Too much power for state in Patel’s NGP

Economic Development Minister Ebrahim Patel’s New Growth Path document put too much emphasis on state intervention, and could both spook investors and drive skilled workers out of the country, SA’s largest business group warned yesterday.

There was little recognition of the private sector as the real driver of the economy in the document released by Mr Patel last week, c (Busa) said.

It maintains there is little new in the proposals, compared to several official growth programmes launched since 1994, including AsgiSA, the accelerated and shared growth initiative of SA.

Patel's New Growth Path

In summary

• Create five million jobs over the next 10 years, especially in the green economy, agriculture, mining, manufacturing and tourism.
• Infrastructure investment will focus on energy, transport, communication and housing.
• An African development fund will be established to invest in African infrastructure.
• State agencies, including the Reserve Bank, will be reoriented to ensure the state "is not hostage to market forces and vested interests".
• Monetary policy will be looser to support a more competitive exchange rate.
• A state mining company and state bank must be established.
• Wage settlements will be moderate to save jobs, create jobs and address inequality. This includes a "modest increase above inflation" for employees earning between R3000 and R20000 a month, increases pegged to inflation for those earning between R20000 and R45000 and pay caps or increases below inflation for those earning over R45000.

Bring haves and have-nots together

Patel, the minister of economic development, believes workers and bosses can agree on a package of productivity, wage restraint and price moderation. Gordhan, the minister of finance, believes new money and old can be persuaded to consume less conspicuously and stop looting the public purse.

The new growth path framework tabled in parliament on Tuesday will test the optimism of the minister of economic development, who will run it, and the minister of finance, who will fund it, because it presumes a national conversation that will quickly deliver a consensus on how to take the country forward to common prosperity, even at the cost of some personal profit.

Patel announces his panel

Economic Development Minister Ebrahim Patel has appointed a panel of advisers packed with left-leaning opponents of former finance minister Trevor Manuel's hardline economics - including renowned Nobel laureate Joseph Stiglitz. 

Patel's panel could be expected to recommend lower interest rates and, possibly, state intervention to manage the foreign exchange value of the rand.

Manuel has yet to choose 20 members from among more than 1000 nominations for a seat on the statutory National Planning Commission he has been appointed to head.

Patel has already taken over management of the response to the global economic slowdown, the Competition Commission and the Industrial Development Corporation.

Patel said his panel would include Stiglitz, Cosatu economist Chris Malikane from Wits University, former Cosatu economist Neva Makgetla, who is now the lead economist in the development planning division of the Development Bank of Southern Africa, and Investec Bank strategist Michael Power.

All have extensively criticised inflation targeting or other planks of the strategy Manuel used to establish South Africa's international reputation for fiscal prudence and macro-economic stability.

Patel gives clarity on role

The role of Economic Development Minister Ebrahim Patel’s new department was clarified when he presented his medium-term strategic vision to Parliament yesterday.

The 56-page document Patel tabled states that his department has a “cross-cutting mandate” affecting no fewer than 15 departments and will work in “strong partnership” with other departments and public service institutions including the National Planning Commission and ministries in the economic cluster.

The department’s key responsibility is economic development policy. Patel has also taken charge of regulatory bodies and development finance institutions which are key instruments of the state in its efforts to stimulate growth. These include the Industrial Development Corporation, the Competition Tribunal and the Competition Commission.

Patel’s strategic plan

Economic Development Minister Ebrahim Patel is to present his much-awaited “strategic plan” to Parliament today, with strong protectionist elements central to a government push to prop up local companies and preserve jobs.

If implemented, the plan could reverse SA’s enthusiastic embrace of tariff liberalisation early in the democratic era, and could usher in an emphasis on government protection for companies — especially those funded by the state.

It also emerged yesterday that Patel’s role in government, and especially in formulating economic policy — the subject of intense speculation — had been broadened, even if details remained hazy. His department will now have “oversight” of important economic regulatory agencies, among them the International Trade and Administration Commission, which sets tariffs on imports.

Patel appointments

Economic Development Minister Ebrahim Patel’s seemingly moribund department has sprung to life with the appointment of two key members of staff who will be transferred from the Department of Public Service and Administration and the Treasury.

Public Service and Administration Director-General Prof Richard Levin will become the Director-General of Economic Development from next month.

The National Treasury loses its Chief Director of the Financial Sector Development Unit, Olano Makhubela, who will become Chief Director of Policy under Patel.

The appointments announced yesterday will, to some extent, quieten mounting concern that Patel’s department was drifting without a structure, strategic capacity and a clear sense of its role and direction.

It has taken more than six months for Patel to take the first public step in establishing a fully functioning office.

The concerns were heightened by the departure at the end of last month of Patel’s special adviser, Neil Coleman, who was seconded from the Congress of South African Trade Unions and who left amid speculation of a fall-out with Patel over the latter’s alleged tendency to micro-manage, though this was denied.

Since President Jacob Zuma created the new ministry last May, there has been a great deal of controversy over whether Patel would be able to carve out a niche for himself in the realm of economic policy making when this has been the domain of the Treasury and the Department of Trade and Industry. There were suggestions the appointment of former trade unionist Patel to the Cabinet was a sop to the labour movement that lacked substance.

Levin will bring with him a wealth of knowledge about public policy making and the internal workings of government gained over more than a decade in the department and as Deputy Director- General of the Public Service Commission.

Makhubela, who has been with Treasury since 2000, has a masters degree in development economics from the University of London.

A joint statement by Patel and Public Service and Administration Minister Richard Baloyi said Levin’s priority would be “to take the establishment of the Economic Development Department into its second phase”.

This would include staffing and the transfer of the department’s financial management function from Trade and Industry.

Source: Business Day

Will the debate on the rand weigh costs and benefits?

Public debate on the rand was focusing on the costs and benefits of possible policy choices to manage the currency, Economic Development Minister Ebrahim Patel (pictured right) said yesterday.

Patel is overseeing talks between labour and business on the perceived damage of rand strength on SA’s economic recovery.

Calls are mounting for a more “competitive” exchange rate, as the unit’s gains of about 20% on a trade-weighted basis this year may erode global demand for local exports.

“There’s a complex trade-off between policy changes … we are identifying the costs and benefits of each one,” Patel said after a meeting of the government’s appointed economic crisis task team.

A second stage in the talks would look at international experience of attempts to manage exchange rates, he said. “It’s absolutely fundamental to our economic development to have a stable and competitive exchange rate.”

Volatility in the rand is seen as a bigger issue than its level.

The Treasury and Reserve Bank have repeatedly said they are sticking to a policy of allowing markets to determine the level of the rand, although they are open to debate on the issue.

There is also intense discussion of the merits of inflation targeting at a time when price pressures are not driven by demand, amid concern that they may force interest rates up before the economy is back on a sound footing.

“I think we are on the right track, we are doing very well overall,” said Zwelinzima Vavi, general secretary of the Congress of South African Trade Unions. SA was developing a unique approach to the global downturn through social dialogue, Vavi said. “The debate (on inflation targeting) must continue, there are no holy cows.”

Nomura International economist Peter Attard Montalto said the Bank’s inflation target mandate was likely to be modified next year, to include a clause on the need for job creation and sustainable growth.

The MPC has kept its repo rate steady at 7% for each of its past three monthly meetings. It only expects inflation to return “sustainably” to the target in the second quarter of next year, and then hover below the upper end until the end of 2011.

Source: Business Day