Ebrahim

Less government spending, and what the National Treasury intends doing to improve the situation

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Does the MTBPS have the right toolkit?

Minister Pravin Gordhan in previous budgets put in place a counter-cyclical strategy to support South Africa due to the impacts of the global financial crises. The recovery in the South African economy has not been as robust as anticipated raising significant challenges. Our economic growth is sluggish and non-interest spending is declining, painting a worrying picture going forward.

Economic Growth

South Africa’s economic growth is more like the developed world, than emerging economies, according to the MTBPS. South Africa is thus projected to underperform in comparison to its peers in other emerging economies and lags behind developing Asia. The choices made by government in the MTBPS will unfortunately continue this trajectory.

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MTBPS-More continuity, when change is needed

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The National Treasury argues that:

The measure of a strategy is not in the breadth of objectives it seeks to address, but rather in its focus on those objectives that really matter. Fiscal constraints force government to choose carefully between competing objectives.

Does the MTBPS have the right toolkit?

This provides a benchmark against which to assess the Medium-Term Budget Policy Statement (MTBPS). The common sense approach is to focus on the level of the deficit. On the one hand, the financial markets will welcome the attempts to reduce the deficit over the medium term, whilst raising concerns about the current perception that debt is high. On the other hand, civil society organisations will argue that more needs to be done, but the deficit will be an indicator that government is attempting to do something during this downturn. There are important public policy choices in this debate, with the National Treasury providing an important input in the Fiscal Guidelines.
However, there is a foundational question – Are the objectives the right one’s? Or more crisply, is the underlying strategy the correct one? To place, this in context South Africa lags behind its peers in terms of economic growth.

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Economic Freedom and Fiscal Policy – Previewing the Medium-Term Budget Policy Statement 2011

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Does the MTBPS have the right toolkit?

As Minister Pravin Gordhan delivers governments Medium-Term Budget Policy Statement (MTBPS) for 2011, the debate on economic transformation is gathering pace. In the same week, as the MTBPS is announced both the African National Congress Youth League (ANCYL) and the Young Communist League (YCL) will hold events focussed on economic transformation. These are separate events, and speak to the broader political positioning that sadly is becoming a permanent feature of the African National Congress.
The strategists at the National Treasury will have to consider these events, but will also have to look towards how the market will react.  The biggest challenge is that rating agencies have raised concerns about the level of government debt. Whatever one may think of the ratings agencies – who contributed to the global financial crises by providing good ratings to dubious investments – they wield power within the market, which in turn impacts on investment choices. Moreover, South Africa will be borrowing to finance primarily the expansion of power stations, but potentially in other areas as well. In other words, the perceptions of rating agencies and larger private companies matter. Their opinion should matter less, but the reality is that they have a powerful set of mechanisms to influence public policy and to ultimately impact on economic growth.

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Is Tim Ferris killing Main Street? Reviewing the Four Hour Workweek

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Tim Ferris weaves a mixture of a self-promotional story and business strategies with the promise of working four hours a week. He counterpoises the four-hour workweek, with the forty hour workweek. In so doing, he unwittingly raises the question – Can entrepreneurial activity still contribute to economic growth and job creation?
The American distinction between Main Street (representing small business) and Wall Street (representing financiers and investors) offers a way to understand this question. It is a theme being played out in the Occupy Wall street, with many local campaigns being undertaken. In the wake of the financial crises, we have justifiably criticised Wall Street for making easy money, for trading nothing (i.e. paper) and for screwing up the world. Main Street in turn is the saviour, the engine of innovation and job creation. Yet, it is possible to create businesses that mimic the worst traits of Wall Street – no jobs, no real products, and no innovation – and dress it up as Main Street. This is my reading of The Four Hour Workweek – a manifesto to create personal gains, without the multipliers (e.g. economic growth, job creation) associated with small business.
Tim Ferris provides the scope for his book as follows:
“The vast majority of people will never find a job that can be an unending source of fulfillment, so that is not the goal here; to free time and automate income is.”

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Youth subsidy – Bringing education into the picture

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The debate on youth subsidy has gathered pace. The arguments for a youth subsidy consist of two major arguments.
First, the high rates of unemployment amongst youth are exceedingly worrying. As shown in a previous chart on Zapreneur. The key features of the unemployment data by age, show that:
The key features of the data include that:

  • The biggest proportion of unemployed are concentrated in the age groups 15-24 years (29.5%) and 25-34 years (42.8%).
  • Unemployment for those 34 years old and younger accounts for 72,3% of unemployed South Africans.

Youth unemployment thus is a serious challenge, and perhaps the defining challenge that we face.

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Discipline Malema, Just do not think redistributive pressures will be disciplined

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The African National Congress Youth League (ANCYL)responded late last night to the charges being laid against its President, Julius Sello Malema, and a member of its National Executive Committee, Floyd Shivambu. Over the weekend, the ANCYL President shored up support within the youth league  at a special meeting of its national executive committee, which dutifully provided support to it’s President, and indicated that a “political issues” needed to be discussed with the leadership of the African National Congress (ANC). In an indication of the proposed mobilisation strategy to support the President, the ANCYL concluded its statement with the following:
The Special NEC re-affirmed the determination to fight tirelessly
and fearlessly for economic freedom in our lifetime, particularly
nationalisation of Mines, expropriation without compensation and provision
of free quality education for all.
The strategic intent, from within Malema’s camp,  is clearly to recast the disciplinary process, as trying to silence the radical programme of economic transformation being proposed by the ANCYL. Those opposed to Malema, are suggesting that brute strength will subdue an increasingly visible and vociferous Malema. It will be an intriguing political contest, and unfortunately will have implications for how the agenda on tackling inequality will shape up. There are three major reasons why the process and outcome of the disciplinary hearing will have on  matters  the public policy agenda on inequality and redistribution.

First, as argued by Sipho Hlongwane, it is important for our society to keep the eye on the allegations of corruption against Malema. The evidence in the media is at best circumstantial, however even at this early stage there remains a case to answer to. There is a case building against the business practices of Malema, and it requires significant focus. Ultimately, there needs to be a process for Malema to face whatever charges he may face, which is fair to him, and will offer the South African public with an exact picture of the business dealings of an important leader in our society. Importantly, as reported by the City Press, the Hawks have confirmed a probe into the business dealings of Julius Malema.
The point is that Malema is being presented the poster child for the term “tenderpreneur”, and as such the investigation has huge symbolic significance . The outcome of  any investigation will provide an insight into corruption in government, but will also provide South Africans with enough evidence to judge whether Malema is simply a crook, or whether his radical stances has made him a target.
Second, the theater of a trial provides Malema with exactly the platform he needs.  It is a skill he demonstrated in shoring up support for President Jacob Zuma, in the trials he faced before becoming South Africa’s president . Jane Duncan, writing in SACSIS,  interprets this skill at mobilisation as being ideologically expedient. She writes that:

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