Tackling the Economic Crisis: Five Steps to Stimulate the Economy
12 August 2015
The South African economy is facing an unprecedented crisis. Predicted growth for 2015 is forecast at only 2% and unemployment has risen steadily over the past 5 years, now standing at 34.9%. Almost 8.4 million South Africans do not have jobs, while 2 in every 3 of those are young people who are left ill-equipped by an inadequate education system. They are not only unemployed, but increasingly unemployable.
This crisis requires immediate and drastic intervention, and a government that can provide a sound economic alternative to the policy incoherence of the ANC. The global economic climate notwithstanding, the South African economy is underperforming relative to its peers. This must be addressed.
The DA’s Vision 2029, underpinned by our new Values Charter based on freedom, fairness and opportunity, outlines a society where opportunity is spread as broadly as possible and access to opportunities gives meaning to the freedoms contained in our Constitution.
The DA’s economic policy, reframed to align with our Values Charter, sets out our plan to reach 8% growth and make meaningful inroads into unemployment. The core focus of the DA’s 5-Point “Jobs” Plan is simple: to get South Africa working.
Yesterday President Zuma updated the nation on his State of the Nation Address (SONA) commitments while the reality is that government continues to fall short of its promises of job creation. Since President Zuma took office, 1.7 million South Africans have joined the ranks of the unemployed.
This economic crisis demands immediate intervention. While the DA’s 5-Point “Jobs” Plan sets out how the DA would unlock the potential of the South African economy in the long term, today the DA is outlining the five steps it would take to stimulate the economy with immediate effect:
1. Act now to solve the energy crisis
The electricity crisis continues to cripple our economy costing us both lost revenue and countless jobs. The DA would address this crisis through both supply and demand side interventions to ensure a sufficient and stable supply of electricity to power our economy.
On the supply side our focus would remain on breaking the monopoly stronghold Eskom has over South Africa and opening the market to independent power producers (IPPs), specifically those in the renewable energy sector. To alleviate the strain in the short term, we would commit an initial R500 million form the Department of Trade and Industry for the purchase of industrial-size generators for manufacturing enterprises. Coupled with increased investment in industrial cogeneration capacity, this would alleviate the strain on the grid and keep factories open and productive.
Importantly, the DA would immediately cancel the R1 trillion nuclear build procurement processes. This programme is not only ill-advised but unaffordable and will only serve to place upward pressure on the electricity price while doing nothing to solve the energy crisis in the short term.
On the demand side, we would encourage electricity suppliers to conclude load-curtailment agreements with their largest consumers, and shift some productive activity to off-peak periods, where possible. Load-shedding can and should be managed to minimise the impact on economic productivity.
2. Sector-specific Interventions
The tourism and mining sectors have suffered tremendously as a result of incoherent, job-killing policies from the ANC government. Immediate and bold interventions are required to halt further decline in these sectors and shield them from further job losses.
Tourism
While the tourism sector contributes 9% to our GDP and employs 1.5 million South Africans, the new visa regulations have precipitated a massive decline in tourists. The number of visitors from China alone has decreased by 38% in the first quarter of 2015.
The DA would immediately suspend and withdraw the new regulations and replace them with responsible measures to ensure the country’s security against threats while preventing economic harm.
Mining
Mining accounts for 50% of South Africa’s exports and almost half a million jobs yet this industry is coming under increasing threat from populist ANC policies aimed at enriching those who have already been empowered.
The DA would take measures to restore confidence lost due to policy uncertainty surrounding the Mineral and Petroleum Resources Development Act (MPRDA) by limiting the powers of the state and the Minister of Mineral Resources to set prices and change regulations at short notice.
Further to this, the DA would safeguard against the indiscriminate raising of the 26% B-BBEE ownership level currently required by the mining charter in order to provide investors with greater long-term security.
3. Support for small business
Small, medium and micro-sized enterprises (SMMEs) can serve as the engine for economic growth and job creation in South Africa. A DA government would therefore make it easier to start and fund a new business.
Instead of focusing on procurement, interventions in small business should be preoccupied with combining financing with tangible and effective non-financial support. The DA would prioritise the identification and reduction of the regulatory burden of job-destroying Red Tape that serves as a barrier to entry to starting a new business, while offering tax incentives to individual business mentors who shepherd new enterprises.
In the DA-run Western Cape, our dedicated Red Tape Reduction Unit continues to successfully assist small businesses in navigating the realms of regulation they encounter. Our “Cut Red Tape Hotline” for businesses has received thousands of complaints with an 80% resolution rate. The DA would roll out Red-Tape Reduction Units nationally.
4. Labour market reform
Labour policy must balance the protection of workers’ rights with the need to build greater flexibility into our labour market to make it easier for businesses to create jobs. If this balance is not achieved, labour policy is protecting the employed at the expense of the unemployed. What is required is a stable labour environment that supports increased productivity and boosts investor confidence.
In order to stabilise and democratise the labour market, three immediate interventions are required. The first would be to repeal or amend those sections of the Labour Relations Act (LRA) that give unions disproportionate power relative to employers. These include provisions on collective bargaining, closed-shop agreements and minimum thresholds for representation.
Secondly we would democratise and better regulate strike balloting procedures, and thirdly we would amend the LRA to address strike-related violence in order to hold unions responsibility for the actions of their members.
The DA believes in fairness and the rights of workers, but we must balance these with the need for economic growth and job creation.
5. Policy certainty
Finally, it must be emphasised that at the heart of South Africa’s policy uncertainty lies the ideological competition and confusion in the Tripartite Alliance. This has manifested itself in a proliferation of inconsistent plans and policies, resulting in policy incoherence and, ultimately, policy paralysis.
While the ANC has lauded the NDP as its overall policy framework, its actions contradict this stance. Providing economic leadership requires a clear, focussed economic policy stance free from internal contradiction. This is something the ANC has failed to provide, leaving investors uncertain about the road ahead with regard to issues such as private property rights and empowerment polices.
The DA would seek to restore investor confidence by amending or repealing the most damaging economic legislation that deters foreign investment, decreases job opportunities and increases the capacity for corruption.
The DA is committed to building an inclusive economy that expands opportunities to all South Africans. This requires a coherent approach to policy making that provides investors with long term security and business confidence. The DA believes that our economic policy can serve as the foundation for growth and job creation and allow for individuals to pursue a life they value.
In the Western Cape the DA has already begun the process of implementing many of the above policies resulting in the lowest unemployment rate in the country, and GDP growth that outpaces the national average. Our economy is in crisis, but through solid leadership robust growth and job creation can be achieved.
Statement issued by DA leader Mmusi Maimane, August 12 2015
