South Africa: Fighting Poverty - the NDP, ANC and a Political Big Beast

By Desné Masie, 3 February 2012
analysis

Over the years, the South African government has released a plethora of strategies and initiatives in its post-apartheid policy reforms. Many of these recommendations and programmes have evidenced middling success, and even outright failure. The latest such proposal is the National Development Plan, issued by the National Planning Commission of South Africa, an advisory body in the Office of the Presidency with a 5 year mandate.

In 2009, one of South Africa's longest-serving former finance ministers, Trevor Manuel, was appointed to head up the NPC in President Jacob Zuma's inaugural cabinet reshuffle. Manuel is assisted in his task by a cohort of high-profile commissioners, including ANC stalwarts Cyril Ramaphosa and Joel Netshitenzhe, and Elias Masilela from the Public Investment Corporation. But while the Left and Labour welcomed the commission's appointment of serious local talent over the "Harvard technocrats" the government usually hauls in to advise, it has grumbled that the "over-representation" of business people will undermine working-class interests. And South Africa's second-largest trade union, the National Union of Metalworkers of South Africa (NUMSA), was especially acerbic in its condemnation of the NPC being headed up by Manuel, whom they largely see as an enemy of the poor.

The NPC highlights not only some important issues about South Africa's political economy, but also Manuel's legacy in it.

The National Development Plan is not official government policy. It is a blueprint of recommendations to eliminate poverty and sharply reduce inequality through the "virtuous cycle of growth and development". In addressing this, the NDP has identified 9 key problems requiring urgent attention in its diagnostic report: high joblessness; poor education; poor infrastructure; spatial inequality in human settlements; an unsustainably resource-intensive economy; a high-disease burden compounded by a failing health-care system; uneven public services; widespread corruption; and social division. The plan provides comprehensive statistics to support these assertions, as well as key targets and recommendations, and it is also self-conscious in its acknowledgement of the challenges to overcome, particularly the weakness of government to co-ordinate, and the uncertainties represented by the current financial crisis.

Importantly, the NDP has highlighted that although poverty is multi-dimensional; South Africa has never had an official poverty definition, and recommends it be those living on less than $50 per month, and to reduce the percentage of South Africans living below it from 38 to 0 per cent by 2030. It also aims to reduce South Africa's GINI co-efficient (a measure of inequality), one of the world's largest, from 0.7 to 0.6, while creating 11m jobs over the same time frame.

The NDP is an impressive document, presenting real solutions - both Zuma and the opposition Democratic Alliance (DA) have come out in support of the debate it has started, but it is not without its detractors. Basic education minister, Angie Motshekga, slammed the Plan's proposals for competency and compensation of teachers as unrealistic. And there have already been vociferous condemnations of the plan by Labour and Black Business for its lack of support for robust redistribution and economic transformation.

Reg Rumney, director of the Centre for Economic Journalism at Rhodes University says "It is a very intellectually rich document, and it does not ignore the politics of change for mere technical solutions. It promotes accountability and fighting corruption."

The ideological context and an ANC Big Beast
Since the ANC took the reins of government in 1994, South Africa's macroeconomic policy has been highly contested. The ANC inherited an economy riddled with debt and capital flight, and the 1998 Asian crisis added fuel to the fire. The currency saw dramatic rises and falls, and the economy held to ransom by speculative global financial capital. On top of all this, the ANC also had to balance intense lobbying by business for trade liberalisation and privatisation, with the demands of the Left for more redistribution and transformation. For better or worse, this setting resulted in the government adopting a relatively conservative macroeconomic policy approach, reducing the deficit in favour of borrowing. This long-term strategy and its outcomes for growth and redistribution raised tensions with the Left.

The political economy of South Africa has since oscillated between perceptions of a supposedly 'neo-liberal' agenda on the one extreme of macroeconomic policy, to that of a 'nationalist' programme on the other.
In 1996, the deficit busting and GDP-oriented Growth Employment and Redistribution plan (GEAR), replaced the short-lived, more distributive, but overly-optimistic Reconstruction and Development Plan (RDP). Allegedly, the ANC's National Executive Committee had approved it before COSATU could get its bearings around GEAR's wider implications. The Left thought GEAR indicated that macro-economic policy had been hijacked by these 'neo-liberal' prerogatives.

Steven Friedman, director of the Centre for the Study of Democracy at the University of Johannesburg, says that the debate between nationalisation and neo-liberalism has been painted as a highly stylised clash of ideas, with the nationalisation debate, in particular, having been blown out of proportion. Friedman is adamant that the main point is substantive: "Let's get the debate right. It's not a matter of policy mix A or B. It is about a government that can deal with the problems. You can't say if we follow x policy cocktail, we will get full employment."

