Business Day column: Gigaba’s overcooked action plan will take SA further off course

02 August 2017
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If you want to understand the government’s economic policy, don’t go away. It works like this: your GPS says you are 200km from your destination. An hour later, you are 300km away, so you drive more resolutely. After the next hour, you have 400km to go.You are bewildered. You blame uncooperative rich whites in big cars. You wave your fist, fasten your seatbelt, spew racist slurs and accelerate.

Another hour down the wide monopoly capital road and you are 500km from your destination.

You intensify your efforts. You slam the accelerator to the floor and pump the brakes in corners to the smell of burning rubber, only to find your car, now 600km from home, is low on fuel, has failing brakes and an overheating engine. Your once roadworthy car has junk status.

When your car stalls, with steam belching from your front and smoke from your rear, a kindly driver stops.

When you tell Gogo the story, she asks: "Did it occur to you that you were driving in the wrong direction?"

So, it is with Finance Minister Malusi Gigaba’s 14-point "inclusive growth action plan", which Reuters calls "ambitious" and BizNews "laughable".

Trying to reach your destination by driving away from it is ambitious. Calling the destruction of the vehicle on which progress depends laughable is laughably understated.

The 14-point plan follows President Jacob Zuma’s nine-point plan, which he reportedly forgot. Remembering 14 points is harder than nine, so here’s a beginner’s guide.

Commentators say the plan is "more of the same" and "nothing new". It is essentially a plea for ministers to do what they supposedly do, most of which would stifle growth. Moribund measures will be "implemented" and "finalised" — these words are repeated nine and 10 times respectively.

While the plan has virtually nothing that is progrowth, it has much to curtail it. Growth is not rocket science. For high growth, Gigaba needs no new plan.

All he needs is to adopt the proven one-point prosperity plan — the "do what works" plan. Instead of giving his colleagues putative "do more" deadlines, they should do less. They should discontinue failed policies that have us tumbling down property rights, rule of law, corruption, democracy and economic freedom indices. They should reinstate Mandela-era high-growth policy trends.

The single point in the one-point plan says "emulate what rich countries did to become rich, and what poor countries do to catch up", namely the opposite of (most of) the 14-point plan.

Governments in high-growth countries do more by doing less. They have small or contracting bureaucracies, low or falling taxes and deficits, enduring fiscal and monetary rectitude, the rule of law, liberalisation, privatisation, secure property rights and freedom of choice instead of Big Nanny controlling every aspect of their lives.

In contrast, under the 14-point plan, billions more will be flushed down the black hole of such apartheid-era dinosaurs as South African Airways and the Post Orifice. Billions more will be flushed down the financial sector "Twin Peaks" black hole. Instead of his fantasy of reduced bank charges, more than R6bn will be added.

Contrary to the radical economic transformation fantasy, the Twin Peaks monster will make it virtually impossible for emerging black businesses and consumers to enter the market lawfully.

The 14-point plan has a silver lining, which may be why economist Lumkile Mondi gave it a flattering two out of 10 score. "Noncore" assets may be privatised. Private partners may rescue catastrophic state-owned enterprises.

The action plan’s greatest virtue is the relative absence of the government’s nuttiest ideas, such as the destruction of property rights, Verwoerd-style racism, Trump-like protectionism and tax-spend-debt addiction.

• Louw is executive director of the Free Market Foundation.

This article was first published in Business Day on 19 July 2017


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