The Party's Over

Sorting out the shambles

THE media has been rife with speculation that Finance Minister Trevor Manuel is to head up a new commission on economic policy, which will be situated in the presidency. But does SA really need a new commission?

Little is known about what the commission would do in practice. President-in-waiting Jacob Zuma has said that it will be a planning commission which would "ensure better planning, monitoring and evaluation of government business".

This could mean anything. At the one extreme, it could imply that the head of the commission will be some kind of economics tsar, cracking the whip to ensure that government policies are implemented. At the other, it will be just another talk shop which tries to meddle with ministries that largely go their own way.

One thing is clear, though: if the head of the commission isn't given the status of minister in the presidency, the commission's power will be limited. Having Manuel at the head will be a definite demotion for him - it's difficult to envision him agreeing to this.

It's also difficult to see what the point of creating the commission would be if it doesn't have the capacity to intervene at cabinet level.

Inconsistencies and contradictions

Perhaps Zuma and those close to him perceive the need for a commission because they realise that government's economic policy is in a shambles. Whether the creation of a new body can sort out the shambles is an interesting question. More pertinently, what SA needs isn't necessarily a new commission, but rather a coherent and consistent set of plans.

SA doesn't need a new commission - it needs an economic policy.

The lack of consistent policy has been most obvious in measures taken to fight the recession. First, a task group consisting of government, business and labour came up with a document that said that there would be strategies to help vulnerable sectors. It listed these - and included clothing, textiles and footwear.

But then, the Industrial Development Corporation (IDC) decided not to provide Seardel with bridging finance which would have helped the company keep Frame Textiles open and enabled it to save 1 400 jobs. The IDC says it only invests in companies which will give it some return in the future, and it doesn't foresee this for Frame.

This is a pretty hardline freemarket approach to the issue. But this hardline adherence to freemarket principles is in stark contrast to other policies that are far from free market.

Ours was, after all, the government that slapped import quotas onto textiles to help the industry. It's also the government that spends billions of rands on the Extended Public Works Programme (EPWP) - which uses labour-intensive methods when sometimes machines would be more efficient.

It doesn't make sense to follow a policy that puts 1 400 workers out of employment at Frame because it would be inefficient to keep it open, only to spend money on inefficient construction methods to create jobs. This isn't consistent policy-making.

Bailout band-aids

It doesn't make sense to take this hardline freemarket approach towards bailing out companies in trouble and then, at the same time, espouse highly interventionist policies.

Before the election, Reuters reported that the ANC planned to set up a state mining company after the election. The report quoted ANC secretary-general Gwede Mantashe as saying that a state mining company would create jobs and help SA benefit more from its mineral wealth.

Of course, companies are best run by the private sector and a state-run mine doesn't make sense.

A similar argument can be made for the textiles industry, which, one could argue, is in terminal decline. Of course, if the textiles industry is going down the tubes no matter what, it doesn't make sense to bail it out.

But it's not that simple.

If one bears in mind that other government policies aimed at stimulating growth - such as the major priority of building skills - are failing miserably, there's a case to be made for buying time by bailing out ailing labour-intensive industries. Give these industries a band-aid; they might in the end still bleed to death, but by then SA might have the skills needed to grow by 6% per year.

The new planning commission will have its job cut out for it. Just making sense of what government's economic plans really are is a massive job in itself. Space prevents me from mentioning the many other examples of policy contradictions.

But the focus shouldn't be on creating new structures. Rather, it should be on the very real task of establishing consistent, coherent plans that recognise the need for short-term band-aids.

- Fin24.com