How can we fix SA’s economy?

On August 7, I listened with great interest when Jeff Radebe , the minister in the Presidency for Planning, Monitoring and Evaluation, released the government’s comprehensive framework for implementing the National Development Plan (NDP) over the next five years.

In the end I felt that Mr Radebe’s presentation was damp squid.

The NDP touches on all of the Social Teachings of the Church, and on social and economic justice, so it concerns us not only as citizens of this country, but also as Catholics

The objectives of the NDP are laudable. No one in their right mind can disagree with them:

• Quality basic education.

• A long and healthy life for all South Africans.

• Safety, and sense of safety, for all people in South Africa.

• Decent employment through inclusive growth.

• A skilled and capable workforce to support an inclusive growth path.

• An efficient, competitive and responsive economic infrastructure network.

• Vibrant, equitable, sustainable rural communities contributing towards food security for all.

• Sustainable human settlements and improved quality of household life.

• A comprehensive, responsive and sustainable social protection system.

• Responsive, accountable, effective and efficient local government.

• Protected and enhanced environmental assets and natural resources.

• An efficient, effective and development-oriented public service.

• A diverse, socially cohesive society with a common national identity.

• A better South Africa contributing to a better Africa and a better world.

The best part in the NDP is its Diagnostic Report. It tells us what is wrong with our country and why.

Most of the NDP’s goals are based on aiming for the ideal. Nothing wrong with that since economic planning should always aim for the ideal, so long as the mechanisms and projections are realistic. But the NDP assumes doing more of the same thing will yield different results. That, according to Einstein, is the definition of madness.

The projections of the NDP cannot be achieved without, for instance, radically altering the current government economic policy.

Almost all of the NDP’s goals are underpinned by an economic growth of at least 5% in the few coming years. Let’s leave alone the fact that our economic growth is realistically projected at 3%, at best, in the coming years

Statistic s— summarised in books such as Capital in the Twenty-First Century by T Piketty — demonstrate that economic growth in our monetary system lead to inequalities, unless boosted by catastrophic events, such as war.

According to Piketty, these growing inequalities will worsen in the future, because the return on capital, as is historical evidence, outpaces the rate of economic growth, which leads to greater gains by those who hold most of the wealth.

It is a height of madness for a country like South Africa, with the highest Gini coefficiency (a measure of statistical dispersion intended to represent the income distribution, and therefore disparities, of a nation’s residents) in the world, not to take radical means to alter this in its government plan.

Piketty calls for higher taxes on the rich—an 80% top income-tax rate, plus a separate tax on wealth—to try to reduce the gap between the rich and the rest.

The Truth and Reconciliation Commission in the 1990s proposed a wealth tax for exactly that reason, but Archbishop Desmond Tutu was howled down in our media when he made that suggestion.

The NDP could have added an Extraction Tax on our mining industry towards creating a Sovereignty Fund. It could have suggested that all parastatals be run along the lines of ACASA—majority owned by the South African government but legally and financially autonomous, operating under commercial law.

The government share of the profits would also contribute to the Sovereignty Fund in a transparent manner that avoids the secrecy and deviousness of hedge funding.

In turn the Sovereignty Fund would be run transparently by an association of academic institutions, business, retired members of the judiciary and public officials appointed by the Department of Trade and Industry.

Its main duties would be to fund government programmes of social and economic development, emphasising on skill development and entrepreneurship. It could even assist in funding the necessary national health programme and a turnaround strategy on education by retraining those of our educators who require it.

The much talked about state bank, to create access to capital for small business, could also be partly funded through this.

I shall inspect the NDP—its problem areas and possible solutions—further in next month’s column.