Of all the issues SA faces, none is more important than restoring business and investor confidence in order to get growth going. Without faster growth, SA will not be able to narrow the budget deficit, or keep social grants growing in pace with inflation, raise tertiary education subsidies or create jobs for millions of disaffected young adults.

In other words, without faster growth, SA's fiscal sustainability and political stability are at risk. There are signs that government has belatedly grasped this fact. Lately it has thawed to the business-friendly reforms that are needed to galvanise the private sector behind a growth effort.

Finance minister Pravin Gordhan has become the champion of this campaign to restore growth and save SA from a junk rating. This includes saving key institutions from "capture" by venal elites. But it is the 11th hour and there are doubts about how effective he can be, beyond the narrow remit of fiscal policy, when he lacks the full backing of the president and the Hawks openly harass him.

Claire Bisseker asked three leading experts on the economy and politics to debate these issues in a recent round-table discussion near Cape Town.

They are Rand Merchant Bank chief economist Ettienne le Roux (ELR); head of the faculty of economic & management sciences at Stellenbosch University, Prof Stan du Plessis (SDP); and BNP Paribas consulting political analyst Nic Borain (NB).

FM: The 2016 budget delivered a credible plan to put SA back onto the path of fiscal sustainability but was unconvincing as a growth strategy, which is what is really needed. Is it fair to expect the budget to have done double duty as a growth strategy?

ELR: No, it’s not fair. Treasury is just one spoke in a complex wheel. The finance minister is limited in what he can do when it comes to broader economic policy. It wasn’t fair to expect he would stand up in parliament and say he’s got all the answers to our growth problems.

SDP: The harsh judgment from rating agencies had nothing much to do with failing to deliver a growth plan. It was for basing a fiscal recovery plan on an unrealistic growth scenario. It’s a tough time in the business cycle to try to turn things around and they couldn’t make it add up in the budget.

FM: Could they have gone further in announcing growth-enhancing structural reforms?

ELR: It’s more a question of implementing the good, new initiatives they have in the budget. If government can, for example, make good on the promises to liberalise immigration policy or undertake reform of SOEs (state-owned enterprises) it will make a significant difference to business confidence and boost growth in the long haul.

SDP: Ettienne is absolutely right. In the late 1990s, when we were in a comparable debt position, part of getting out of it was through fiscal prudence, another part was through restructuring state assets. If we can do it this time around, that’s one way to make inroads.

My concern is that the budget bows to the presidential review committee on SOEs. Whereas the minister explicitly analyses SOEs’ dire financial position, the committee speaks about other goals and the developmental state. If you have that perspective on SOEs you don’t do what we did in the 1990s, you don’t restructure them. You think you solve a problem by merging SA Express into SAA.

FM: You doubt government will do what really needs to be done?

SDP: One of the technical parts of the fiscal turnaround is on state compensation. But the work of that is actually going to be done in the next two fiscal years, not in this one. And that’s exactly the story we’ve heard for the past five years. Every time we have a strategy the actual work is put down for the following two years and when we get there we start again, and it’s always two years into the future — which is why the actual debt line marches majestically upward (see graph: Broken Promises).

FM: Do you think this joint reform/work programme between government and business is the real deal? Could it actually push the growth rate up or is it mainly just good PR designed to pluck some low-hanging fruit in the hopes of staving off a credit-rating downgrade?

ELR: It can’t be the real deal. To be the real deal, all stakeholders should have been involved from the beginning and I don’t see much sign of labour. Still, I do think it’s a genuine attempt on the part of government and the private sector to mend their relationship.

Also, I don’t think we should view these conversations as the new reform programme of SA. Rather, they’re an attempt to fast-track the implementation of some National Development Plan initiatives.

And the third objective, there I would agree with you, is an effort to find some quick fixes to help stave off a sovereign downgrade. It’s an attempt to buy time.

NB: I think it would be wrong to just dismiss it. This is a government that has been shaken and went straight to business and took business’s advice in terms of its analysis and the touch-points that business said need to be fixed. This was a responsiveness we haven’t seen from the ANC in a long time.

SDP: The contrast is indeed very sharp. This year, President Zuma has been speaking with the realisation that sometimes politics has to accommodate the world of economics and I think that’s a really big shift and very encouraging from my perspective.

FM: But does this mean you expect things to change in the real economy?

ELR: We have to be realistic. Whatever growth initiatives are implemented will pay dividends only in two to three years’ time, whereas the pressure is here and now. Unfortunately, SA is hostage to an unfavourable global picture while domestically, fiscal and monetary policy are being tightened. The latter is depressing growth even though it’s probably what’s required to help safeguard the sovereign rating. I guess that’s the bitter medicine we have to take.

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