another two jobs. The whole world feels they can recruit our own [people] but we feel we can restrain our own and constrain ourselves from recruiting. It’s not ­logical. Beautiful ideas die at the altar of politics.

Have you learned lessons from the Gear experience so that economic policy is not merely implemented but negotiated?

[Laughs] Gear was formulated in the middle of a crisis. We have breathing space but it does not mean it must be a Codesa-style negotiation. [A reference to the years long negotiation of the transfer of power.] In June we will hold a conference of South Africans from all walks of life; we will engage the unions and the broader elements of civil society.

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