Of political somersaults and contradictions on economic policies

Jacob Zuma’s insincere economic mantra since Polokwane has revolved around providing contradictory assurances to international investors about the ANC’s position on economic policies. That Zuma and the ANC have been inconsistent in their messages to investors is an understatement. A conclusion that can be drawn from all these inconsistencies is that either Zuma is a pathetic liar and deliberately misleading his audience, or he genuinely has no clue what he is talking about, in which case we would not judge him harshly.

Zuma should have represented the country at the Beijing Olympics in gymnastics and saved the country from embarrassment. He has consistently demonstrated rare talent and keen interest in performing somersaults. He has been flip flopping on a range of policies in a desperate and populist attempt to appease different audiences. Given his tarnished public image, Zuma is eager for business to view him and his leadership favourably going into the 2009 elections.

Like a true political polygamist, while pledging to ANC alliance partners that his government would not erode rights of workers, Zuma stated in an interview with the Financial Mail that government may have to revisit rigid labour legislation to allow for more flexibility. He said he opposed capital punishment but advocated public debate at the same time. It is becoming more and more difficult to believe anything that comes out of this man’s mouth.

The issue of economic policies is an important one given the current global economic climate and the state of our economy. The soundness of the economy is paramount for continued solvency of business in general. Leftist economic policies are a threat to the noble aims of government to eradicate poverty and provide a better life for all in the fomenting unfavourable economic environment. It is crucial that the ANC government post 2009 continue to embrace prudence as a guiding principle for economic growth.

At the July 2008 cabinet lekgotla, the half-yearly meeting at which government evaluates its programmes and begins to plan for the next budget cycle, former president Mbeki said government had no intention of revisiting either of its key macro economic policies: inflation targeting, including the present target range, and the budget surplus. The SACP and Cosatu, as staunches critics of the Mbeki government, reacted to this cabinet resolution arguing that conservative economic policies should be ditched.

Zwelinzima Vavi, Cosatu secretary general, in December 2007 said that the government’s free market economic policies have been disastrous for the country under President Thabo Mbeki’s rule; obviously ignorant to years of economic growth and number of jobs created during that same period. Vavi has been most vociferous in his criticism of policies implemented by government and the Reserve Bank, in particular the monetary policy of inflation targeting.

At the Polokwane conference, the ANC and its alliance sidekicks resolved to close economic policy gaps especially those around job creation, poverty eradication, and combating inequality. To an unsuspecting audience these resolutions may sound noble and requiring of support of business. But on closer scrutiny we may unravel that underlying and hidden intentions of such resolutions are much more disastrous than can be easily discernible.

While Jacob Zuma trots around the world telling anyone who cares to listen that economic policies would not change, it is becoming more evident that there is a concerted effort by the Alliance to shift policies towards the left. At Davos at the beginning of the year Zuma told gathered business leaders that, “If anything the current policies will be deepened. We will try to work hard to ensure that we continue the trajectory of economic growth in South Africa.”

At a press conference in Cape Town on September 22 2008, Zuma again said the ANC will do all in its power to ensure stability is maintained in government and in service delivery and further stressed that economic policies would remain stable, progressive and unchanged. The progressive part in his statement sounds a bit suspect considering that he confirmed that ANC alliance partners are key stakeholders in policy development and implementation. The influence of the SACP and Cosatu on the policy direction of the ANC has been significant since Polokwane as noticed from the resolutions of the Alliance Economic Summit held on 17 and 18 October.

The ANC, Cosatu and SACP released a statement on conclusion of the Summit informing us that they had a constructive engagement on a range of macro-economic policy choices, including inflation targeting, and the broader role of monetary policy in line with the Polokwane resolutions, which prioritise the creation of decent work. Therein lies a problem.

While we all agree that macroeconomic policy needs to support economic development and employment creation, as has been the case, it is troubling that the Summit resolved that monetary policy should be sensitive to the impact on the productive economy and employment. This resolution, when decoded, calls for a significant shift in the price stability mandate of the Reserve Bank towards the disastrous dual mandate pursued by the US Federal Reserve Bank.

Gwede Mantashe, secretary general of the ANC, confirmed his support for inflation target, but insisted that target range needed to be reviewed. A view equally shared by the SACP and Cosatu. The maintenance of flexible inflation targets is nonsensical and defeats the whole objective of having targets in the first place if they are to be conveniently shifted to achieve imprudent short-term political ends, while threatening the overall soundness and stability of the economy.

Mantashe appears to be communicating the real position of the ANC on economic policies than Zuma is. His statements are consistent with the Alliance Economic Summit resolutions on macro-economic policies. When addressing delegates at the United Transport and Allied Trade Union national congress this week (October 22 2008), Mantashe publicly criticised Zuma for telling investors that economic policies would not change. He said, “that is not true … there will be change where we see that something is not working and there will be no change when things are progressing.” It appears the secretary general had conveniently forgotten to use the structures of the party to express his disagreement with those deviating from ANC policy position. We are anxiously waiting to see what disciplinary measures the ANC national executive committee would enforce against its undisciplined secretary general.

What is comforting for the short-term are mid-term budget statements by the Minister of Finance, Trevor Manuel, that government would not change the current inflation target and his optimist outlook on inflation that it will probably drop within the 3% to 6% target range by the third quarter of 2009, earlier than previously forecast. Again Manuel’s economic posturings would only last until next year’s elections after which the leftist economic policies would be pursued by the new Zuma led government (that’s if the new political party does not cause much damage to the ANC at the elections).