A SERIES of events has reinforced the message from last month’s column: that the government is incapable of leading the country out of its economic malaise.
First, GDP growth for the first quarter came in at a dismal 0,9% compared with an increase of 2,1% in the previous quarter. When it comes to GDP growth figures, economists’s forecasts are not usually far off the mark but they weren’t close on this one – predictions from BDLive’s survey of 11 economists ranged from 1,4% to 2,7%, with 1,9% the median forecast.
Second, President Jacob Zuma, in attempting to reassure the nation and indeed the world that the government was able to tackle the country’s economic problems, instead emphasised his government’s inability to do anything.
In his address to the media at the Union Buildings, which he called to speak about the economy, he spoke about what South Africa needed, he emphasised how South Africa was suffering because of global economic conditions and he sketched over some of the problems facing the economy. What he did not do was offer up any solutions, for he has none that Cosatu will allow.
One of the issues he spoke about was how South Africa needed a stable and growing mining sector. He said the sector remained the cornerstone of the economy, “even though [it’s] now smaller, relative to the size of the overall economy” – but did not acknowledge his government’s role in the value destruction witnessed by the industry . While rising costs have been the main problem, bad policy and the threat of bad policy – nationalisation – played a significant role.
Soon afterwards, his MPs voted against a resolution reached at Nedlac between government, labour and business that would have enforced unions to ballot members before embarking on a strike.
With elections next year, Zuma has made it patently clear that he will continue to put the ANC’s needs – bowing down to the unions to ensure their support at the polls – before those of the economy.
Third, Reserve Bank governor Gill Marcus publicly criticised the government.
Decisive leadership was needed, she said, to tackle South Africa’s domestic challenges that had reached crisis proportions.
Speaking at an economics conference in Johannesburg, Marcus said South Africa needed a “co-ordinated and coherent” range of policy responses that were beyond monetary and macroprudential policies. In other words, it’s up to you, Mr Zuma.
“Much more important than the precise elements of a strategy is for the government to be decisive, act coherently and exhibit strong and focused leadership from the top,” she said, in what was an extraordinary public attack from an ANC stalwart.
There are numerous other portents.
Mining production fell unexpectedly by 0,4% year on year in April. The weak rand is fuelling imported inflation, with domestic food prices expected to rise.
The Reserve Bank expects the negative output gap of 2% in its composite leading business cycle indicator to widen over the short term, and has warned of the potential for further job and output losses, particularly in the mining sector.
And, it says, labour market instability has undermined confidence, investment and productivity.
There is no one big thing Zuma or anyone can do to put South Africa on a prosperous path. But there are two things that will make an immediate and material difference to international sentiment and serve at least to arrest the slide: implement the sensible youth wage policy and ease South Africa’s rigid labour market to make it less pro-labour and anti-business. Such moves would be a display of the sort of leadership Marcus was calling for.
Unfortunately, all Zuma has shown so far is that, no matter what he says in public, Cosatu’s wish is his command.
• This article was first published in Investors Monthly