Reply to SONA 2018

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As part of his series of letters to Cyril Ramaphosa, Mphuthumi Ntabeni today responds to the State of the Nation Address asking further questions and advising the new president on how to tackle job creation and inequality. 

For the first time, since you were elected president of the ruling party you too delivered a speech that managed to reawaken our hope as the nation. You’re still scant on the details, but have begun to grant us a glimpse of your vision and sketches of your implementing plan, giving a  slew of skewed statistics on employment, education and welfare data. Here are some more thoughts on your address.

Jobs

The majority of your speech - rightly so - concentrated on economic matters and the need for entrepreneurial revitalisation. We welcome your message of charting a new path for our country and imprinting footprints for what you call our “future greatness”. The idea of concentrating on jobs, especially to tackle youth unemployment is well-advised, but I get wary when politicians mention public works jobs as part of tackling unemployment. They’re great as emergency bailouts, but are not sustainable jobs. If we going to create real low-skill employment, we must, as you’ve emphasised, look deeper at construction and agriculture. We must couple it with the agenda of modernising our schools, building new community clinics that would expand access to quality low-cost care. We must include them on plans to upgrading decrepit electrical substations, localising the building of trains and bus coaches, public housing and all.

Green Energy

A launch of a national transition to a low-carbon economy is the best way of tackling unemployment, and putting our foot on the future that is already here. A permanent transition to clean energy would still require government to impose cost on dirty energy; this must not just be limited to automobile industry, but should extend to building structures also. This should start with government buildings that must lead by example in being low carbon and energy efficient structures. The Department of Environmental Affairs is a first example of this.

You have a great opportunity to build a legacy of being regarded as the “Green President”. We can transform the entire food chain: reducing energy use through efficiency, shifting from coal and other fossil energy sources towards renewables; and accommodating those renewables with a smart grid. But this will not come from thin air. Your government will need to invest in and finance cutting-edge green research and will then need to build a manufacturing base for the green economy.

There’s a lot of shovel-ready battery for solar energy and other geothermal technology factories that are desperate for capital investments. Cut the red tape to make it easier for start-ups in particular to access government funds. Tie loans to the transfer of skills to youth, women and previously disadvantaged. Better still, why not establish infrastructure bank along the lines of a land bank?

Cresting a new South African manufacturing industry that can make a real difference is imperative, Cyril. I’m glad you mention special economic zones. In fact, township and rural areas should all be declared special economic zones whereby companies who build their manufacturing plants there should be absolved from paying company tax.

Our economy desperately need a kick-start - one only government can do, especially now that our private capital is in hiding. Banks have stopped lending money to small business, so waving administration fees for them and increasing government guarantee for new loans might thaw this frozen credit market.

You also need to compel the Labour Department to ramp up innovative ways to come up with job programmes, especially for the youth. Their job must not just be administrative, but also creative. Our Unemployment Insurance Fund, for instance, is antiquated. It serves less than a third of our jobless workers as it takes too long to qualify for benefits. We need to expand the system to last as long as the person is unemployed, provided they demonstrate job-seeking activity. Benefits should also extend to part-time workers; those who quit their jobs to care for a family member, follow a spouse who has been relocated, and those who are escaping domestic abuse. This will provide our country with Keynesian stability in these time of high unemployment.

Inequality

We’re the only country on the planet where the national levels of wealth inequality mirror global rates - whose richest people are among the richest in the world, and the poorest are among the poorest in the world. This was worth mentioning in your first State of the Nation Address.

The top one percent of earners take home 17% of all income, and the top 10% earn 60%. Are you embarrassed because you now fall under the mentioned 1%? Rumour is running on speed that you intend to raise the money by hiking the VAT. If true, this would be the first major disappointment on your administration. Not only is it unfair to punish the poor for the incompetence and corruption of your government, it’ll also raise revolt on the ground when this transfers to higher food prices. Income inequality has come to be ranked alongside terrorism, climate change, pandemics, and economic stagnation as one of the most urgent issues on the international policy agenda.

Societies do not flourish on economic growth alone, they suffer when the poor are unable to see a path toward betterment, when the path to social mobility is blocked by inequality. This is part of the reason why we have not been able to dent the apartheid legacy realities. Worse still, our bleak economic outlook has serious consequences. Cyril, why do you suppose we are among the worst countries when it comes to civil unrest and protest? Even the UN and the World Bank have now admitted to the clear link between widening inequality gap that provides fodder for political unrest, as citizens watch their prospects decline. Widening inequalities lead to widespread disaffection and radicalisation among the poor. Ignore it at our own peril.

Consensus

A job summit is a good idea - ditto the Investment Conference - provided it is not a white-wash in the manner government currently conducts its public consultations without effecting any suggestions from the public. You need to take seriously other people’s views, especially when they conflict with yours, because that is the only way you will also test and strengthen yours. Often it is people on the ground, wearing the moccasins, who know where it pinches and how to solve it. I am also sure opposition parties, like the UDM, who’ve been calling for an Economic Indaba, will support you on this. We might as well all come into a consensus about how to tinker and update the constitution to optimise our participatory democracy. For one, if anything, Zuma’s tenure taught us is that the current electoral system, without the mixture of constituency based MPs, does not serve the needs of our communities. And it renders parliamentary debates ineffective due to the abuse of cloture vote by the ruling party.

Sovereign Fund

The best way to fund infrastructure investment is to establish a national Sovereign Fund. Let the farmers pay back their government subsidies into that fund and add a percentage from mining extraction licensing. Instigate a land tax that’ll make it impossible for people to horde unproductive land and direct this into the fund. Not only will this solve the issue of land distribution, but you will also stop developers who profit through land speculation - something that is driving unrealistic house prices in places like Cape Town.

Compel all major municipalities to establish municipal bonds and give tax incentives to those who invest in them. In addition, give direct subsidy on these that’ll lower their rates enough to attract the investors. Not only will this provide you with funds for infrastructure investment, but it will also compel clean governance in the municipalities who will have to compete for investments. Thinking along these lines is how you pay for, not only the infrastructure, but free education and health insurance. We do not the regressive taxation of raising VAT.

Be bold

I refer you to my suggestion of land tax above for the expropriation of land without compensation, but I indicate in passing that I don’t understand how you aim to achieve it under our current constitution. Thank you for not killing the idea of free higher education for poor families, and reviving the moribund idea of National Health Insurance.

I hope your Presidential Economic Council shall not be filled by only neoclassical economists. Balance your views with other schools of thought. Do not shun the faith groups also - the Catholic Church, for example, has a long running tradition on thinking on good economic policies, the solidarity rights of workers , and income justice through its social teachings. Consult the Church and you’ll be surprised to learn how obvious the solutions to our modern problems have been hidden in plain sight.

We shall judge you on your anti-corruption efforts. We shall be vigilant in demanding transparency and accountability from your government. We shall be rigorous in reclaiming our dream and in advancing the gains of our democracy. Having gone through the era of deferred hope we, as the public, are no longer as gullible and naïve as we used to be, but we shall be fair and respectful so long as you extend the same courtesy to us.

I close by reminding you of Cicero's maxims; that if you must do something unpopular, you might as well do it wholeheartedly for, in politics, there is no credit to be won by timidity. Be bold, Cyril! Nothing less will solve our gargantuan problems. Rip and replace! SA.

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