The Myths of Mboweni Economic Plan

 In Economics, Politics, South Africa

The National Treasury under Tito Mboweni (finance minister) recently released the 77-pages openly neo-liberalism document, with the title, Economic transformation, inclusive growth and competitiveness: towards an economic strategy for South Africa. However, this document builds on and is a continuation of previous failed neo-liberal policies. Thus, this document does not represent either new policy shift or ideological shift from previous neo-liberal policies such as GEAR [Growth, Employment and Redistribution] and NDP [National Development Plan].

Promotion of privatization

This document advocates for the privatisation or the hand over of key government functions to the private sector. In addition, to supporting the unbundling of Eskom, this document went further and makes proposals for the selling of Eskom power stations to private investors in order to raise R450 billions-roughly the size of Eskom debt. The stations would then sell electricity back to Eskom. The underlying assumption is that the selling of power stations will rescue Eskom from its financial challenges.

This language of privatization goes beyond Eskom, this document also proposes the introduction of the private sector in the ports, rail, water and sanitation. This means municipalities and other government departments will hand over some of their functions to the private sector. The consequence for this obviously will include exorbitant tariffs, job losses and super profit for the capitalists, also the level of corruption will increase.  

Despite, its massive emphasis on raising the ‘competitiveness’ of the South African economy, amazingly the entire document does not attempt to challenge the existing private sector monopolies.  Instead, the document focuses all its proposals for greater competition in areas where state-owned enterprise operate one example, electricity. In other words, its focus is on introducing private-sector competition where there is state ownership; and is lenient when it comes to acting against monopoly ownership and control in the private sector.

Collective bargaining and Economic growth

Moreover, this document also represents an open attack on workers rights. It proposes that Small, Medium and Micro-Enterprises (SMMEs) must be exempted from certain regulations. These regulations include collective bargaining agreements or labour laws. This document uses the challenges of SMMEs to justify proposals which are in fact demanded by the big capitalists. For many years, the big capitalists blames labor laws and collective bargaining for sluggish job creation or losses. Far from labour rights being the main obstacle to SMMEs growth, the biggest problems facing the SMME include the lack of access to affordable credit, and lack of access to markets, because of the dominance of the monopolies.

Furthermore, this document makes proposals for an economic growth rate of 2 to 3 percents. Even though, economic growth is imperative, however, economic growth alone is not a panacea to the challenges facing South Africa. In the era of neo-liberalism, economic growth tends to be ‘jobless growth’, not only in South Africa, but globally. The economic growth under neo-liberalism also tends to benefit a few people (capitalist monopolies). Added to this, the primary focus of this document is on the rate of growth, not on its composition, or the role of redistribution in determining the impact of growth. In other words, there is a need for a new trajectory of growth, which addresses rather than reproduces our triple crisis of unemployment, poverty and inequality.

 Job creation

In South African unemployment remains over 25 %. This means the economy is not creating enough jobs. In response to this, this document envisages to create more than 1 million jobs. The question is: what kind of jobs? This document cites SMMEs and agriculture as some of the key sectors in job creation. Actually, this analysis is off the mark. These sectors are not creating enough jobs and there is no considerable evidence that in the near future these sectors will emerge as the main employment creator.

This document overlooks the fact that neo-liberal agriculture in South Africa is characterized by marginalisation of small farmers and increased competition in a liberalized environment. Small producers are struggling to compete with big agrarian capitals with some going out of business selling their land. At the same time, the neo-liberal agricultural model has a record of replacing labour with mechanical capital, and the casualisation of labour, where jobs are created. Since the adoption of neo-liberal paradigm, the agricultural contribution to the GDP has decreased over the past four decades, in 2018 agriculture decreased 24,2% and contributed -0,7% to GDP. But also drought and other challenges associated with climate change will further shrink the contribution of this sector to job creation. Therefore, large-scale employment and poverty reduction cannot be achieved through the neo-liberal model of agriculture

Furtheremore, this document believes that SMMEs are capable of creating jobs. This is a false analysis because in the last couple of years SMMEs were not creating enough jobs and there is no considerable evidence that in the near future SMME’s will emerge as the main employment creator.   In the context of neo-liberalism or trade liberalisation, it is difficult for the SMME’s to be strengthened and create jobs. In fact, the SMME’s which are single out by this document as a potential creator of jobs will not survive if trade liberalization continues. In other words, SMMEs cannot compete with the influence and power of multinational companies in the global market. This trade liberalisation which is praised by this document, in the periods between 1996 and 2005 was responsible for job losses, especially in the textile industry, as clothing buyers switched to imported clothing.  In conclusion, this document over-look the advent of fourth industrial revolution and climate crisis. Any economic plan which ignores these realities is bound to fail. Nonetheless, this document is just like the old wine in a new bottle, it rehashes old outdated and failed proposals of free market.

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