THE drafters of the ANC’s discussion document titled “Economic Transformation” must be alarmed at the policy uncertainty that the recent cabinet reshuffle has created.
South African foreign currency denominated debt has been downgraded to junk status by global credit rating agencies Standard & Poor’s Global and Fitch Ratings after a controversial cabinet reshuffle that saw President Jacob Zuma replacing his finance minister Pravin Gordhan with Malusi Gigaba, pictured right.
The 19-page “Economic Transformation” document — part of a series of discussion papers released ahead of the ANC’s policy conference to be held in Johannesburg from 30 June to 5 July – warns against the ruling party heightening policy uncertainty, which may deter investors from taking an investment bet on South Africa.
The document insinuates that if the country wants to meet the economic growth targets envisaged in the National Development Plan (NDP) it has to increase the combined investment by the private and public sectors to 30% of Gross Domestic Product (GDP) from 19% of GDP.
But attaining significant increase in private sector investment will require political and policy certainty.
“Policy certainty is key for longterm investment. Concerted efforts are required at eliminating policy uncertainties and unwarranted regulatory hurdles. “Government should conduct an audit of the policy and regulatory
constraints to investment and set a clear timeframe for addressing them,” the document reads.
Despite numerous assurances by Gigaba that there will be no economic policy shifts under his watch, the markets have not bought into his pleas with the rand remaining weak after falling sharply in the wake of the cabinet reshuffle
that involved 10 ministers and 10 deputy ministers.
At the heart of investors’ nervousness are the calls by Zuma for radical economic transformation (RET), which the credit rating agencies interpret as a move away from Gordhan’s prudent fiscal policy to reckless government spending by Gigaba.
Reports that Gigaba was headhunting left-leaning economist Chris Malekane to join the National Treasury as his economic advisor may give credence to predictions that South Africa was on the verge of a radical policy shift that will result in the vigorous implementation of RET that will accelerate wealth redistribution.
Interestingly, Zuma and the writers of the ANC policy discussion paper “Radical Transformation” seem to hold
differing opinions on what “radical economic transformation” means.
In his State of the Nation Address on 9 February, Zuma described RET as follows: “We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female, as defined by the governing party, which makes policy for the democratic government.”
Zuma believes that the solution to undoing skewed economic ownership by whites is for the state to intervene in the economy by using legislation, regulations, licensing, race-based procurement and black economic empowerment (BEE) policy to give black people a bigger share of the economy.
But the drafters of the ANC’s policy discussion document have a different version of RET in mind. The document drafters want economic growth prioristised before wealth redistribution while Zuma wants redistribution now.
“Primarily, radical economic transformation is about fundamentally changing the structure of SA’s economy from
an exploitative exporter of raw materials, to one which is based on beneficiation and manufacturing, in
which our people’s full potential can be realised. “In addition to ensuring increased economic participation by black
people in the commanding heights of the economy, radical economic transformation must have a mass character,” the document explains.
But Zuma and the drafters appear to agree that RET — which can be best described as black economic empowerment (BEE) on steroids –must benefit a broader society than benefitting a small elite, as it was the case under first- generation BEE policies.
Calls for RET correlates with the introduction of the third phase of BEE implementation, which kicked in 2015, whereby the focus is on creating black industrialists.
The first two phases of BEE implementation dating back from 1998 to 2013 focused on selling minority stakes in white-owned companies to a few politically connected individuals, but little of this wealth trickled to the poor black
It remains to be seen if the RET will succeed where BEE failed in radically increasing black ownership and
control of the South African economy and benefitting the poor.
Andile Ntingi is CEO and co-founder of GetBiz, an e-procurement and tender notification service.