Shifting a target we cannot hit
A couple of years ago South Africa Inc was galloping along at 5% per annum GDP growth. We can remember sitting through dozens of economic presentations where experts told us 6% per annum was structurally unattainable… The country simply didn’t have the human or infrastructure resources to attain the “Holy Grail” of growth. Not much has changed since, except government seems keen on 7% growth – for thirteen consecutive years. That’s how fast the economy will have to grow for a successful National Health Insurance (NHI) implementation. Will we hit this moving growth target?
“It’s far more likely South Africa will experience growth of between 3.5% and 4.5% per year over the period the NHI is implemented,” said Econometrix’s Tony Twine. “Policy makers will need to sharpen their pencils and perhaps cut back on some nice-to-haves in the proposed NHI if it’s to be sustainable,” Reserve Bank governor Gill Marcus reckons the economy will grow 2.8% in 2010 and 3.2% next year. And government is fully aware of these growth limitations too.
More tricks up the sleeve
Last week Wednesday finance minister Pravin Gordhan used his mini-budget speech (medium-term budget policy statement) as a platform to promise “radical transformation” of the economy. His growth expectations: “We expect overall growth of 3% in 2010, rising to 3.5% in 2011 and 4.4% by 2013.” And he admitted the economy would have to grow at twice that rate if there was any hope of living up to President Zuma’s promise to create five million “jobs” by 2020.
Gordhan’s presentation was full of promises that seem to clash with recent government actions. The jobs promise certainly isn’t going to materialise given current GDP growth estimates. The promise to “strengthen our capacity to root out corruption and waste” flies in the face of recent steps to quash the arms deal investigation, dismantle the Scorpions and ride roughshod over the NPA. And the offer to “make it possible for members of this House and ordinary citizens to see the links between the activities and projects of government departments and service delivery in our communities,” contradicts the ongoing move to curtail press freedoms…
Although his presentation was pro poor – full of promises – the only tangible concession made was to further relax exchange controls – something which only benefits the country’s wealthiest 1%. “Exchange control and offshore investment limits on individuals will be amended to encourage diversification of portfolios and remove unnecessary limitations,” said Gordhan, also announcing that restrictions on the “blocked” assets of emigrants would be lifted.
Expect massive infrastructure expenditure
The mini budget promises more expenditure on infrastructure over the next three years, totalling some R811 billion. Of this total 40% will be in energy, 26% in transport and 11% in water supply. “Reliable electricity supply, clean water and better transport services have to be paid for over time, and so we will see further rises in tariffs and user charges over the period ahead,” said Gordhan. Residents of Johannesburg and surrounds will feel the first impact when the extensive highway tolling system comes into effect early next year.
Some progress on the corruption front
Gorhan also highlighted some recent successes in clamping down on tax evasion, corruption and tender fraud. “Members will be pleased to know that the government was awarded preservation orders worth about R200 million which included a Lear jet, a golf course, a holiday home and a hotel,” said Gordhan. “And in a recent case, a firm which was paid R10 million by a department for work they had not done, voluntarily returned the money to the fiscus.” Gordhan never mentioned whether any parties to this transaction were behind bars...
There has been some progress in clamping down on transgressors, but for the most part the perpetrators of glaring large scale fraud receive nothing more than a slap on the wrist. And the “victims” of the massive Cabinet reshuffle announced Sunday – those who Zuma felt weren’t living up to the demands of public services – have simply been redeployed.
Editor’s thoughts: President Jacob Zuma recently announced a new growth strategy to create five million jobs over the next decade. To do this the economy has to grow at 6% per annum or more. But the man handling the purse string says we can expect, at best, 4.5% growth by 2013. Do you think government’s promises are realistic given the growth path mapped out by Gordhan? Add your comment below, or send it to [email protected]
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