It seems worth reiterating here 'nationalisation' has never been official government or ANC policy. But says Adrian Saville, chief investment officer of Cannon Asset Managers and visiting professor at the Gordon Insititue of Business Science: "I don't think the stance is clear. I suspect that government has a clearer view in its own mind about the perception. I don't think that nationalization (as markets commonly imagine it) is a likely outcome. However, either way, investors and markets will be happier with certainty." While the ANC has been quick to pacify investors that nationalisation is not on the agenda, it did, however, appoint a team of experts to look into the effects of nationalisation in 14 countries, after its Youth League had raised the issue for discussion. While that report is largely expected to say a course of expropriation is very much ill-advised, it remains instructive of the ANC's kowtowing to the divisive influence of suspended ANC Youth League leader Julius Malema in exploiting the debate to gain political support.

The inability of government to clarify the perceived division and incoherence of its policies lies at the heart of the confusion over whether the NDP duplicates the functions of other government departments and commissions, or competes with them.

Manuel will have to continue to stand firm in the face of competing interests, and doubts concerning his ability to bring South Africans out of poverty, while he succeeded in reducing the deficit, unemployment rose to frightening levels under his watch. His legacy in South Africa's political economy will receive mixed reviews. He remains popular with business, but has made some powerful enemies on the Left. There is speculation on his political future and ambitions, made more opaque by the ANC's treacherous infighting on the road to its potentially bloody leadership battle at Mangaung in December.

Certainly when Zuma became president, there would have been hell to pay in the international financial markets if Manuel had left, yet his appointment to the NPC was perceived as an odd sideways move. Current finance minister's Pravin Gordhan's competence has allayed investors' fears, and it may be that Manuel's presence is no longer a big factor for capital markets.

But whether Manuel and Zuma survive Mangaung in December this year,
the key issue is that South Africa's inequality and poverty is undoubtedly an urgent long-term project. In this, the NDP is a step in the right direction. And even though there are other pressing trade-offs between poverty alleviation and external drivers of monetary and fiscal policy, can the South African government remain steadfast in getting its policy message coherent and continuous enough for the central aims of the NDP to succeed? At a practical level, corruption and financial mismanagement must be overcome by legal sanctions with teeth, and support for whistleblowers. The ANC must also appoint the appropriate people to important government positions, instead of merely settling its political debts.

The main challenge will be getting the Left and Labour firmly on board, and this requires recognising that their concerns about joblessness are justified, albeit polemical. Unless all South Africans can pull together in the face of structural inequality, as the NDP itself proposes, it will once more be the poor who lose out, and that prospect is unsustainable for the country's long-term stability.

Desné Masie is a journalist and academic. She is a former senior editor for the Financial Mail in South Africa, and is currently studying towards a PhD in finance at the University of Edinburgh Business School.



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& the krakkaz getting nervous

Anglo Says South Africa Must End Debate Over Nationalization

February 07, 2012, 6:24 AM EST

By Vernon Wessels and Carli Lourens
(Updates with minister’s comments in seventh paragraph.)

Feb. 7 (Bloomberg) -- Anglo American Plc, the fourth- largest diversified mining company, said South Africa must end a debate about nationalizing mines “once and for all” this year as it’s damaging the country as an investment destination.

South Africa, site of the world’s biggest platinum, chrome and manganese reserves and about 40 percent of Anglo’s assets, has been riven by arguments over whether the state should take over national mineral resources. The ruling African National Congress recommended against the policy, demanded by its youth wing, instead proposing increases in taxes on mine operators.

“It is clearly important this year to resolve once and for all, in the right way, the lingering uncertainty created by the nationalization debate,” Godfrey Gomwe, executive director for Anglo American South Africa, said today in a speech in Cape Town. “Nationalization does not work.”
Anglo’s platinum unit, with mines in the north of the country, is the world’s largest producer of the metal, while BHP Billiton Ltd., the biggest mining company, and Xstrata Plc dig for coal and produce aluminum and ferrochrome in the nation.

A study was commissioned into nationalization on behalf of the ANC following demands for the state to take over mining assets by the party’s youth wing, which says the country’s black majority isn’t benefiting enough from the industry. Economists appointed by the ANC to investigate nationalization recommended against the policy, a party official who has read the document and declined to be identified said last week.
Light Years

While the study “proposes very extensive changes to the fiscal and administrative regime of the mining industry,” it’s “light years” away from becoming policy, said Nic Borain, a political analyst at Religare Capital Markets (EMEA) Ltd.

Nationalization isn’t viable and the government may take a different view to the tax-raising proposals in the study, Mines Minister Susan Shabangu said today in Cape Town. National mining policy must be competitive and encourage growth, she said.

“We look forward to the policy debate reaching a clear conclusion that nationalization would be the wrong path for South Africa to follow,” Gomwe said. “As well as removing the doubt hanging over the mining industry, that conclusion will enable us all to concentrate on the real priority of working in partnership to tackle unemployment, poverty and inequality.”

--Editor: Tony Barrett, Randall Hackley