The GDP Election Poser

Addressing the a New Age breakfast, President Zuma under pinned the ANC manifesto for 2014 with the promise below: 

"One of the key achievements of the past five years has been the development of the National Development Plan.  The NDP proposes that the unemployment rate should fall from the current rate of about 25 percent to 14 percent by 2020 and to 6 percent by 2030. This, states the Plan, requires an additional 11 million jobs. We should all be mindful of the fact that such growth will require an average annual GDP growth of 5.4 percent."

On the ANC's 2014 election manifesto - Jacob Zuma

There is no doubt South Africa needs economic growth to achieve the promise of democracy. The issue should decide the 2014 elections. The ANC challenge is that most parties have no new ideas on the table to address the challenge. What I can confirm though is this, the current trend of GDP is far worse than 2008 before the peak of the recession and the quarterly number continue to show, the trend is still down.

The ANC over promise  

It is an ambitious but commendable idea for the ANC to embark on a 2030 plan to grow the economy by 5.4%, for three reasons which I will share below:

1. Trading Economics issues long term forecasts with analysts expectations and technically projected using an Auto-regressive Integrated moving average (ARIMA) model. First, they model the past behaviour of a time series by using vast amounts of historical data. Then, they adjust the coefficients of the econometric model by taking into account, analyst’s assessments and future expectations. From these economic the projections of GDP growth, the forecast looks very gloomy. The number is 2.48% GDP growth by 2030, only countries growing at around 4.2% now will reach the desired 5.4%
2. The NDP is an elaborate programme which is founded on ten pillars and the first half requires a Social revolution unprecedented in South Africa. This is even wider than the anti-apartheid movement. South Africans needs a new conscientious of their role and responsibilities in the new South Africa. Such a social compact will take time to build in the absence of immediate economic relief.
3. The magical word in our politics is New ideas. Who has them and can they bring the desired economic growth. Here is a quick scan of the Economic ideas as proposed by the ANC, in their manifesto. (in later articles I will explore other party manifestos). Through these policies I am trying to locate the magic idea that South Africa's fortunes will be change by.  

ANC Top Ideas to grow the Economy

• Establish capacity in the state to do long-term planning, drawing where necessary on expertise that exists in wider society.

This is particular interesting considering the Midterm budget speech in 2013, where the Minister of finance lamented the use of consultants in the public sector and the Auditor General call annually to reduce such spending. So this manifesto promise means the ANC has a new consultative process in mind to lookout for. This has to be encourage though, in the past 20 years, our scenario planning as country has been bad, to an extended that we are still producing wrong skills from our institutions versus the opportunities the economy is creating.

• Promote local procurement by directing the state to progressively buy at least 75% of its goods and services from South African producers and support small enterprises, co-operatives and broad-based empowerment.

I have always been a fan of the tender system, precisely because as an entrepreneur the platform has always been my easiest access to capital for my other ideas. This is a common reality to many. However the DA lament and perhaps to an extend an AgangSA one has been the Government assuming this role and not charging the private sector with a similar burden to service their needs. The primary and missing cohesion in South African economics in the effective management of Nedlac, it is way overdue and we need a new compact between labour, business and government to shape a common future and to reduce the amount of strikes we are getting and labour market volatility. Government cant do it alone, lets task business and let not fear or protect it.     

• Accelerate the roll-out of the massive economic and social infrastructure programme “ especially in energy, transport, ICT and water “ to unlock economic opportunities, create jobs and improve people's quality of life.

There is not doubt that Infrastructure development is an area this economy is going to grow on. With the country at estimated 1.3 Trillion backlog this is where the jobs are going to come. I have five questions that I believe are lost though in the ambiguity of the statement:

Financing: The NDP says 10% of the GDP will be allocated to these projects. That is commendable, save the highway project in Gauteng has an outstanding bill and its an infrastructure project, which remains open ended. So: 

• How are the relevant government institutes tasked to build infrastructure? 

• What happens to the potion of GDP growth accredited to private business contribution, who invests that portion into infrastructure development? 

• How do past projects such as the Gauteng Highway project benefit from such future programmes?    

• In the case where GDP growth remains slow, do we abandon the project or do we finance through debt again and add to the deficit?  

Projects: I am a fan of Broadband communication and to the idea that anyone with access to the internet is a lot more empowered than where they stay or what the ate. So what happened to the Broadband project and how far are we from implementing it. Also what happened to Universal Access projects in rural places, at some point Universal access was an ANC policy driver resting with ICASA and now its gone cold. How can we empower the youth in rural areas if their level of access to information is not on par with their peers across the country.

Priority: What is the primary infrastructure project that we need to execute to create jobs. Where are starting?     

