Treasury’s strategy paper an illustration of SA’s inability to plan

Former statistician-general says there is no systematic process, nothing that makes everything go through ‘the eye of the needle’.
Dr Pali Lehohla says you can’t have the president talking about creating 2m jobs in 10 years while the master plan talks about creating either 1m or 10m in that period. Picture: Moneyweb

Finance Minister Tito Mboweni’s economic strategy discussion paper is flawed. 

This is according to former statistician-general of South Africa, Dr Pali Lehohla, who has described the 77-page discussion document released by National Treasury last week as “an assemblage of essays.”

Treasury says the document – ‘Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for SA’ – is a response to the diagnosis that the country’s economic trajectory is unsustainable. 

Economic growth has stagnated. The South African Reserve Bank estimates that the economy will grow by only 0.6% this year. Added to that is rising unemployment, which currently sits just under 30%, while inequality remains high. 

Read: Treasury has laid down the challenge

At its core, the paper aims to steer the country to a higher growth path through a number of structural reforms categorised under five themes drawn from the National Development Plan (NDP). Read the document here.

Weakest point

Lehohla says that while the NDP’s primary motive is to deal with poverty, inequality and unemployment, Mboweni’s paper does not go into any real detail about how it plans to reduce the levels. 

The paper does however emphasise inclusive growth and economic transformation without compromising competitiveness as “the most sensible strategy to address the challenges of unemployment, poverty, and inequality.”

Treasury outlines a number of interventions that will result in lower electricity, communication and transport costs for all. There is a focus on labour-intensive growth in the tourism and agricultural sectors, which are best positioned to absorb low-skilled workers who make up the bulk of SA’s workforce. There are also policy, financing and government interventions aimed at increasing the ease of doing business in the country, particularly for small and medium-sized enterprises.

Lehohla says that while those are “good words” the paper should have specified by how much it aims to reduce the three issues and that omission is the “weakest point” of the document.

Read: Less ambition is a good thing in South Africa’s economic plan

Had the document been explicit about those elements, one would be able to test how valid the interventions are in terms of reducing or eliminating unemployment, poverty and inequality, he says.

“[Instead] it talks about a whole host of things that will have to be done that will enhance growth and then, at the end, it says growth will be 2% to 3%,” Lehohla told Moneyweb.

Is it because the growth is so pedestrian that they would not commit to saying poverty, inequality and unemployment? I am left with that kind of question in my mind.”

Unemployment 

In addition to the three-percentage-point growth projection, Lehohla finds issue with the document stating that should the interventions be successfully implemented they would “create one million job opportunities”.

Currently, by official count, 6.7 million people – 29% – are unemployed in South Africa. The extended definition brings the number to 38.5% or more than 10 million people being jobless. 

A breakdown of the million jobs and economic growth targets is provided in three scenarios (short, medium and long term), where government quantifies the impact of the interventions using Treasury’s South African General Equilibrium (Sage) model to make estimates.

Source: National Treasury’s economic transformation strategy document

Lehohla says the language of “job opportunities” in the first paragraph is a cop out and there is an inconsistency between the number of jobs mentioned in the abstract and the concluding statements in the paper.

“That statement at the front, and the concluding table, leave you completely confused as to whether it is a million jobs in 10 years or whether it is 10 million jobs in 10 years,” he says.

“Now, when you have to contend with that, we have to start asking is this document really serious? Where is the arithmetic? Where is the transmission mechanism?”

Lehohla believes that regardless of whether the document refers to one million jobs or 10 million, it is “wrong” in both cases.

Read: SA sees selling coal plants and visa reform boosting GDP

If one million jobs in the long term scenario translates to 100 000 jobs a year, this is not realistic when there are 10 million people who are unemployed and every year an additional 400 000 people are added onto the list, says Lehohla. On the other hand, 10 million jobs over the next 10 years cannot be sustained by growth of three percentage points. 

“I am terribly worried that numbers that big are just thrown around like that.”

Planning 

Instead of being a plan, Lehohla says the document is better described as an “assemblage of essays” and a good attempt that raises issues around how SA goes about planning a system.

“There is no systematic process that makes everything go through the eye of the needle. It is a compilation of pieces of paper and then we think that’s a plan. That’s a problem.”

The former statistician-general says a master plan also requires all spheres of government to talk the “same language”.

For instance, in July President Cyril Ramaphosa said that he planned to create two million jobs in 10 years, through private sector participation as well as by leveraging off the tourism and agricultural sectors. This is not dissimilar from the Treasury document, however, the economic blueprint only speaks of one million jobs.

“Those are two big, different numbers and in terms of development communication, it shows the fault lines in the plan itself,” said Lehohla. 

‘I can’t trust those numbers’

It is this incoherence by political heads that Lehohla argues creates distrust in the bigger numbers asserted by the document. 

The economic document proposes that embattled power utility Eskom sell off its power stations and their respective obligations as a way of limiting the fiscal and economic risk that Eskom poses. It is estimated that the sale will generate R450 billion. The paper also proposes greater energy production by independent renewable power producers.

