Gordhan adamant about state's economic role
THERE is a need for state intervention in the economy, and not enough has been done to change the apartheid legacy of its structure, Finance Minister Pravin Gordhan said yesterday.
His remarks echoed comments made by President Jacob Zuma, who told the policy conference of the African National Congress (ANC) on Tuesday that it was time for a "radical" shift in approach to transform the economy.
"We have created democratic institutions, but what we have not been able to do . is to change the fundamental structure of the economy. We don't give enough attention to this," Mr Gordhan told a business forum at the ANC's policy conference in Midrand, Gauteng.
Globally, there was now a realisation that there was a place for the state in economies, he said. "Where markets don't go, the state has to intervene. There are many places in SA where markets won't go."
Many investors believe that there is already too much intervention in the local economy, and warn that confidence in SA will be undermined if the ANC adopts some of the controversial reforms on its table.
They include a 50% windfall tax on mines, export levies on strategic minerals, and capital gains tax on the transfer of mineral rights.
The ANC has also said it will discuss calls for the prescription of assets of private pension funds, expropriation of land, and constitutional and judicial change.
"As business, we are becoming concerned that there is increasing state intervention in the economy," said Neren Rau, CE of the South African Chamber of Commerce and Industry. "Although we would agree that a completely free enterprise system is not ideal for SA, we don't want too high a degree of state intervention and control in the economy because that reduces flexiblity for business," he said.
Any policy changes mooted by this week's conference would have to be adopted at the ANC's elective conference in December.
Mr Gordhan said changes to mining taxes were under discussion. "Can we acknowledge that in SA we are only in the first stages of transforming ourselves into a normal society where everyone is treated equally and has equal opportunities...? Whether we like it or not, certain ownership patterns have persisted."
Mr Rau said there could have been more progress in dealing with inequality, but that the answer lay in making policies more effective.
Mr Gordhan said there was "no decision yet" on a proposed carbon tax. The government was "listening very carefully" to stakeholders, and would continue with that engagement, he said. A new discussion document on the proposed tax was due in February but has not been released yet.
Mr Gordhan was replying to questions at a breakfast hosted by the Progressive Business Forum. He emphasised the need for the government and private sector to build the trust needed to restore business confidence and boost investment.
"Downside risks" were increasing to the government's forecast that the economy would grow 2,7% this year, as Europe's crisis was having a major effect, he said.
"The world is getting used to the idea that the next three to five years will be pretty gloomy years."
Lower oil prices were helping to mitigate the effect of a depreciating rand, which has weakened in response to global risk aversion, Mr Gordhan said. That has put local exporters in a "much more competitive position", he said.
Mr Gordhan said much more had to be done about the constraints on SA's economy. That included developing Eskom's power capacity, improving transport infrastructure, and increasing SA's low level of savings, which keeps the country dependent on foreign capital.
"In the next couple of months we are putting proposals in place to increase savings," he said. South African households spend all of their disposable income, according to figures from the Reserve Bank.
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