Economic policy direction: An open letter to President Zuma

Note to editors: The following is an open letter written to President Jacob Zuma by DA Shadow Minister of Finance, Dr. Dion George MP.

Dear President Zuma

I write to you today concerned about the economic direction of our country. We all know that we continue to face enormous economic challenges in the form of continued poverty, inequality and unemployment. As such the national consensus has long been that we need to increase the rate of economic growth and job creation in order to extend more opportunities to those people who have previously been marginalised from the formal economy.

In recent weeks, economists, the public and leaders from all parties alike have however been growing increasingly uneasy about the state of our economy and our future economic direction. This has been fuelled by a barrage of mostly negative statistical information about our economic performance over the past 12 months. During this time, several credible studies have indicated that our economy is largely stagnant and is failing in the two most important barometers - creating jobs and growing at a sufficiently high pace.

The most recent Quarterly Labour Force Survey, for example, indicates that during the second quarter of 2011, only 7000 new jobs have been created, whilst the number of formally unemployed South Africans actually increased by 174 000. At the same time, the United Nations released a report indicating that foreign direct investment (FDI) into South Africa declined by 70% over the last year, and last week the Reserve Bank's annual economic report indicated that savings was below par, that the rand was overvalued, that economic growth was only 2.8% for 2010, that government was accumulating a growing stock of debt and that there existed significant potential for increases in inflation going forward.

All of these indicators are pointing to a struggling economy. With the possibility of an international "double-dip" recession now also increasing after the downgrading of the United States' credit rating and the continuing debt problems in Europe, South Africa, as a small, open economy, is currently in a precarious economic position.

After the 2008/2009 recession your government did the right thing in adopting expansionary monetary and fiscal policies to support the economy during that difficult time. But I fear that the effect of these policies is now petering out and that few expansionary interventions remain at our disposal within the current economic framework.

With our growing stock of debt it is unlikely that we can further stimulate the economy with government spending and with inflationary pressure on the rise, interest rates will inevitably have to be increased at some point in the foreseeable future. The only plausible option at our disposal is therefore to shift our economic paradigm and to adopt a new, growth-oriented economic framework.

Mr President, to this end I call on you to lead South Africa and take a stand on our economic future. Stand up and explicitly reject proposals for the nationalisation of mines and banks. Stand up and explicitly reject proposals for the expropriation of land without compensation. Stand up and tell unions to wield their influence for the betterment of all South Africans, and not just for the betterment of their own members.

Stand up and implement the wage subsidy you proposed in the State of the Nation Address this year. Stand up for our mining industry that has failed to participate in the minerals boom of the last decade. Stand up and dismiss corrupt government officials that steal precious state resources. Most importantly, consider input from all perspectives.  The Democratic Alliance has many constructive policy proposals to add to the debate on our future economic policies and the path towards national prosperity.

We have ideas on how to increase savings, on how to increase foreign direct investment, how to create a more employment-friendly atmosphere, how to revive struggling industries, how to responsibly manage the consistent overvaluation of our currency and how to grow our economy and create jobs. Many other groups, individuals and organisations also have ideas on these issues and a platform for the debate and discussion of our economic future needs to be created.

Mr President, the country needs you to take a stand and lead. The success of your presidency and the improvement of our people's lives depend on it.

Yours Sincerely
 
Dr Dion George MP
Democratic Alliance Shadow Minister of Finance

Statement issued by Dr. Dion George MP, DA Shadow Minister of Finance, August 10 2011

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