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Way forward lies with policy changes, not project roll-outs by Steven Friedman (BDlive), 17 June 2014

17 June 2014

THE state of the nation address many in the mainstream want to hear is not the one the country needs to hear. Tuesday’s address should help answer two important questions.

Does the new government want to bargain with the business sector and other interests to chart a new path for the economy, or does it believe it can fix problems on its own? Are poverty and inequality still high on its agenda or has its attention turned elsewhere? Much of the debate wants to hear an address that does not "waffle" about policy but promises to "get things done".

But, if that is all we hear, we are likely to remain stuck where we are when we need to move forward.

Evidence that the African National Congress (ANC) faces a choice when President Jacob Zuma spells out the government’s priorities is found in two recent documents.

The first is its election manifesto, which seemed to spell out an invitation to business to negotiate changes to the rules governing the economy. It proposed five changes — a national minimum wage, narrowing the wage gap in businesses, financial sector regulation, faster black economic empowerment and measures to bring poor people in the cities nearer to the economic action.

It offered business changes in return — reduced red tape, infrastructure partnerships and incentives to create jobs. The details are not important. What is important is that it signalled that the ANC was in negotiation mode: it was telling business and other interests what it wanted and was offering to give in return.

As the economy is held back by many of the patterns of the past and the only way to remove the obstacles is through negotiation, this promised the beginning of a bargaining process, which, over time, could place the economy on a surer footing.

Some in the ANC continue to think along these lines. New Gauteng Premier David Makhura has said his administration understands and respects business’s concern for the bottom line. But, he added, business should respect his government’s bottom line (which is presumably to address the needs of those who voted for it).

His administration did not want a cosy relationship with business but it did want a strong one. In effect, he was saying, it wanted to bargain.

But that does not seem to be the view of the second document, a detailed statement the ANC issued last week after a strategy session. It attracted headlines mainly for its wild attack on the leaders of the platinum strike. But what it did not say was as important as what it did, for there was nothing in it about poverty or inequity and nothing about negotiating anything with anybody. It promised more efficient government, infrastructure delivery (again) and an energy master plan. Its unstated message was much the same as the one it delivered a couple of years back — that the government can fix itself and society without help.

This difference between the documents is surely driven by the way in which the ANC reads the election results.

The push to begin talking about economic change with the major actors was driven by fear that the governing party was losing touch with its voters and that this would cost it at the ballot box. In the view of ANC strategists, a key reason for grass-roots unhappiness was a failure to do more to change the economic patterns of the past: this is why, since mid-2012, ANC documents have talked about the need for "radical economic transformation".

But the ANC also knows that it cannot simply impose these changes without damaging the economy. So it needs to negotiate them. This is why the documents calling for radical change had no proposals that would have shifted policy dramatically. It also explains why, for example, the labour minister says the national minimum wage proposal is to be investigated over the next five years. These changes were placed on the agenda to invite a response from business and other interests, not because they were about to become policy.

Why would the ANC retreat from that concern after an election in which it lost ground? The answer may lie in a key line in the statement promising that it will "reconnect" with the black middle class. Its reading of the election result is that it lost ground among middle-class voters, not the poor. This may have convinced it that its problem among voters is not poverty and inequality but issues that worry the middle class.

If this is present ANC thinking, we can expect a state of the nation address filled with promises to fix the government and the country’s problems but with little or nothing about engaging with others to change the economy’s direction. We can also expect the economy’s and the ANC’s problems to persist.

The ANC did bleed middle-class votes — in the main, workers and the poor voted for the ANC or stayed home. But avoiding negotiation is unlikely to win back the middle class. Concern about corruption and ineffective government is one reason the black middle class deserted the ANC — but it tried to fix the problem on its own before and failed. It is likely to do no better this time. Corruption, as the Treasury has learnt, cannot be fought simply by changing management systems: it needs, among other things, the cooperation of business and labour.

The government’s failings are often a product of its relationship with the society: that cannot be fixed by technical solutions.

Equally important, a key concern of the black middle class is that the racial patterns of the past are still embedded in business and the professions. This requires negotiation, not new government programmes.

Middle-class people (like everyone else) are also concerned about our economic problems. But this makes economic negotiation essential. A key reason for the economy’s problems is not that the government has not unfurled an energy plan but that there has been no serious bargaining on how to change the patterns of the past without damaging the economy’s ability to create wealth.

Infrastructure programmes, energy plans and improved government are necessary. But they are no substitute for sorting out the obstacles to growth that includes all.

So, unless we get a state of the nation address that advocates policy changes and invites business, labour and others to negotiate these reforms, the economic problems will remain and the ANC will remain alienated from a key source of support.

This means that we need to view Tuesday’s address in the opposite way to much of the debate. An address concerned only with fixing the government and rolling out projects might satisfy those who see policy changes as a threat to growth.

But, if this is what we get, our problems will remain, and growth, if it happens at all, will be limited.

Only the supposedly scary policy changes offer a solution, if they are accompanied by a willingness to bargain.

If Tuesday’s address repeats some of the proposals for policy change in the ANC election manifesto, we might see some scare-mongering media coverage in the days ahead, but we will be moving forward.

If it repeats the stress on programmes rather than policy in last week’s statement, we can look forward to treading water.