What President Zuma failed to mention

The most surprising thing about the State of the Nation address wasn’t the violent ejection of the red berets. That’s a rerun of an old movie. It was the President’s failure to mention the major State-Owned Companies at all. They have featured prominently in the news as drivers of transformation as well as sites of corruption and patronage. This is all the more surprising because you would think they would be central to the “radical economic transformation” that has been promised.

And what about that “radical economic transformation”? Well, the South African government treads a fine line between trying to reverse the effect of centuries of exploitation and not causing the foreign investors who prop up our economy to flee. The President reflected this in the speech, which was free of the kind of rhetoric that is the preserve of the Economic Freedom Fighters.

At least one really radical change was noted, and it wasn’t about land. This is the plan to change competition law.

During this year, the Department of Economic Development will bring legislation to Cabinet that will seek to amend the Competition Act, 1998 (Act 89 of 1998).

It will, among others, address the need to have a more inclusive economy and to de-concentrate the high levels of ownership and control we see in many sectors. We will then table the legislation for consideration by Parliament.

In this way, we seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation.

I can only think that this amendment will allow the competition authorities actively to break up remaining natural monopolies and big, dominant companies. SA Breweries springs to mind. A government willing to take on big business will need steely will. Not only do the authorities face waging war with armies of well-paid lawyers, they have to be prepared to deal with the fall-out of unintended consequences, one of these possibly being capital flight as those nervous investors decide to go elsewhere. Yet this is what has been missing from competition law in South Africa. The US, for example, has acted to break up dominant firms, the AT&T breakup being probably the most prominent.

In not talking about the State-Owned Companies, which have often in recent years been muddied by poor governance and allegations of corruption, but presenting a plan to increase competitiveness in the private sector the President left out an important part of our economic puzzle.

What is missing from policy, as ex-competition tribunal head David Lewis noted in his book Thieves at the Dinner Table, is policy on competition generally, and where the SOCs fit into that. The President also promised the State would proceed with a State mining company, for instance. How will the State be both coach and player in this game?

As for the rest of the speech, it was as usual wide-ranging and did not present a coherent theme.

For three years now, the president has referred to the government’s nine-point plan in in his speech. It has changed ever so slightly, but it is an orthodox set of focus areas for intervention, with the idea of solving unemployment simply by spurring growth. Note that this is a technical, economic approach to solving our problems.

I set it out in tabular form, with the focus areas on the left and the departments or ministries responsible on the left.

Nine-Point Plan focus areas: Ministry responsible
Industrialisation, dti
Mining and beneficiation, Mineral Resources/dti
Agriculture and agro-processing, Agriculture/dti
Energy, Energy/Public Enterprises
Small, medium and micro enterprises (SMMEs), Small Business Development/dti
Managing workplace conflict, Labour
Attracting investments, dti/National Treasury
Growing the oceans economy and tourism. dti/Tourism/Public Enterprises

Overall, the Economic Planning department would be involved, but note the important role the Department of Trade and Industry plays in, by my calculation, at least six out of the nine areas. And what happens in energy affects almost all the other focus areas too. Perhaps managing workplace conflict can take place in the dark.

Not much attention is given directly to finance. The financial sector broadly constitutes the biggest part of economic output at 21% or so. There is mention of a need for more black people in the real estate business, but no discussion about the central role and performance of the finance industry, including banking, on which so much depends. Where finance fits into the government vision for economic growth will have to feature in the Budget.

Other parts of the SONA also involve the dti, such as effort to involve black people in the real economy through the Black Industrialist Fund, SADC regional integration, and so important for our economy that it should have been right up front, trade.

Four cross-cutting issues are mentioned in addition to the nine-point plan, because governments have difficulty in prioritising. These are:

• science and technology,
• water and sanitation infrastructure,
• transport infrastructure and
• broadband roll-out.

They involve departments other than the dti, but underpin the economy as well as many other areas of our lives. In addition to promising to roll out broadband, something that the private sector seems to be doing well in the wealthier suburbs, with fibre connections, the president promised to keep data costs affordable, but gave no details. Thanks to the Auditor General and media, we know that the department charged with water is in deep trouble.

The president acknowledged that agricultural land redistribution – not land restitution – is important and acknowledged the government’s failure to redistribute land to black farmers. There is mention of expropriation for land redistribution, once constitutional issues have been sorted out, but a paragraph in the speech is worth repeating in full:

Most importantly, we appeal to land claimants to accept land instead of financial compensation. Over 90% of claims are currently settled through financial compensation, which does not help the process at all. It perpetuates dispossession. It also undermines economic empowerment.

This might be an exaggeration, as has been suggested, but it does raise the question: what is the demand by black people to become farmers? How should this demand be stimulated? Should it? Are industrial jobs not more important? Nonetheless, the President announced specific plans to help black farmers, and this needs to be evaluated by experts.

Finally, the President mentioned the Expanded Public Works Programme, but said nothing about the Community Works Programme, an extremely promising job-creation project along the same lines for municipalities.


Leave a Reply