Abandon policies that inhibit growth goals

20 March 2016 - 02:00 By Frans Cronje


In a statement released by the National Treasury this week, Finance Minister Pravin Gordhan said: "The next few months are critical as South Africa is expected to demonstrate concrete actions to map a path for higher economic growth as it seeks to preserve its investment-grade rating." The trouble is that many of Gordhan's cabinet colleagues continue to send the wrong message.For example, the Department of Public Works continues to press ahead with the Expropriation Bill, which could allow the state to seize property without compensation.The Department of Agriculture is proceeding with a bill that threatens to vest all agricultural land in the custodianship of the state. The government has also reopened the land claims window and encouraged the lodging of some 120000 new claims. The unfortunate impression is that the government is not interested in attracting further investment into agriculture.story_article_left1The Department of Trade and Industry has pressed ahead with the Protection of Investment Act, which provides much-diluted protection to foreign investors. It has also proposed a bill thatdilutes protection for copyright holders and provides for an "intellectual property tribunal" empowered to grant compulsory licences over patented products.These are not the actions of a government successfully positioning South Africa as a leading research and innovation hub in Africa.The DTI also continues to press ahead with ever-more onerous BEE requirements.Last week, my colleagues released a report pointing to a decline in the number of children passing maths in matric with a grade of 70% or higher. The Department of Basic Education's response was a denial that there was a problem.The Department of Health is pursuing the national health insurance scheme, which is geared at undermining South Africa's world-class private healthcare providers. Better policy would be to expand the scope and reach of the private sector.The government remains open to the introduction of national minimum wages, even though the labour force absorption rate among black people is just over 40%.Even entertaining the idea of a new minimum wage raises doubts about whether the government is serious about addressing our unemployment crisis.story_article_right2Countries that suffer downgrades to subinvestment grade tend to only recover after lengthy and painful internal reforms. If South Africa does suffer further ratings downgrades this year, it will not be because the finance minister failed to make a credible commitment to fiscal consolidation, but rather because the government of which he forms part persisted with policies that are inimical to economic growth.Not for a moment should the government assume large investors do not see the contradictions.What "concrete actions" should the government undertake to avoid a further downgrade? Start with sweeping policy reforms to secure property rights, from agriculture to patents. Replace counterproductive BEE policies with the far more effective policy on economic empowerment for the disadvantaged developed by the Institute for Race Relations. Repeal aspects of labour law so as to deregulate the labour market and price poor people into jobs. Sell state-owned enterprises.The good news is that these policy shifts will get South Africa back onto a higher growth track. They are also shifts that are within the power of the government to implement. More than before there are now reformist thinkers - including in the government and the ANC - who are open to these reforms. With sufficient support they might yet turn our economy around.Cronje is CEO of the Institute of Race Relations

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