Reply by Ryan Coetzee MP, Democratic Alliance shadow minister of economic development, to Jacob Zuma's state of the nation address, national assembly, parliament, June 5 2009

State of the Nation debate: Put the people, not the state, at the centre of economic policy

Mr. Speaker, Mr. President, Fellow Members,

After the President's first State of the Nation address on Wednesday, it is clear that the government and the DA have significantly different views on how best to approach economic policy in the years ahead.

I trust we will find it within ourselves to debate the subject with open minds. 

The state is at the centre of the government's approach. Yesterday the President promised more social spending, a state-directed approach to industrial policy - focused on industries chosen by government - and an extension of the preferential use of government procurement policies, the effect of which are to drive up costs to the taxpayer.

It is tempting in the depths of a recession to spend money on those most vulnerable to the downturn, and indeed we must, which is why the DA has always supported a welfare safety net for those unable to provide for themselves.

But we must also have the courage and discipline to ensure that the steps we take now do not undermine our ability to take full advantage of the upturn which will follow the recession, hopefully next year.

The actual extent of our budget deficit is not known right now, but is likely to far exceed expectations. We must remember that borrowed money has to be paid back, and every Rand spent on servicing or repaying debt is a Rand that could have been put to more productive use in our economy.

President Zuma promised to spend and spend on Wednesday, but we simply cannot run up a deficit that undermines our ability to remain competitive and which in the medium term reduces the capacity of the state to deliver services, especially to those who most need them.

We must, however, despite the recession, continue to spend on infrastructure, because these investments will generate growth when demand increases in the domestic and global economies.

But we should even now start looking for private partners who can help to fund that infrastructure spending. We know that credit is hard to come by right now, but in the long run there is no need for the taxpayer to fund single-handedly all the projects currently planned or underway.

And rather than focus all our spending on consumption, we should urgently introduce a wage subsidy scheme that makes it cheaper and easier for employers to bring first time job-seekers into the labour market.

The expanded public works programme is a kind of welfare, with precious little skills transfer taking place. A wage subsidy is much more than that: it has the potential to bring unemployed people into the labour market permanently through a real transfer of skills while in the short term will help to stimulate domestic demand.

Of course those who advocate a more interfering state are emboldened by the current global recession, and have long argued, with some justification, that the economic policies pursued under President Mbeki's leadership failed to provide enough jobs.

The truth is that our economic performance during the boom years preceding the current recession was no better than okay. Our growth was driven by high commodity prices and cheap credit, underpinned, it must fairly be said, by judicious monetary and fiscal policies.

But macro economics is actually the easy part. What we failed to do with enough focus and follow-through was restructure our economy for sustainable growth.

The solution now is not to fantasise about a so-called developmental state. The conditions do not exist in South Africa today to emulate what took place in Europe or Japan after the Second World War or parts of Asia more recently. Our state lacks critical management capacity; we live in a globalised economy that is more open and competitive than ever and we can't use trade barriers to protect our industries.

The solution, Mr Speaker, lies in unleashing the creative and productive power of the South African people.

We must make economic growth the single most important objective of economic policy, especially the kind that seeks to absorb large numbers of unskilled people into the labour market, because that is the nature of our workforce.

We must accept that the private sector is the engine of economic growth. Yes, regulation to ensure competition and mitigate against excesses is required, but we must not talk or act in a way that suggests the private sector is a necessary evil that needs to be tolerated begrudgingly and constrained as much as possible.

We must implement a counter-cyclical fiscal policy that remembers to be counter-cyclical once the recession is behind us and revenues increase once more.

We must stand fast behind a monetary policy that counters the real threat of inflation, because inflation makes everyone poorer, with the biggest impact being on the poor. That is why inflation targeting remains an essential instrument of monetary policy.

Our industrial policy must not seek to pick winners, even at industry level. Rather, it should focus on creating the conditions in which those companies that can compete successfully are given the space to grow and create jobs. The market - that is to say, ordinary human beings - must decide which industries fly and which fail.

The DA has long advocated export processing zones in which business, both local and foreign, would make use of infrastructure, a much freer labour market, low taxes and a minimum of red tape to create opportunities for growth and jobs.

In the face of a global recession, we must avoid turning to protectionism. Our future lies in embracing free trade and exporting goods and services abroad. We can't do that in an environment where we make it difficult for others to export to us.

We must up-skill our workforce by allowing the people who have proven their ability to run successful enterprises to set the training agenda, not bureaucrats in SETAs who have proved merely that they can't manage the money the taxpayer so generously gives them. Companies should be able to claim back the costs of their own legitimate training through the tax system. SETAs should be abolished.

We must - we absolutely have to - make excellence the overriding value and objective of the education system. We need to identify every obstacle to excellence in education and systematically eradicate them all. The government must seek to unite parents, principals and teachers behind the excellence agenda and not let up until our children are getting the world-class education they deserve.

And we need to accept the need for environmentally sustainable policies that acknowledge the reality of climate change and respond to it creatively.

If this government is so keen on picking industries for special attention, it should consider how best to incentivise and support green industry, because in the long run, environmentally unsustainable policies will cost us growth, jobs and quality of life, and again the poor will be hardest hit.

Mr Speaker, the ANC has always claimed to be people-centered. Well, why not empower South Africans to participate freely in the economy?

Why not make it possible for entrepreneurs, for managers, for workers and for the unemployed to make the choices they believe best suit them and their needs?

We do not have to fear our own citizens, and we should not patronise them either.

Politicians, almost by definition, have an excess of faith in their views and abilities and a terrible fear of losing control. We must overcome these deficiencies to embrace the idea that free people, adequately supported by a government that knows its place, will build South Africa with greater success that the people sitting here today can by controlling and interfering in their lives.

We face a choice, Mr Speaker. We can choose to empower the state, stuffed as it is with politicians and bureaucrats, or we can choose to empower the people, and provide our citizens with a less interfering, more efficient, empowering state.

Let's put people, not the state, at the centre of economic policy. That is the path to growth, opportunity and dignity.

Issued by the Democratic Alliance, June 5 2009

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