A big test for the GNU cabinet is coming: Katzenellenbogen

The Government of National Unity’s ministers will convene for a two-day cabinet lekgotla to draft a reform plan. President Cyril Ramaphosa will unveil this plan next week. South Africa’s economic growth and stability depend on effective reforms, balancing the need for swift action with potential internal resistance. The challenge lies in aligning diverse party manifestos and overcoming vested interests to ensure meaningful progress.

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By Jonathan Katzenellenbogen*

Tomorrow, the Government of National Unity’s ministers and senior civil servants will begin a two-day cabinet lekgotla, to try to agree on a plan. Next week President Cyril Ramaphosa will unveil the plan in an address in Parliament.

That is when we may know if our new government intends to undertake big reforms or might be heading for gridlock or even collapse.

If the GNU does not promptly go about the business of reform, our decline will speed up. With virtually no growth, massive unemployment, and mounting public debt, we cannot afford not to take the reform chance now. The economy requires faster growth to generate the tax revenue that can guarantee the continued growth in the payment of grants. And yet reform that goes too far and fast might spark an internal revolt in the ANC and cost the President his job.

The ANC is worried that its support base will pay a price for reform, but on the other hand, it cannot afford not to go ahead with change because low growth will undermine its ability to pay grants.

To guide the politicians in coming up with plans, the senior civil servants have begun looking at the manifestos of parties in the GNU. If their intention is to mix and mesh the manifestos, they will have a mighty difficult task. Much of the ANC manifesto recites motherhood-and-apple pie-like aims of cutting unemployment and growing the economy, but fails to explore the measures that are required.

In its plan for the economy, released shortly before the election, the DA has come up with an almost full agenda for reform. The proposals include freezing minimum wages, abolishing black economic empowerment, and privatisation of the state-owned enterprises. All those policies are unacceptable to the ANC.

Vested interests

Agreeing on goals in the Statement of Intent, which parties had to do to join the GNU, was easy. It is agreeing on the measures that are needed to get to the goals is unlikely. So, at most, the ministers are likely to agree upon is a plan that is sure not to take on the vested interests of trades unions, civil servants and the ANC patronage network. That would look like the existing heavily restricted ANC plan for reform, Operation Vulindlela.

That is why the lekgotla might be more of a session to emphasise joint cabinet responsibility and insist that ministers should stick to their lanes. Minister in the Presidency Khumbudzo Ntshaveni has already come down on DA ministers who, on the day after they were appointed, got going on their jobs. The minister of public works, Dean Macpherson, said the state would no longer buy new properties or rent accommodation for politicians. And the home affairs minister Leon Schreiber said foreigners whose visas were up for renewal could stay in the country until decisions were made.

Matters that are not routine must first be referred to the Cabinet for consideration, Ntshaveni insisted. There is a need for coordination, but the requirement that cabinet approval is required for non-routine decisions could also be used as a delaying and control tactic. It is not always clear what constitutes a non-routine decision. If the overall thrust of a policy has been agreed upon, why should ministers wait for cabinet decisions on its implementation?

Tortuously slow

Cabinet decision-making has been tortuously slow for some time, and there is nothing to suggest that it will be faster and more agile with the GNU in power. Ramaphosa has been keen to build up the power of his office by having ministers in the presidency who co-ordinate the work of other ministers. It is likely that the President still wants to guide reform from his office.

Operation Vulindlela, what the President calls “a bold agenda of economic reform”, is run by his office and the National Treasury. It is aimed at addressing the issues that have held back growth. A report that came out earlier this year says that nearly 90 percent of reforms identified by Operation Vulindlela have either been completed or are on track.

The problem with Operation Vulindlela is that implementation has been tortuously slow, and the initiatives are limited in scope. It aims to deal with bottlenecks in regard to economic growth in the state-dominated network industries – the transport, water and telecommunications sectors. It also aims to streamline the issuing of visas, particularly to skilled foreigners. Another goal is to ensure that the country has an up-to-date and efficient system to manage mining rights.

The more than 100 days so far this year without power cuts has been something of a triumph for this initiative. One claimed success is that the private sector is no longer restricted in the amount of power that it can produce. But that came about, not so much from the government’s initial intention, but more due to the power crisis forcing the government’s hand. Similarly, the damage caused to importers and exporters acted as the big push for the government to allow the private sector to run rail lines and ports.

Allowing the private sector to generate large amounts of power and run rail lines and ports is, in effect, a partial privatisation and breaks the state’s virtual monopoly. It is progress, but it all took a long time.

Pointed to key reforms

Operation Vulindlela is now in its fourth year, and it is five years since the then finance minister, Tito Mboweni, launched the original report which pointed to key reforms needed for faster growth. Business is providing the government with help in managing Eskom and in ensuring the backlog on rail and at ports is reduced. Clearly the ANC realised it was heading deeper into disaster and was willing to take help.

All of that is good progress, but speeding up growth requires a lot more than Operation Vulindlela. With real structural reform, it is not clear that the government would need an Operation Vulindlela. Privatisations and concessioning of Eskom’s coal-powered fleet to contractors would mean state enterprises are no longer a government problem. It would also not have to use bailouts to keep Eskom afloat.

How can the investment climate and growth gain a boost when expropriation without compensation and a National Health Insurance scheme are on the books?

Reassurances that these laws are all about electioneering and won’t ever be implemented are insufficient to allay the fears of investors.

A mix-and-match reform plan that selects some easy picks from the DA and pins them to Operation Vulindlela falls well short of what is required. We might be headed for another missed chance to make this country a success.

But there is progress, in that reform is now at the top of the political agenda and the battle lines around this have been formed.