This comes against a backdrop where Minister of Mineral Resources Gwede Mantashe has affirmed his backing for coal and nuclear in the country’s energy mix. Meanwhile, former energy minister Jeff Radebe’s unpromulgated Integrated Resource Plan sees coal as part of the country’s energy mix only until 2030, to be replaced by renewables, and does not account for new nuclear projects.

“This incoherence is so serious and so deep that you can’t swing in less than a month on issues like these,” says Lehohla. 

“I have very little confidence in the R450 billion, because there is nothing that proves to me that the one million and 10 million [jobs] are not different.”

Lehohla says it’s not just the process of implementing reforms that SA does not get right, it is also the process of planning.

“Unless we get those right it will be very difficult to win the confidence of South Africans that things may look different.”

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The whole of Africa is always full of plans e.g. economic development plans, macro growth plans etc. People are always waiting for government to roll out the next big “plan”. These “plans” are always drafted by bureaucrats who have never run a business of their own in their lives. My advice to the people of Africa is simple, roll up your sleeves and get your hands dirty. Try to improve on the products and services of your competitors and try to make more money than them. It is that simple. Work hard and you will reap the benefits.

I am afraid its nor really that simple. In a rapidly changing world entering the fourth industrial revolution, its not just a matter of “work hard” It is also a matter of working clever and using the tools “read technology” available to get that crucial one step ahead of your competitors. And that is where the ANC government has failed South Africans the most. Education, Skills development and the cost of the most basic technologies to get a start i.e cost of internet connectivity., electricity, transport and more generally logistics to reach a larger market

I agree and disagree with this statement. Yes people do need technology with the way the world is going today, but at the same time there are lots of people throughout the African continent that can’t read or write, so there will, at least for a number of years still, if not decades, be manual jobs that require sweat and hard work to allow people to earn cash (of some sort at least) since there is a vast majority that is still unbanked.

You also need an attitude of application to the job at hand; doing it as best as possible and not simply pitching up for work and getting a pay check.

For 26 years all the plans in the world but no execution thereof. Now it seems as even the “plans” have come to the point where they are dreams. Meanwhile back at the ranch in JHB it is, as the BBC calls it, Pandemonium. So Maybe a nice tourist attraction – Come to SA and jo
in in the violence!!!

YES THE WHOLE AFRICA IS FULL OF PLANS AND IDEAS BUT SIMPLY DO NOT HOW TO MAKE IT A REALITY, SO WE GET STUCK ON THE DREAM, AT THE END OF THE DAY I STICK TO THE SAYINGS: “KNOWLEDGE IS POWER” AND “TALK IS CHEAP, MONEY BUYS THE WHISKY”

BOTH OF THESE SAYINGS ARE PLAYING OFF RIGHT NOW IN SOUTH AFRICA WITHOUT THE ANC EVEN RECOGNIZING THAT IT IS ACTUALLY HAPPENING

Whatever the the plans are , it always comes at a cost for tax payers. SAA in case. Coleman Andrews cost us >R200m.. then SAA closed Sunair .. then Nationwide…then 1 Time. In all these plans the main objective was “job protection for SAA ” at the expense of tax payers.
The same principle is in progress for yet again SAA and ESCOM. The ANC will not accept the fact that all SOE’s are over employed .
The ANC fears the trade unions and CR is not in charge till he and his “top 6 ” take charge and face the facts and re-structure the entire Government .

@chalky. What you say MAY be right. You’ve talking with your head. To govern you need to engage with the head and heart. The ANC knows that the SOEs are overstaffed. But what you do as a leader to purge this baggage? Would you let them go and add to the unemployment? Thus creating a brew of crime and drugs and other activities that go with low self esteem.

Shakespeare ..“uneasy lies the head that wears the crown”

Muks, “Uneasier lies the head that’s no longer attached to the body,”
meaning that the head needs to have a body that does the work, or it’s as good as dead.

The ruling party is in bed with the Trade unions and would not incur their wrath by cutting jobs.
SAA will be kept afloat at all (taxpayers) costs because who else is going to honour the free air tickets our (dis)honourable members receive.

The mere fact that a minister comes up with an economic plan is hugely problematic. The state should be confined to service delivery and protection of property, they should not be active in economic planning. There are zero barriers to entry into the business of career politicians. They do not even need grade 12. The only requirement to become a career politician is the ability to lie convincingly.

The most efficient system to drive economic growth is the system of Democratic Capitalism, as we see in the West. Even State Capitalism delivers remarkable results, as is evident in China. Democratic Socialism can deliver positive results if redistribution takes place on a purely voluntary basis and is not forced upon citizens by the state.

The worst possible combination, the economic system with the worst track record on earth, the system that delivers poverty, hunger and disease 100% of the time, is the system of State Socialism. That is what we have got in the form of the tripartite alliance. The ANC took control of economic planning. This is disastrous because politicians are not entrepreneurs. They make mistakes as entrepreneurs do, but they never pay for their own mistakes like entrepreneurs do. When socialist politicians cause economic disasters, the population pay with their lives.

Our economic system, State Socialism, is the worst possible system and guarantees disaster.

