PETER ATTARD MONTALTO: Stop reinventing old policy

Posted in: i-Blog, Media on January 14, 2019

Working papers on policy reforms have been saying the same thing for decades

This column was first published in Business Day

I hate new year’s resolutions. They invariably end up rapidly defunct (like doing “dry January” which ended for me this past Friday) or are improbable (I once tried to learn Arabic, I can now order falafel and that’s about it). Yet they still expose necessary truths by positing the start or  end of something — so here goes for SA.

Stop trying to invent new policy. Stop the never-ending hunt for a magical policy tree of new low-hanging fruit that are easy to implement at zero political cost. They don’t exist.

The total menu of policy options in this reform restaurant is already on the table — from the radically collectivist to the libertarian laissez-faire. What  SA needs to do is simply choose and implement with laser focus.

One of the only policymakers who seems to be pushing this view is finance minister  Tito Mboweni. His excoriation of circular policy debates on several occasions in the months before Christmas sounded almost radical for its uniqueness in the public discourse. He highlighted that policy was continually trying to reinvent itself when the same issues had been discussed and not implemented 15 or more years before.

In this vein, his colloquium just before Christmas was notable for the seeming clarity of thought in reviewing existing known policy options — as well as for the lack of usual suspects from the left.

There are plenty of people floating around the National Treasury and the Reserve Bank who have been laying out in working papers and elsewhere a whole host of clear policy reforms needed for decades. Mboweni, rightly, is saying that he knows these options are there and now instead they just need to choose and discuss implementation.

The outcomes of such a process will be challenging. In terms of specifics — the consensus in such circles that a much looser immigration regime is needed to more rapidly kick-start productivity growth, which is political anathema to current policy. But also challenging in process terms is that the shutting out of the left has already caused rankled moans in these opinion pages before Christmas.

SA’s political economy is not set up for such decisiveness with its overreliance on collectivist consulting. A left-field additional new year’s resolution might be to scrap Nedlac.

The postelection period is going to be a real test of quite how consultative economic policymaking is led by President Cyril Ramaphosa, and if enough gumption can be stirred to undertake more politically costly reforms to deliver on manifesto job-creation commitments, or reach towards 5% growth — or if consultative paralysis remains and those targets fall flat.

In this period before the election we have seen paralysis in terms of the lack of speedy implementation and actual worse uncertainty around visa rules, the inability to accelerate the spectrum auction process and lack of any selection of interesting policy outcomes from the jobs summit.

This test of where the centre is between the Mboweni determinism and the traditional consultative, however, will be most acute and urgent at Eskom, which has the biggest risks.

The government had the right policy in its 1998 white paper and numerous studies and task teams since. It just needs to get on and implement a plan  for a  huge decentralisation and deregulation of the energy grid with an Independent System Market Operator balancing demand/supply and doing transparent tariff applications, and Eskom reduced to less than 50% of capacity. All this will mean lower tariffs through competition and the greater efficiency of a  predominantly private sector model.

Instead we risk further kicking the can down the road. The manifesto this last weekend shows there is no change of mind on Eskom, with a vision of it as the heart of the future of renewables in SA — despite all the evidence from renewable energy independent power producer procurement that exactly the opposite is working.

The consultative process has further shown itself wanting in other parts of the manifesto, most especially on the Reserve Bank. Despite the  Bank (deliberately) not featuring at all in the 2014 manifesto, it  does in this one. An explicit link is made from the Bank — an independent institution — to a politically loaded project in the form of the “second phase of transition”, and goes on to reference the need to add in growth  and employment after the primary aim of price stability.

This is exceptionally dangerous, given the nationalisation debate that will reignite shortly, pressures as growth rebounds exceptionally slowly and the importance of the Bank  as a bedrock of macro-stability. It seems like a risky move for the Ramaphosa faction to put this in the manifesto, for little upside.

But more importantly, it highlights the fact that during a consultative process on policy formation,  factional interests can win out in subtle but important ways. The characterisation of consultative processes as mild-mannered and academic discussions is false in this highly contested and factional ANC.

In this environment, more dubious factional forces know that policy shifts through consultative processes act like a ratchet and new ground gained will shift expectations in the future.

This is exactly why it is important for 2019 to be about “wham-bam choose a policy and implement it”, and draw red lines against fiddling with the Bank, its nationalisation, things like prescribed assets and still treating Eskom with the same monopoly mindset.

• Attard Montalto is head of Capital Markets Research at Intellidex.

Correction: January 14 2019

An earlier version of this article incorrectly identified Tito Mboweni as the governor of the Reserve Bank. This error was introduced in the editing process.

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