NEWS & ANALYSIS

Is the ANC actually serious about investment and growth?

John Kane-Berman says all the current evidence suggests the opposite

Last week the minister of trade and industry, Rob Davies, launched the tenth "iteration" of his department's industrial policy action plan (IPAP). He said the IPAP was "premised on the principle that an ongoing effort is required to reindustrialise and further deepen industrial development in the country and that this must be part of deep-seated radical economic transformation".

No doubt it was just his bad luck that a few days later Statistics South Africa's data showed that this country has made no progress in reducing our unconscionably high levels of unemployment. The overall total has risen from 3.67 million when the African National Congress (ANC) came to power to 9.30 million last year.

After mining, manufacturing has been the worst performing of all economic sectors in job losses since the advent of ANC rule. Manufacturing employment, on which Dr Davies has a direct impact, has dropped from 1.42 million in 1994 to 1.18 million last year.

This 17% decline in manufacturing employment has taken place during the currency of the previous nine versions of Dr Davies's action plans. The contribution of manufacturing to total GDP has declined from 19% in 2001 to 13% in 2016.

The question which Dr Davies never seems to be able to ask himself is whether these declines have occurred despite all his plans or because of them.

A week before launching Iteration Number Ten, Dr Davies declared that "in a bid to cut red tape, work is under way to rationalise and streamline investment regulations and reduce the cost of establishing and running businesses". This promise has been made umpteen times since Dr Davies and his merry men came to power, not least in the forlorn National Development Plan published nearly six years ago.

Yet, according to data published by the World Bank and the International Finance Corporation, South Africa's ranking for "ease of doing business" has dropped from 28th out of 178 countries in 2006 to 74th out of 190 last year.  

While employment in manufacturing and mining has shrunk, public sector employment has risen – from 1.45 million when the ANC came to power to 2.04 million last year. Perhaps this steady inflation in the size of the state is one of the reasons it has become more and more difficult to do business in this country. More and more bureaucrats inevitably means more and more red tape and more and more regulation, some of it emanating from Dr Davies's own department.  

So far there has been no indication that President Cyril Ramaphosa's government has the conviction, the will, or the ability to reduce government obesity. Quite the contrary. The Department of Labour has recently been placing advertisements to the effect that the introduction of the national minimum wage will require "a sufficient number of adequately trained inspectors" to enforce it. Quoting an academic at the University of the Witwatersrand, the department says that implementation of the minimum will lead to "massively increased jurisdiction" for the Commission for Conciliation, Mediation, and Arbitration (CCMA). This will mean fewer industrial jobs but more for lawyers. Mr Ramaphosa is himself the major sponsor of the new minimum.

On the one hand, Dr Davies promises to cut red tape. On the other he says that "transforming" the economy is "core" to industrial policy. Experience shows that "transformation" means more regulation, less streamlining, and higher costs.

Not long before Dr Davies had promised yet again to cut red tape, the National Energy Regulator of South Africa (Nersa) had published draft rules to require owners of solar panels and backup generators to register them. No homeowner – or any business customer – was to be allowed to connect to Eskom or to municipal electricity without submitting an application to Nersa to register their own equipment. Following widespread criticism, the rules are now to be withdrawn and amended. But the very fact that so unnecessary a set of rules can even be contemplated demonstrates yet again that piling on more and more regulation has become a habit that the ANC government and its embedded bureaucracy cannot break.       

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom.