Three things we can expect from the Economic Recovery Plan

Tito Mboweni / Photo by GCIS

Crucial cabinet battle for Mboweni’s progressive economic plans

The tussle between the ANC and its trade union partners enters a new era.

Three things we can expect from the Economic Recovery Plan

Tito Mboweni / Photo by GCIS

President Cyril Ramaphosa called an extraordinary extended cabinet meeting of all his ministers and deputy ministers in Tuynhuys yesterday to obtain their backing for Finance Minister Tito Mboweni’s economic recovery plan called “Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa”.

The document of almost 80 pages provides a blueprint for medium term economic growth which has elicited mixed reactions so far.

Mboweni’s financial strategy unpopular with unions

Much as it is understood to closely reflect the wishes of President Cyril Ramaphosa, its reliance on free-market thinking and the sale of state assets have set red lights flashing for the ANC’s alliance partner, the trade union federation Cosatu.

Cosatu has said the Mboweni plan will increase uncertainty about the direction of the country’s economy and will create labour conflict.

That forms the background against which Ramaphosa rallied his troops to Tuynhuys yesterday – he needs wider backing within the ANC and the ruling alliance for Mboweni’s economic plan, which proposes, amongst others:

  • A deliberate and concerted effort to place growth at the top of the economic agenda;
  • An admission that the current economic path is unsustainable;
  • A focus on igniting growth in order to overcome unemployment and worsening inequality;
  • Modernisation of especially the energy, transport and telecoms sections of the economy;
  • More competition by eradicating red tape for start-up firms;
  • The sale of coal-powered Eskom power stations;
  • Making it easier for new players to enter the electricity provision market;
  • Greater support for small scale and commercial agriculture and
  • Less restrictive visa regulations.

Although these seem good ideas to those more supportive of a free market approach, Ramaphosa needs to bind in his opponents on the left, and one (maybe not very effective) way could be by a binding cabinet resolution on the basis of joint responsibility, reached in a sphere (Cabinet) where the President has definite majority support.

South African economy: The way forward

It is a risky strategy, though, as it could lead to big differences within cabinet, could force wholesale changes to Mboweni’s document, and because any battle within cabinet is sure to be leaked to the media should it turn too nasty.

At a briefing to the parliamentary press corps on Thursday afternoon, Minister in the Presidency Jackson Mthembu put a predictably rosy gloss on it all, calling the extended cabinet discussion on the matter “fruitful” without giving any details of the discussions. He also thanked the more than 700 South Africans who had sent in submissions to add to Mboweni’s plan.

Cabinet will start leaking soon. Keep an eye on it – this time it could be crucial for the medium term direction of our economy.