Make no mistake about it. Despite his reassuring words in Washington last week Jacob Zuma and his comrades in the SA Communist Party and Cosatu want to transform the South African economy with eye-popping changes. Should he be elected next May they will radically alter the political, economic and social landscape, the way the country is governed and everything in between. The post-Mbeki power-seekers do not intend to just shift deck chairs on the ship of state. They are preparing for a 180 degree course correction.

If you don't believe it read the SACP's statement on state power of September 10 (see here). Then the Alliance's report on its Economic Summit of October 19 (see here). Note what the Declaration leaves out. That's as significant as what is in it. The SACP's finger prints are all over it.

In a nutshell the ANC-SACP-Cosatu Alliance plans to transform South Africa from a largely market-driven, business-friendly, economy in which government's role is mainly to set rules to ensure an even playing field, consumer protection, fair labour practices and the delivery of essential public services to one in which the central government plays a decisive role.

An Alliance government's over-riding objective? Generating work. The first four pages of the Declaration contain no fewer than 10 references to job creation. A sample:

"Decisive action is required to transform the pattern of wealth production and distribution

"The creation of decent work for all South Africans.... must be the primary focus of all economic policies

"The priority is ... to create decent jobs and combat poverty and unemployment" (my italics)

How many new jobs? No less than five million in five years. At present only around 12 million have paid employment out of a population of 48 million, with unemployment up recently from 23.2 percent to 23.5 percent.*

Making job creation the alpha and omega of economic policy will require "fundamental micro-economic interventions that transform the structural character of our economy along with macro-economic policy choices. That in turn will require high-level planning, evaluation and monitoring".

To push through this radical transformation Zuma proposes to establish a Planning Commission that he himself will head up. It will have the power to align the work of all [government] departments and organs of state to the government's development agenda ... Industrial policy ... must lead transformation of the economy instead of simply following investment decisions...".

The ANC-SACP-Cosatu Alliance also intends to divide the Cabinet into two tiers. A senior tier of ministers will set strategic targets and a junior tier will oversee the implementation of specific developmental projects within each department.

To be sure, there is an urgent need for more coordination among government departments when implementing government's developmental programmes. And for fewer under-experienced, under-trained, inept bureaucrats to be involved in executing key projects. But whether adding a Planning Commission to the mix will help remains to be seen even if they are to be armed with a daunting arsenal of weapons to deploy in pursuit of their ambitions.

They include fiscal incentives; development finance; public procurement; state-owned enterprises; import and export taxes; licensing; Black empowerment; and trade agreements.  Prescribed investments that require the provision of social infrastructure for housing and job creation will also be mandated.

In the sphere of national finance the Planning Commission will "align government budgets with developmental planning", set broad targets and make strategic risk assessments. Even the Reserve Bank will be strong-armed into doing the planners' bidding and accept the primacy of job creation. Whereas its present mandate is price stability and the management of exchange rates both "need to be calibrated to take account of industrial policy imperatives. Its new mandate should also include employment and economic growth".

So get ready for higher prices, lower interest rates and a weaker rand.

But wait. There's more. ".... An Alliance government strongly believes everyone should enjoy social protection .... Everyone should have free water, electricity, sanitation, basic education, subsidized housing, health insurance, retirement benefits and cover against disability, occupational accidents, unemployment benefits, child support grants and a uniform pension scheme". A national health insurance scheme would provide all "with free health care at the point of delivery".... Government departments are to be "realigned ...  to implement this agenda of social protection for all".

One can only gasp at the cost of this laundry list of state provided social benefits and wonder how it will be financed. From new taxes? From borrowing? The Alliance doesn't say except to reveal that its three members will "together elaborate a programme to ensure the necessary funding...was secured and integrated into the national budget.

They must be joking! Only the wealthy industrial nations could hope to enjoy a social welfare regime of such magnitude. Isn't South Africa still a developing country struggling to finance even an effective AIDS programme, combat urban and rural poverty and mitigate the burden of high rates of unemployment in a global economic environment that is deteriorating before our eyes?

The core problem at the heart of the Alliance's grandiose plans is that it is putting the cart before the horse. Job creation, social welfare, and an end to poverty depend first and last on the economy's capacity to generate more wealth. On its ability to achieve growth in real GDP at high and sustainable rates. And that this in turn requires high levels of investment, public and private, entrepreneurs willing to take risks, and a market-led system of allocating resources to where they will earn the most income. In the first quarter of 2008 the contribution of private sector investment to GDP reached an all-time high of 15.9%. That compares with 3% by public corporations and 2.8% by general government spending.

As Professor Raymond Parsons put it in a recent address to the SA Property Owners Organisation (SAPOA) "... it is in fact mainly the private sector that is investing for our future. Private sector investment rose from 10.8% of GDP in 2002 to an all-time high of 15.9% in Q 1 2008. In other words, 70% of the 7.2 percentage point rise in investment from 14.5% of GDP in 2002 to 21.7% in Q 1 2008 is the result of higher private sector spending...."efforts thus far by the public sector to raise its investment from levels that were patently too low are being dwarfed by the efforts of the private sector to raise its production capacity--- and this is how it should be in a market-driven economy. What matters is our ability to maintain acceptable and strong growth rates with primary reliance on private investment activity". (my italics)

The problem the ANC faces is that this sort of realistic assessment is anathema to its two Alliance partners. It doesn't seem to realise that allowing the SACP to fulminate about "monopoly capitalism" and the need for "working-class hegemony" and to hijack the Summit with its ideological nonsense is precisely what undermines investor confidence and encourages the emigration of those with skills a growing economy desperately needs.

No matter his other failings Thabo Mbeki understands this. So do Trevor Manuel and Tito Mboweni.  But how long will they want to stick around? The ANC should have known better than to allow its Economic Summit to be hijacked by a handful of power-hungry ideologues.

* NOTE: This article initially stated the unemployment figure released by Statssa earlier this week reflected millions of people rather than, as it should have been, a percentage of the population.  Apologies for the mistake.

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