/ 24 June 2021

‘We mustn’t tire’ — Manuel on South Africa’s economic recovery

Day One Of The World Economic Forum 2012
To rebuild South Africa’s economy — in the wake of Covid-19’s onslaught — the country needs a stronger social compact, Trevor Manuel has said. (Chris Ratcliffe/Bloomberg via Getty Images)

To rebuild South Africa’s economy — in the wake of Covid-19’s onslaught — the country needs a stronger social compact, Trevor Manuel has said. 

The former finance minister, who currently serves as the chair of the Old Mutual board, was speaking at a webinar hosted by the Centre for Development and Enterprise on Wednesday evening. 

Manuel spoke on a range of topics, including South Africa’s economic recovery, cadre deployment and the future of the ANC.

“The president has spoken to it, but it needs a big push. And that is to bring back the idea of a social compact,” Manuel said.

“I think that parts of it were tested … and that is something that South Africans must commit to — a social compact that was the essence of what we crafted in the National Development Plan.”

The National Development Plan was adopted by parliament almost a decade ago and is the product of the National Planning Commission, which was led by Manuel and now President Cyril Ramaphosa. Building an inclusive economy is one of the plan’s cornerstones.

“In a society like ours, I think we owe each other the responsibility to know that nobody goes hungry, that we will do our level best to ensure that there is employment and that everybody can aspire to a reasonable quality of life,” Manuel said.

Manuel cited the government’s economic recovery plan, which was adopted by the National Economic Development and Labour Council in September last year. The council — through which government, business, labour and community organisations negotiate on reforms — is the home of developing a social compact.

The government’s plan, Manuel said, needed to synthesise the positions of social partners but was lacking in detail. “I think that is worrisome.”

In the weeks leading up to the plan’s release, Business for South Africa released its own plan, titled A New Inclusive Economic Future for South Africa

The government’s plan, which focuses on economic growth, job creation and infrastructure investment, has been widely criticised. 

On Wednesday, Manuel referenced one such criticism, levelled by the Thabo Mbeki Foundation. Earlier this year, the foundation released a paper that called the government plan “a vision” rather than a “transformative plan”.

Manuel said fixing public finances was also “fundamentally important” to putting South Africa’s economy back on track. The cost of the public-service wage bill needs to be remedied, he added.

In his budget speech earlier this year, Finance Minister Tito Mboweni restated plans to radically reduce spending on public servants’ compensation, which accounts for 32% of government expenditure over the medium term.

The treasury views an increase in public service compensation as the primary culprit for the sharp rise in government spending over the past decade. Proposed reductions to the wage bill amount to R303.4-billion between the 2020-21 and 2023-24 financial years.

Cutting spending is aimed at stabilising the debt-to-GDP ratio and narrowing the budget deficit, which, according to the treasury, has doubled since the 2020 budget, from 6.8% of GDP to an estimated 14% in 2021. 

Manuel said the government and the public must not lose focus when it comes to issues affecting the country’s economic trajectory. “Those are the issues that I think should be raised up on the agenda. And we need to come back to them,” he said.

“We mustn’t tire, or become tired of talking about these issues, knowing that there are proper decisions to be made to remedy those kinds of matters.”