Op-ed: New Deal a mirage unless president sells an enterprise-friendly strategy | Business Day05 Sep 2018, by
Ramaphosa is caught between the global economic realities and leading a corrupt and deeply divided party.
In November 2017 Cyril Ramaphosa, then deputy president, borrowed the evocative language of Franklin D Roosevelt in calling for a New Deal for SA. His 10-point plan focused on rolling back corruption and state capture, the creation of policy certainty and building investor confidence in the service of jobs and growth. He saw inclusion and transformation for workers, communities and entrepreneurs as central to the new approach and called for macroeconomic policy that secures the country’s economic sovereignty through growth.
In reference to the challenge of improving the quality of education, he said “unions must refuse to defend those who stand in the way of the education of the children of the working class”.
Land reform was not one of his 10 points; it was mentioned only as a key part of the objective to pursue meaningful economic participation for the poor and marginalised. His approach to the private sector departed from the ANC’s previous attacks on “white monopoly capital”. He suggested private sector expertise and resources would complement state capacity in infrastructure, and suggested the private sector as a possible strategic partner strengthening the balance sheets of some state-owned enterprises (SOEs).
To Ramaphosa, business was also seen as a social partner that would create jobs and support black-owned small and medium enterprises in achieving high growth and sustainable returns.
These welcome emphases and reversals of Zupta-era aberrations were, however, placed within a firm commitment to the existing policies of the ANC and included a number of statements and proposals that indicated a continued statist approach to development. This struck a warning note, which would be greatly amplified by the ANC conference and its aftermath, about how new the New Deal would really be.
Elected president of the ANC in December by a thin margin, Ramaphosa’s supporters lost on key policy questions debated at the ANC conference. Since becoming president of the country he has been embroiled in the realities of leading a corrupt and deeply divided party.
The gap between the ideas candidate Ramaphosa extolled in setting out the New Deal and those to which he is bound as a consequence of the factional atmosphere in the ANC and the alliance, means the president is condemned to live in the parallel universes of ANC populism and economic reality. The former is marked by fiscal incontinence — public sector wages, endless bailouts for SOEs, fee-free tertiary education, an uncosted National Health Insurance plan — and an attitude to property rights (reflected most clearly in the debate over expropriation) that at best is cavalier and at worst predatory.
In the real world, however, Ramaphosa’s priorities should be fiscal discipline, growth-friendly policy certainty and the implementation of confidence-building reforms that would enable the private sector to do more of what the private sector does: increase economic activity, employ more people and pay more taxes.
Caught between these two alternate universes, the president has so far chosen continuity with ANC policies of the past two decades, spiced up with increased populism and next to no progress in curbing public spending or adopting new policies to enable economic growth. SA certainly does need a new deal with jobs and growth at its heart if we are to build a more inclusive and transformed society. This is not something we have ever had. Thus far, public policy has done little to extend employment and inclusion to millions of people whose life chances have been compromised by our failing education system.
Instead, far too much policy attention and far too many public resources have been deployed in a manner calculated to increase insiders’ share of the national economy. By far the most telling statistic in this regard is that since 2008 the population of young people in SA has swelled by 2-million but the number of young people who have jobs has fallen by nearly 400,000.
SA has always offered its excluded outsider poor a raw deal, but its persistence into a new era of hope and expectation should be intolerable. The president needs to lead the country, not just the ANC. He has to talk to South Africans about the crisis we are in and why a wholly new approach is needed. If jobs and growth are truly to be at the heart of a new deal, the policy consequences of putting these priorities at the centre of the government need to be thought through, spelled out and communicated effectively within the ANC, within the government and to the country at large.
For any of this to work, SA needs a new attitude to the role of business in national development. There is a pervasive anti-business sentiment in and around government, which treats the private sector as at best a necessary evil and is for the most part devoid of facts and reliable analysis. The narrative has to change. The issue is much less about what more can be extracted from business than how to tap into the power of markets and enterprise to help build SA.
When the president tells us the country is imperilled by appalling misgovernance and venality in our main SOEs — which he described as “sewers of corruption” — as well as in many other parts of the state, he needs to draw obvious conclusions about the quest for a development state and the plausibility of state-driven development, inclusion or, say, land reform.
FDR’s New Deal was forged at a time of great peril in US history. Millions were without jobs and hope; demagogues put democracy and capitalism at risk; there were dangerous developments in the world economy and increasing international tension. The signs are familiar. SA’s president needs to lead the entire nation, develop workable policies, provide hope and combat dangerous populism.
Like FDR, he needs a brains trust to work on developing the key elements of a true new deal as well as how to build the political coalitions to support the reforms — many of them painful — he will need to lead. This is essential if he is to create a meaningful prospect of a better life for all South Africans, especially those who have been left behind in the past 24 years.
We cannot go back to ANC policies and approaches of 10 or 20 years ago, buying the promise that this time it will be different.
The country has changed, the economy is in much worse shape, the world economy is tougher and less forgiving, and SA’s state is far less capable. In this new world pursuing the same old policies is a recipe for a raw deal, not a new one.
• Bernstein is executive director of the Centre for Development and Enterprise.
This work by Centre for Development and Enterprise is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.