By: Peter Attard Montalto
- After the tripartite alliance summit last weekend, is it too early to call the death of the National Development Plan (NDP) and the National Planning Commission (NPC) which created it?
- That may be an oversimplification, but we believe the government’s initial cold shoulder to the NDP is now becoming a more formal sidelining and crowding out with two new growth commissions on the scene. NDP as a ‘coherent whole’ is certainly no more; only selective, politically ‘easy’ parts will be implemented.
- There could be profound implications for wider growth and economic policy in terms of the removal of a forward–looking united vision, but we think it simply means the status quo of low potential growth will likely continue.
The concept of the NPC and the production of an NDP came about at the ANC’s Polokwane elective conference in 2007 when Jacob Zuma became its president. However, it was not until mid-2010 that the NPC was appointed (a range of external experts in various aspect of policy as well as Trevor Manuel as Chair and Cyril Ramaphosa as its Deputy and a secretariat in the Presidency) and its mandate set (to lay out where South Africa should be in 2030 and how to get there). A diagnostic publication was then produced on 9 June 2011 and a draft NDP on 11 November 2011. The final, sizable, document was published on 15 August 2012. Coming back full circle, the ANC in Mangaung last December endorsed the NDP.
Since it was first published we have noted in various publications and trip notes the lack of universal backing for the NDP across the government and the public sector, with some policymakers counter to its specific recommendations in their relevant area while in other areas lacking capacity even if they were in agreement with its prognosis. Simultaneously, we always judged there was a lack of top-down buy-in or leadership on the NDP to push it forward through implementation. Hence, the NPC has been engaged in an uphill battle with other departments for the past 18 months.
There were the usual people backing the NDP, such as the National Treasury, but as we commented in our Cape Town trip notes back in May, it was noticeable how much the private and charity sectors were having to pressure government to try to push parts of NDP to implementation.
The experience of the NDP contrasts unfavourably with the PICC (Presidential Infrastructure Coordinating Committee) which has actually been very successful albeit with a limited scope of ultra-large scale infrastructure requirements. It saw sound analysis that led to 18 key project areas, solid planning and now implementation with leadership to push through projects for funding and getting buy-in from across the public sector. [We intend to comment further on the PICC and its effect on potential growth soon.] That is not to say it hasn’t come up against capacity constraints, labour issues etc, and that the speed of impact on growth will be limited, but simply that as a policy exercise it appears to be the way to go.
What’s happening now?
There have been three events of note.
In the past month Jacob Zuma and the ANC leadership have been talking about the need for a new ‘Presidential growth commission’ to ‘kick start growth’ and ‘unblock’ areas that are holding back investment. Interestingly, similar language was used when the NPC mandate was being set. This new commission is yet to be fully set up, though we understand that it will comprise a range of government officials, academics and people from within the ANC’s economic development committee, but is likely to be a more compact organ that the NPC, reporting directly to the President but with a strong ‘dotted line’ into the ANC.
We also had the tripartite alliance summit last weekend, at which there was remarkable unity in general between the partners (ANC, COSATU, SACP) on a range of differences, masking the more heated rifts between them, and especially within COSATU. On the NDP the summit resolved that “The NDP is a living document, not cast in stone, and needs to be adapted, where appropriate” and went on to highlight that in areas where there was agreement, implementation should follow, but in others changes would be needed. To undertake this process it set up an “Alliance Task Team” to look at the NDP, but also job creation and macroeconomic policy more generally. Remember, it is the ANC that is proposing this, which at the Mangaung conference said it “supports the implementation of the NDP and endorses its objectives and goals”.
The final event was Cyril Ramaphosa, Deputy Chairman of the NPC (and possible ‘prime minister’ in all but name after the election, probably in charge of overseeing economic policy), commenting this week that the NDP should be embraced. But he then went on say that only those areas where there was agreement between the tri-partite alliance members should be adopted.
Taken together these events show:
- The NDP is now subject to external audit and sign-off before implementation is even considered.
