Why South Africa's 3.3% GDP growth target falls short

If you want to compete in track and field in the summer Olympics, you have to achieve a predetermined distance or time; and if you want to pull your country out of the muck and mire of fiscal deficits and spiralling unemployment, there are similar easy-to-define growth hurdles to clear.

In what universe does 10.3s get you an Olympic gold?

In this opening framing, the euphoric declaration by the South African government and its private sector conscripts of a 3.3% GDP growth target for 2025 is akin a 100 meter specialist announcing he is training towards a 10.3 second dash.

For the uninformed, you had to run 10s or better to qualify for the men’s 100m event in Paris 2024, with eighth place in the final posting a lightning-fast 9.91s. My question, dear reader, is why work towards a target that is not aligned with your reality? In the above example, the sprinter needs to run 10s or better for a medal shot, and SA needs to grow at 5-7% rather than 3-point-something to address its myriad socioeconomic ills.

Alas, private sector and you and I are being sucked in (again) by the #Ramaphoria construct popularised by the mainstream media. Case in point, Moneyweb.co.za applauded the 3.3% announcement with the headline: ‘Ramaphoria is back as government targets 3.3% growth by end 2025’.

Early on in the piece, the Business for South Africa (B4SA) chairperson concedes that even this ‘not good enough’ target will be a tough ask. Curiouser and curiouser, dear reader. Our beloved country is gunning for a sub-par growth number and setting out on its journey with a disclaimer that it will likely come short of this already ‘short’ target.

Your writer is not so na?ve as to believe that we can simply wish a GDP growth number into existence; but he contends that the primary constraint to unlocking South Africa’s 5-7% GDP growth potential is the policy environment that the private sector operates in; and the entity responsible for this treacly environment is none other than government, the other half of the much-vaunted Public Private Partnership (PPP) arrangement.

As the latest iteration of SA’s PPP deflects from past and present policy catastrophes behind beaming smiles and creepy-duration handshakes, your writer contends it may be worth digging a bit further into the character of the first ‘P’.

On National Elections and GNU schizophrenia

This line of thought crystalised during an interesting political analysis presented on the first day of the 2024 Institute for Risk Management South Africa (IRMSA) Conference.

Dr Sizwe Mpofu-Walsh, an actor, speaker and lecturer at the University of the Witwatersrand, shared his thoughts on the outcome of the country’s May?2024 National Election and prospects for the Government of National Unity (GNU). His first observation was that the country had experienced a monumental political moment, and that few citizens appreciated the scale of political change that had taken place.

Commenting on the election outcome and the precipitous fall from grace of the ruling African National Congress (ANC), Mpofu-Walsh said, “we have witnessed a once in a generation, seismic moment; for 30-years we have lived under one reality, and poof, in the blink of an eye, we are in another.”

But it was his dissection of the ruling party’s approach to post-election dealmaking, and the ensuing divvying up of power under a post-election government, that should stand out as a screaming (sic) red flag to the B4SA component of the aforementioned ‘hurrah, growth, hurrah’ PPP.?

“The ANC lost the election; but it won the post-election negotiations through the brilliance of its negotiating team,” Mpofu-Walsh explained. Read this statement carefully, dear reader, because by the time the dust had settled, the ANC had turned its mere 40% national support into a ‘power in Parliament’ position that was not dissimilar to its heyday of 60% of the vote and higher. According to the presenter:

The ANC knew that the official opposition, the Democratic Alliance (DA) would never work with other large parties, the MK or Economic Freedom Fighters (EFF) … and that the latter two parties’ ideologies were likewise incompatible with the DA.

From 40% support to 60% power

“The ANC were able to divide opposition parties against each other and then play them off against each other to make sure that they maintained as much power as possible, and they played a blinder,” Mpofu-Walsh said.

The result, an ANC-aligned President, Deputy President, Speaker of Parliament … and a cadre in most of the power ministries including Defence, Finance and International Relations. PS, your writer pauses here to draw attention to one of the many ironies of the emerging government being the growing cohort of ministers and deputy ministers despite widespread pre-election promises to rein in public sector expenditure.

In the presenter’s view, the ANC has created a two-tiers of decision making. “There is a coalition for the voters and the markets, called the GNU … and there is a shadow coalition for whenever the GNU partners disagree with the ANC,” he said. He then offered ‘quantum coalition’ as a phrase to explain the emerging political scenario: depending on when you look at it, South Africa is governed by a GNU or some other coalition of the ANC’s choosing. Or put another way:

The country has a compromised GNU outcome that is celebrated by the media and private sector despite its clear shortcomings.

This status quo will last at least until the next local government elections, which will likely only take place early in 2027. “The first period will be between now and the next local government elections, and this is a period in which things will remain roughly as they are; there is not a great incentive for either opposition parties or the governing coalition to break apart before this election,” he said.

The big inflection point could coincide with the ANC Elective Conference later in that year, else the next National Election in 2029.

You will swallow these Acts, and like them…

Until such time, voters can look forward to countless more questionable government decisions and policies. Case in point, the ANC abandoning its GNU partners to vote alongside the EFF and MK on controversial questions around the Judicial Services Commission (JSC) and contentious legislation, such as the recently assented BELA and National Health Insurance (NHI) Acts. Another example, the latest ousting of the DA-aligned Tshwane mayor.

Why should you care about these outcomes. Well, two reasons. The first, in the context of the presentation, is that the ANC remains “the main political game in town” despite having a fraction of its historic voter support.

And the second, returning to the ‘growth targets and PPP’ focus of this article, is that business is being trawled by government in much the same way as the DA was. Tough words? Not at all. As Mpofu-Walsh warns:

The ANC [government] presents itself to the gullible in the markets [including B4SA], as if it is in one coalition [or in one position] and when it needs to, it just goes to another.

This is why, dear reader, government will push for NHI despite warnings from the private sector that this interference will be the downfall of healthcare countrywide. And this is why a 30-40% party will abandon its GNU partners and back a de facto coup of a metro mayor, ignoring the negative impact of such disruptions on service delivery and society. The public sector cannot trust the first “P” in this PPP arrangement.

In your writer’s opinion:

Rather than promising to work together for a 3.3% growth under the current framework, B4SA should take a more ballsy approach by challenging government to remove constraint x, y and z and clear a path for the much-needed 5-7%.

Heed the anonymous commentators

A public comment to the aforementioned Moneyweb.co.za article offers some additional, useful insight. Posting under the nom de plume, Sensei, a reader wrote:

This collaboration between government and business is a last-ditch effort to prolong the operational ability of both parties; the socialist government desperately needs private enterprise, like the tick needs the dog.

Those who argue our government is ‘anything but socialist’ might spend some time digesting the NHI and other recent laws in the context of the Public-Private power imbalance they create.

According to the online commentator, government already extorts free (sic) enterprise with layers of SARS taxes alongside a range of “exploitative Luthuli House taxes in the form of BEE; EE; labour laws; minimum wages; preferential procurement; local beneficiation requirements; loaded administered costs; redistributive municipal taxes; cadre deployment; unpunished corruption; institutionalised incompetence etc.”

Not my words, dear reader, but it is an excellent list of the type of constraint that needs to be eradicated in order for South Africa Inc to grow at its true potential.

To conclude with Sensei’s words: “PPPs are the next step in the socialist exploitation of private enterprise extending the infringements on private property rights; it is voluntary enslavement on the part of business. The proper solution is to remove the socialist government; kill the tick to save the dog.”

The dog is private sector; but it is also you and I, dear reader.