Sep 12 2008

Zumanomics for Dummies

Published by at 10:01 am under Opinion,South Africa

First published on my old blog on 21/1/2008.

The ANC has published two instalments of its new economic policy agenda as agreed at Polokwane in December last year on its website. More instalments are to follow in the coming days. 

Although the second part was published last Friday (3 days ago), the SA media have not noticed (or reported on) anything to date – everyone is still “vas aan die slaap”. 

So, let me write a few comments. And then decide whether we’re actually staring “a jump to the left” in the face, or not.

To date nothing has been published about monetary and fiscal policy management. Until that instalment is published, we’ll probably have to go slow with our assessment. 

I’m not going to re-publish the two instalments here – they can be read on the ANC site. 

Here just a few highlights and general observations:

* Firstly, we are back at the wishlist approach again, employed by the ANC in the run-up to the 1994 election. This approach simply lists everything that would be “nice to have” – from a comprehensive social security net for all (as a few developed countries in the world can afford it), to free schooling and medical services and housing – irrespective of what the whole thing will cost and without a word on how it will be financed. 

* It is stated several times that the state will take the “central and strategic role” in directing economic development. For that purpose a central planning agency will be established for coordinating policy over all 3 levels of government. 

* There must be universal and subsidised access for all to basic services, health care, affordable transport to all, free education and extension of the social grants, while the burden of the low-income earner must be alleviated. (In short, the sooner all 48 million people in SA could have everything, the better.) 

* A few examples of the kind of “state intervention” we can expect: There will be a state-owned pharmaceutical company which will ensure medicine prices stay low; the state will intervene in the building industry to curb the spiralling cost of building materials; there will be “central planning of building resource allocation”; the willing-buyer/willing seller principle will be discarded to accelerate the distribution of land; foreign ownership of land should not be prohibited, but it should be regulated “with immediate effect”; government will roll out a massive state-led infrastructure investment programme to improve the country’s logistics, energy capacity and communications capacity (it’s not stated, but I assume the Eskom issue and the internet infrastructural deficiencies are intended here….hurray!).

* Furthermore, the ownership structure of the economy “still reflects the apartheid past” and must be transformed at an accelerated pace; black economic empowerment must stay; and something the white farmers will particularly like: there must be “strong intervention in the private land market” to transform the pattern of land ownership and “deracialise the agricultural sector”. (That doesn’t sound very friendly…)

* The industrial policy is (again) a bit of all, regardless of whether the parts actually fit together in a coherent whole, eg. we must grow our export industry and we must develop our rural areas.

Comment: These are all noble goals (and there are a number of VERY positive aspects listed, which I haven’t repeated now, but intend to list later), but it’s unlikely that they are affordable. 

Even if we acknowledge that Trevor Manuel’s idea to balance the books (no deficit this year), is a bit unrealistic and out of place in a developing country with big social backlogs like SA…even if one drove state expenditure up to its utmost limit of what is regarded as healthy by international norms, then this programme of the ANC probably won’t be affordable. 

Yes, there we are back at the old, boring complaint offered in the pre-1994 era. But, if it was true then, it still is today. Because, the state debt situation might be much healthier now – but the population is also 10 million bigger now than in 1993. 

We’ll have to wait for the instalments on monetary and fiscal policy to see how the ANC intends financing its ambitious programme. 

But, one doesn’t have to wait until then to say that it won’t be business as usual for economic policy under Zuma. There will be more state intervention. And the freedom of a number of the markets will be curbed. 

The thin ray of hope: After two instalments there’s nothing to suggest Trevor Manuel must necessarily pack his bags. Let’s hope it stays like that.

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