- Ultimately, only the politically ‘easy’, i.e. less free market, polices are likely to make it through these processes.
- There are now two new overlapping, likely differently-staffed bodies overseeing government economic policy which will complicate the process of policy-making and likely crowd out the NPC. We will await the make-up of each, but the Alliance Task Force will very likely be more left-wing than the NPC by simple definition of who is setting it up.
- The NDP will be caught between the result of the leadership cleansing at Mangaung, COSATU and SACP struggles to reassert their power within the tripartite alliance, and the struggle for ANC-affiliated unions to keep membership.
- All this is on top of the mixed reaction from government, line departments and civil servants, as mentioned above.
What are the ‘easy’ policies, and which are not?
Health care (in line with NHI, but capacity issues), infrastructure (in terms of what to provide, not the way it is provided), spatial planning, energy, land reform, some of the suggestions around mining and beneficiation, housing, education (in part) are all areas that can be implemented from the NDP.
However, other issues seem much more open to opposition like private sector involvement in infrastructure, a whole host of issues around labour laws (labour brokers and youth wage subsidies being the most high profile), mining efficiency and market-related matters, reforms to state-owned enterprises, how infrastructure is provided and paid for, and regulatory issues about product and services markets and trade. More broadly, alliance partners’ objections are to the more underlying ‘ethos’ of the NDP economic chapter, rather than simply policy specifics. Put simply, they think it is not state-interventionist enough in various industries and markets.
The NDP was far from perfect in our view. It was often contradictory both in specifics and ethos in various places, as well as being vague with a firm timetable of implementation never pushed publicly by the NPC.
However, we need to remember that it was the product of a politically hemmed-in process involving a range of contributors across the political spectrum of the left, which Trevor Manuel has managed to wrestle back into something that is still overall pretty market-friendly compared with attitudes elsewhere in government. It is still very interventionist in the economy, but more so in some areas than others and probably overall. The labour chapter is also presented in such as way to make it more attractive to the left, but beneath the surface we believe it has advocated looser labour market regulation.
Overall, we think the NDP is the best available (from an investor perspective) in the current political reality and much better than many of the alternatives out there like the NGP (New Growth Path) – even if in an ideal world free from political constraints we would be looking for a different ‘zero-base’ policy.
Equally, a new process now of reformulating the document through these two new panels or independent policy plan formulation outside the NDP (or only paying it lip service) could lead to a dangerous increase in union and other leftist involvement in the process that was thankfully avoided last time around.
We are already seeing this in terms of the amendments made to the MPRDA (Mineral and Petroleum Resource Development Act – increased discretion for the minister, powers of export quotas and price-setting among other things) and labour laws this year (increasing the rights of part-time and temporary workers after only a minimal time in employment) which are counter to the NDP. The (perhaps temporarily withdrawn) business licensing act was another example of the state increasing its involvement in the economy.
We should also consider that after the election, if the ANC does indeed fall from 65.9% down to 56.2% as is our current (preliminary) forecast – then new layers of policy panels on the economy will likely add additional scope to shift policy to become more interventionist and so attempt (futilely, in our view) to strong arm development and growth that way initially at least. We don’t believe there would be any ‘big-bang’ shift to the left after the election but a possible gradual slide in areas such as: greater resource nationalisation; greater regulatory burden on BEE, goods and services and labour; monetary policy shifts in line with what was laid out in the Mangaung resolutions; and more sharply redistributive taxes on corporates and individuals – to name just a few areas.
As ever, we think none of this means a crisis for South Africa, just a slow underperformance for growth potential vs peers and vs what’s needed to reduce unemployment.
The lack of leadership around NDP has basically killed it off as a coherent (even if vague) whole, in our view. South Africa is about to enter a period of increased fighting on the nature of economic policy thanks to these two new panels being set up. We do not necessarily see that as an election issue per se, but the ramifications could still be substantial.
Peter Attard Montalto is a strategist at Nomura