PETER ATTARD MONTALTO: Extremes and choices in the year ahead

Posted in: Covid-19, Economics, i-Blog, South Africa on Dec 6, 2021


Screeching down the runway — in Ethiopian Airways’ shade-of-green seats — I had three flights ahead over the next 24 hours to try get home to the UK before red-list travel restrictions came into force. I was quite mad at having to cancel an entire week of meetings for a pointless showboating policy.

What struck me was the juxtapositions of my trip. I had gone from spending time in townships at early childhood development centres with the amazing staff of Breadline Africa to some of the best tourism experiences in the world. And from meetings in Pretoria with world-class policymakers to head-bashing in despair during meetings with others elsewhere in the capital.

This year has, of course, shown up these contrasts like never before: the July unrest and its self-interested instigators freed versus the world-class, selfless excellence of SA scientists and medics now working at speed on Omicron. The danger of the extremes is becoming more apparent after July and  the chasms are going to widen.

Last week’s unemployment data was a shock even in the context of SA. What we saw was a record high in the official print, but look through layers of statistical issues with this data and the underlying share of people who should be in the labour force but are out of employment is at 47.1% — higher than the 46.6% this measure hit in the second quarter  at the peak of the lockdown. July was not enough to explain this even in KwaZulu-Natal and Gauteng, let alone in the other provinces.

There are about 11-million people out of work who should otherwise, in a “normal” economy with “normal” levels of unemployment, be in work. How do you solve an 11-million-person problem sustainably? Not with a basic income grant.

Solving this crisis is the urgent task for 2022. It’s the task for newly elected mayors around the country — either returning ANC ones or, surprisingly, newly elected DA ones.

Every decision, every choice of priority, must be passed through this lens. But of course this is not what 2022 is going to be about; from January 8 we are going to have an entire year of ANC elective-conference mania.

If we run with the assumption that Cyril Ramaphosa has no viable challengers, then the really interesting moment in this roller-coaster should be the midyear policy conference. Can the party break free from the unnecessary and unworkable compromises of Nasrec on policy: the pointlessness of Reserve Bank nationalisation; the impossibility of a well-run state bank;  or the distraction of constitutional amendments from desperately needed real land reform?

It’s a chance for the party to show some fresh thinking and start to write a bounce-back narrative through 2024. Will we get clarity of vision or PR and spin in 2022 with all this distraction?

It’s a year when policymakers need to wake up from their infrastructure spin and do anything that will actually lift the dial from just 14% investment to GDP now — and take some tough decisions on a private sector-led model.

Similarly, will we have groundhog day at the investment conference in March as we count existing operational expenditure plans as new investment or already announced plans as new? 

We must hope that the National Treasury keeps the line on fiscal consolidation rather than seeing its constitutional mandate to safeguard fiscal stability overridden from unexpected quarters. The interminable “debt or growth” debate will perhaps be thrown into some new contrast in 2022 — especially for those who seem to think there is a magic debt-issuance machine, divorced of consequences — as developed-market growth and particularly inflation drive the Fed and other central banks to drive global real rates higher.

The real question, however, is how much madness is allowed to proliferate in this ANC elective conference year, be it industrial policy, as Peter Bruce has been writing about, or energy policy, as I’ve been writing here throughout 2021.

This year was one of major breakthroughs for both SA’s climate policy and energy policy despite resistance on both counts. Next year needs to see these consolidated — especially with a new emissions-capped, least-cost, jobs-maximising Integrated Resource Policy that should kick off early in the year.

Yet the department of mineral resources & energy is consolidating an unsustainable and ultimately unworkable position that is not aligned to least cost nor maximising jobs, let alone emissions-aligned. Such a position will ultimately only embarrass the president unless he shows some leadership in this area.

All this will focus minds on a question that has slipped to the back of minds in 2021 but will resurface with a vengeance in 2022 as the funding cap comes around: does business back Ramaphosa and a path to a “reformed” ANC through December 2022?

The election of DA mayors in major metros now and the prospect of a serious upset at provincial level in 2024, and the probability of a national upset in 2024, puts such a decision into starker contrast. Can any serious probability of reform be expected of a party that has allowed the instigators of July’s unrest to go free for reasons of political expediency? The policy and elective conferences will allow tests of that probability.

As the Zondo commission report emerges into the political storm of an elective conference year, and as unemployment rises further, 2022 will be a year for taking risks for everyone as we constantly peer over the edge into a repeat of July. Everyone will have choices to make.

• Attard Montalto is head of Capital Markets Research at Intellidex, a South African research-led consulting company.

This article first appeared in Business Day

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