Time for talking is over: let the NDP do its job at last

07 February 2016 - 02:00 By CHRIS BARRON

Finance Minister Pravin Gordhan's indaba with CEOs last week led to speculation that this could lay the ground for an economic Codesa. But veteran economist Raymond Parsons says South Africa's situation is too desperate for that."We don't have time for an economic Codesa. We're already into our 12th or 13th socio-economic plan. The National Development Plan is the best plan on the table and the one that needs to be implemented."Let's not be diverted from implementation by going back into more summitry and more meetings that require us to go back to first principles. We don't have the time. We have a plan and we must now make it work."Parsons has been prominent in academia and business for many years. He is currently a professor at North West University's business school, and special policy adviser to Business Unity South Africa.He says the plethora of different and often competing socio-economic plans is both symptom and cause of an unsustainable and damaging level of policy uncertainty, which he hopes a policy uncertainty index he has devised and which will be published ever quarter, will help to measure and thus control.An economic Codesa would simply exacerbate and prolong policy uncertainty and give the government another excuse to avoid tackling the harsh realities it has been evading for too long."The fact is that we don't want to grasp certain nettles," he says. "We now have to grasp those nettles or we are not going to turn our situation around."President Jacob Zuma's state of the nation address this week and the budget soon thereafter will tell ratings agencies and investors if the government is ready to grasp these nettles or not.They will be looking to both speeches for a clear commitment to the NDP. If the government wants to project an image of policy certainty, it needs to start right here, he says."Everything we need to do is in the NDP. What has gone wrong is to a large extent because we have not done the things we said we would do."The NDP has not been visibly implemented in ways that make a difference to people's perceptions," he says."Other decisions appear to have been taken quite unilaterally, such as on land reform and nuclear power, which are in direct contradiction with the NDP, which also undermines certainty and trust as to how seriously the NDP is being taken."We have been telling foreign investors that we are going to take it seriously, so I hope there will be tangible evidence of this in the state of the nation address and the budget."Parsons says it will have to be a "tough" budget if the country is to avoid being downgraded to junk status."This must be our top priority. All policies and fiscal messages must be configured around ensuring that we reduce the chances of being downgraded."The public wage bill will have to be curtailed and "tight control" exercised over further employment in the public sector.What about the political cost?"Those are judgment calls the minister and political leadership will have to make," he says."The damage that being downgraded to junk status will do to this country will outweigh the damage of controlling the public-sector wage bill and further public-sector employment."Gordhan will have to look "very vigorously" at social spending, and tax increases may be "unavoidable".Parsons says none of this is optional if policy uncertainty is to be reduced and ratings agencies persuaded to hold off.Generating considerable uncertainty is the stand-off between the commissioner of the South African Revenue Service, Tom Moyane, and his political boss, Gordhan."It must be resolved as soon as possible."Can it be resolved while Moyane, who has made it clear he won't take instructions from Gordhan, remains?"That will have to be sorted out at a political level," says Parsons. "It is a source of uncertainty which needs to be resolved quickly."There is also uncertainty about whether Zuma would act against Gordhan if the minister acted against Moyane, who is very close to the president."What has to be decided here is what needs to be changed in order to project a much better image of stability in the functioning of SARS and in the relationship between the minister and SARS," says Parsons. "And quite clearly this will call for decisions at the highest level."Any uncertainty around the tax regime "sends out all the wrong signals" and must be avoided at all costs, he says.How seriously does he take the warning of a possible tax revolt sounded by Judge Dennis Davis, chairman of the committee on tax reform?"The point he makes is very important," says Parsons. "Namely, you don't want to project any image of instability in SARS."He says policy uncertainty is caused by a combination of the system of policy-making, ideological differences and vested interests. Too many decisions are taken without adequate consultation.Although the government is supposedly committed to regulatory impact assessments, "they have not been effectively applied". This has caused hugely damaging uncertainty, as seen in the impact on tourism of the visa policy brought in by the Department of Home Affairs."The index is identifying that there is not enough effective prior consultation, not enough homework is being done, decisions are being driven through in ways which do not take account of unintended consequences. This generates a huge amount of uncertainty and makes a lot of investors very unhappy."What about the uncertainty generated by concerns that Zuma will dump Gordhan as soon as he feels it is politically safe to do so? "The minister of finance has said that he is going to take the decisions that are necessary to turn our situation around. I think he is in a strong position, and I think he should be backed by the ruling party," says Parsons.But will he be backed by the ANC?"I see no signs that it has not happened yet. He has been saying things which in other circumstances might have induced a negative reaction from some of his colleagues, but it is quite clear that he is putting over the message that our room for error has narrowed and we don't have many options if we're going to turn this economy around."Parsons says he hopes that the index will send a message to decision-makers about how well or badly the government is doing in terms of policy uncertainty, which he blames for "quite a lot of what has gone wrong in our economic performance".He was heartened to hear Zuma say on his return from Davos that top of his list was to assure investors that there would be policy certainty.Hasn't Zuma previously also assured them that South Africa was open for business? Is it any more than wishful thinking to take his pronouncements seriously?"Importantly, we can now test it," says Parsons. "It is now not a matter of rhetoric, it is a matter of reality."The question is why the government should be persuaded by this index when repeated warnings by business leaders of the damage caused by policy uncertainty have had no discernible effect in the past.Parsons agrees that policy uncertainty has become "more acute" in the past couple of years."But now at least when government challenges business leaders to prove that policy uncertainty is as bad as they say, the index will give them the tool to do so," he says...

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