NO U TURN

Good morning all bloggers. This is what would have been posted on 3rd March. My thanks to my friend Louise Barns of Louise Barnes Communications, for sending this article to me. It does indeed bring ideas to ponder over.

Regards
Nikki



ECONOMIC MANAGEMENT

No U-turn

By Carol Paton

What will happen to SA's economic management when Mbeki and Manuel go?


President Thabo Mbeki's remark that "the years of freedom have been very good for business" in last year's state of the nation speech was apt. The years of freedom have been better than business ever imagined they might be - thanks largely to the shared vision of Mbeki and his finance minister, Trevor Manuel, whose goal has been to build a business-friendly, globally approved economic environment. Can SA still be assured of prudent financial management and business-friendly policies?

Trevor Manuel

The obvious unknown is who will be president next. The race is still wide open. But the political outcome is fairly simple to predict.

The options can be categorised into three: a conventional ANC candidate (such as ANC secretary-general Kgalema Motlanthe or foreign minister Nkosazana Dlamini-Zuma); an ANC business tycoon (such as Cyril Ramaphosa or Tokyo Sexwale); or a third, Left option. The Left candidates include, as a diminishing possibility, Jacob Zuma, who has campaigned with the trade unions and the SA Communist Party.


WHAT IT MEANS Business as usual, whoever leads SA , SA must correct inept public service


The first two options would bring business as usual. But how much could a Left-leaning president change the environment for doing business?

As a mass-based organisation with constitutional structures able to insist on a responsive leadership, the ANC is highly vulnerable to economic populism. Demands for an expansionary approach to government spending could conceivably be rallied around and won. A basic income grant is a good example. But pushing up consumption spending by introducing income support across the board would be bad for inflation and put pressure on the rand.

"The Chavez option is not a realistic one in SA. One needn't have lurid worries about that" - MICHAEL SPICER

But just as the ANC feels the pressure from its base and will so more and more the closer the December 2007 conference comes, there are other pressures propelling it towards fiscal caution.

Top of the list is the global community - including multilateral organisations like the World Bank and IMF, big foreign investors and ratings agencies - which all act to subdue policy exuberance. Next are SA's own established institutions - the independent central bank and the prudently run SA Revenue Service.

There is also a firmly rooted understanding in the ANC, which permeates several layers of leadership right through to the provinces and municipalities, that it is business that makes the investments necessary for jobs and prosperity.

All this means that "the culture of macroeconomic management is well-entrenched", says commentator and analyst Iraj Abedian, chief executive of Pan African Advisory Services.
"A new leader might bring about a change of emphasis but not a fundamental change" - SAKI MACOZOMA

"I don't hear any voices calling out to abandon Reserve Bank independence or inflation targeting, and start printing money," he says.

Michael Spicer, chief executive of Business Leadership SA, agrees that the risks of a even a "leftish" candidate in the presidency are not something about which to be unduly concerned.

"The range of possibilities is quite limited, given the institutional and global constraints that act on policy. The [Venezuelan president Hugo] Chávez option is not a realistic one in SA. One needn't have lurid worries about that," says Spicer.

Policies out of step with global convention would inevitably face reaction and correction.

The ANC's policy conference in July looks set to settle worries about economic management in the future, when it again debates the organisation's policy on the economy.

Says NEC member and Stanlib chairman Saki Macozoma: "Most of us hope this will be settled by the policy conference and that basic economic policy will remain the same. A new leader might bring about a change of emphasis but not a fundamental change."

Such changes in emphasis might be felt most in the internal power and organisational dynamics of the state.

A new finance minister, for instance, would be unlikely to have the great influence and clout that Manuel has in government, and one might expect a slightly weaker, less influential treasury.

The same goes for the presidency. Under Mbeki, the office of the president has accumulated significant powers and capacity. It is largely responsible for co-ordinating the work of departments, monitoring their progress and putting together over arching strategic plans.

A serious risk of the transition to a new leader is that such competence might be lost as old staff leave or are pushed out to make way for new political appointments.

This points to a far bigger problem and one that far overshadows concerns of sound economic management.

The dominating challenge for the next three years (while Mbeki and Manuel are still in power) and spanning the 10 years beyond "is to establish a culture of effectiveness and efficiency in the public service", says Abedian.

The decline of service levels and efficiency in the public service because of patronage and inappropriate appointments is presenting SA with a far bigger challenge than the management of the macro economy.

" One hears more and more frequent reports of ineffectiveness, lack of service delivery, lack of timeliness and of a culture of inefficiency. This is a management issue, a skills retention and acquisition issue and a question of system changes," says Abedian.

It is also, perhaps most importantly, an issue of depoliticising the state.

"When appointing a chief director or a director, the criterion must be competence, not loyalty or credentials related to what that person did in the past. Those people [comrades from the struggle] must be rewarded in another way," says Abedian.

In the US, for instance, a similar politicised civil-service culture prevails where top officials (the equivalent of cabinet ministers) bring in an entirely new staff when their term of office begins. But in SA, such politicisation permeates all levels.

"We must focus on the infrastructure of the state and distinguish it from the political infrastructure," says Abedian.

To best guarantee its future, business then needs to do what it can to boost state capacity and support shared objectives. This is a role that government has been happy to see it play, calling for a bigger role for business in the financing and provision of public services.