• Empower, educate and create jobs for youth through job placement and internship schemes, allocating 60% of employment in infrastructure and other projects for youth, and promoting youth employment and training incentive schemes.

The youth employment challenge is a pressing one and the EFF is on record to saying the ANC has adopted Neo-liberal idea from the DA to overcome the challenge of youth unemployment. Youth Wage subsidy has come under scrutiny and criticism by proponent of protecting the working class. There is room for the ANC to explain further the idea around this manifesto promise but here are Economic game changing ideas that I would like to share around this subject:

1. Youth education and career planning do not start after high schools. In a knowledge development system we need to grow our citizen to add to the economy we are building. We should be able to direct the population from primary school to areas of interest they could develop careers into. For a long time the system has been about delivering education in a given year, surely we deserve that, it now becomes about producing productive members of society.
2. Township based fully licensed community universities. I believe we have shot our-self on the foot for divorcing access to tertiary education from tertiary Institutes. Access in this context define our ability to attend tertiary education because we can travel to it and its affordable. Tertiary institutes receive 50k applications and take only 10k like UJ in 2014, this must be burdening to our ruling party that the rest have no access, even if they can afford it because the opportunities are limited. Bring back community colleges and force tertiary institutions to license community centers for their programmes. Its a quick win.
3. The management of Youth Entrepreneurship should form part of an education process. The is no single clear agenda for youth entrepreneurship in SA. Here is evidence, no youth can access a loan facility from banks and even from the NYDA without satisfying NCR regulations. When a young person starts a business they are viewed and considered as adults.
4.  The University dropout rate is high among black people and there is no study or proposal to manage it. 
5. If the assessment process still requires in-service opportunities, how are we going to achieve this when its already hard to get our FET learners to complete in-service hours in the current environment of mistrust between the private sector and government   

• Promote investment and access to credit in the productive economy from the financial sector, including development finance institutions, through bolder and far-reaching reforms.

I agree this would be a great move. South Africa has failed to attract Direct Foreign Investment(DFI), in fact the trend has shown that the US has become the place for money to be invest over the past ten years. Cheaper assets after the recession may have something to do with it. However South Africa has remained a good destination for Speculative investors and our Stock Exchange has continued to enjoy the attention of multinational investors. The bold reforms proposed here will have to take in mind these very ideas. Firstly that we do not alienate FDI and that we still maintain the discipline necessary to manage Speculative investors. The Adcock Ingram and Walmart deals may suggest that SA is not a great destination for foreign investment. The long drawn out process on both deals with a government agency at the centre with each may create a wrong perception.

 The second part of the position is on how, do we define productive economies (historically being the manufacturing sector), I remain uninformed. The EFF would argue for Land, AgangSA for SMME's and the DA for Big business participation, there is room for clarity there. However on the historic assumption that our Industrialization policy has already defined productive economies, what happens to those left out like services sector?      

• Consolidate the public works programme, creating six million work opportunities by 2019. Many of which will be of long duration.

The success of the public works programme is genuine and it will continue to make an impact. The nature of jobs, I assume they are not as envisage on the youth policy point. These opportunities are by nature very short-term and some may fail to satisfy the COSATU definition decent work. A number has been attached to the EPWP before by the President and the debate as to whether He delivered the number was never settled, hence I would rather put the 6 Million jobs target on all programs I am implementing, not just on the public works programme.      

• Investigate the modality for the introduction of a national minimum wage as one of the key mechanisms to reduce income inequality.

Minimum wage modality as the position says, are hard to decide on. Last year the minister of Agriculture had a challenge in the Western Cape harvest on the subject and the Minister of Labour had to intervene and even then for a good five minutes it was easy to assume that they contradicted each other. Thus I like the idea of a national minimum wage, its how it will be sold that would like to see. The youth wage subsidy was hard enough to sell to labour, this may just be harder given the post Marikana era, where the minimum wage for drillers was high.

• Enforce measures to eliminate abusive work practices in atypical work and labour broking.

I am not sure if the ANC has promised to cancel Labour broking from this position. There is an ambiguity that requires further elaboration. Although I am for better working conditions without abuse.

• Promote decent work and strengthen measures to speed up employment equity.

Employment Equity after 20 years in South Africa is surprisingly stagnant. I would have assumed that in the 90s we warmed to the idea of a inclusive nation. We are still lurking behind our own national convictions. In our mind this country is improving but the reality is we still need our social conscience to be educated on building integrated working place. Policing Employment Equity should be an indictment to us all.

The manifesto points covered here are on the economy, and I have failed to notice that game changing strategy that will change the current GDP growth trajectory. I am writing as a voter and not a critic and I am not attached to any news company and I hope this article is viewed as such. 

The Thinker!