Agree Sensei, but would love to argue that Tito (hopefully) engaged with those of an entrepreneurial mindset, in order to put this report together. Additionally, it would be helpful to think that he released this report to exercise pressure on his peers, doing it with true conviction. But, I guess one never knows with politicians…. By default they would do anything to cling to power.

I share your sentiments and I salute those brave individuals who contributed to this plan. This plan is the correct solution, and those who came up with the plan are true patriots, but this solution is now being “thrown before the pigs”. Who can expect a socialist coalition consisting out of the SACP, the Labour Unions and the many different looting ANC factions to agree to a wonderful free-market capitalist plan?

I am on Tito’s side as far as the plan is concerned. When it comes to the implementation of the plan, however, I put my money on the FF+. How many people do realize that this plan is actually FF+ manifesto? Do we honestly believe that the Tripartita Alliance will implement the FF+ manifesto?

Let’s have another conference to talk about it ………..sigh ! It’s so dangerous when the people in charge don’t know that they don’t know . TIA !

The Dunning-Kruger Effect is something our government and their minions are riddled with. Undernourished and badly educated children are in the majority and therefore destined to repeat more generations of sub-70 IQ people. No hope, unless there is a realisation that the key to job creation is effective, quality education and skills training. The rest will follow, albeit in a long time – but there is no short cut I fear. Teach a man to fish damn it!

Tito’s document may not be in the form of the grand 5-year and 10-year plans so loved by the Soviets and clearly also loved by our former statistician-general.

However it is a list of concrete steps which if even only some are implemented will have a positive effect of growth.

We also know none will be implemented as none fit in with the NDR, the developmental and now the entrepreneurial state.

Our biggest problem is the unemployd youth
Why can we not absorb them into our police and emergency services
This will solve some of our problems but these youngsters will have to be given propper training under strict dissipline (sergeant majors and nursing matrons)
These youngsters will then have a job and be off the streets and it need only be at the cost stopping the gravy train of government

Lol massive inflated and inefficient state workforce is half our problem, they tried this solution and have reached saturation point…

Now dumping useless bureaucrats in favour of public servants, is a cause I can get behind.. One hire means one fire…

There are plenty of very simple ideas that will work but the direction must come from the top (ha ha). This should be that a job is a privilege (passed on to the CCMA – you mess around; you are out) and discipline is absolute. You may have to do menial work – walking a beat, guarding potential targets, answering domestic alarms, saving kittens up trees. Absolute discipline, three times dirty shoes and out. Criminal record and you will not get in – you go to picking worms off organic grown lettuce.

Ho hum; I know it won’t get anywhere but if it does it will kill the security industry.

“Treasury’s strategy paper an illustration of SA’s inability to plan”; this directly influences and governs the way Eskom, Transnet etc. “plans.”

I wonder if the following is also true for Eskom’s Procurement processes: “There is no systematic process that makes everything go through the eye of the needle. It is a compilation of pieces of paper and then we think that’s a plan (or process). That’s a problem.”

A good start would be to demonstrate a cut in wasteful expenditure/headcount and an increase in infrastructure expenditure on roads and water/sanitation infrastructure.

This will build confidence and also create jobs.

We needed someone to think out of the box! Because desperate times calls for desperate measures. Let us not fool ourselves – SA is experiencing desperate times! And all of us must put SA first and foremost. Do we realise that by doing things that are say 70% right, is better than doing nothing at all.We need action not more plans.

I was going to add my 10 cents but whats the point. There is just so much wrong in every direction. Our country has now tipped over into anarchy. Crime is now our chief economic activity, the troops are now patrolling the streets but the crimes and violence are getting worse by the day. A country gone to the dogs. Thanks ANC and your ignorant voters! Ignorance causes suffering, so get used to it and suck it up, there is still room for more destruction, degradation and suffering to catch up to Zimbabwe’s wonderful example.

…. “an assemblage of essays.” Precisely what I though as I laboured though the 70 odd pages and then the references to various academic papers and literature like a presentation of a thesis.

It was probably prepared by an internal trainee team fresh from some MBA college.

And in the entire document I couldn’t find one reference to corruption ….

Ever self supporting South Africa became a liability after the era cold war. The rest is history. To go back to the old status require a mindset different as today. All set for becoming wealthy beyond dreams. Obvious running counter for any plans considering country first. It is me, the greatest. Read Santam.

Well, we need a million fireman to put out a whole country in fire so there’s a solution?

When the country needed buffalo balls, all we got was squirrel nuts.

Until someone tables a better plan I’m not listening. Its easy to find fault in an imperfect world. Clearly the dreams of the revolutionary masters are just that, dreams, and reality requires something real. The plan is not perfect, but it’s the best one we have right now.
#STOPTHEXENOPHOBIA

We South Africans are widely famous for most elaborate planning, the outcomes of which never see light of day, and zero implementation.

Mention population growth and the Editors of Moneyweb do not place my post of this morning.

Yet Pres. CR and Michael Jordaan both said that the economic growth must be bigger than the population growth – yet everybody focuses on half the problem, that of economic growth and nobody and the population growth part of the equation.

Singapore and China focused on both and are hugely successful.

End of comments.

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