Invitation to join Bric

The decision this week by the Chinese government to invite SA to join the Bric (Brazil, Russia, India and China) group of emerging countries has caught many analysts off-guard.

According to Chinese Foreign Ministry spokesman Jiang Yu, Chinese President Hu Jintao has invited President Jacob Zuma to attend the third Bric leaders' meeting to be held in Beijing this year.

Yet many analysts are sceptical about SA's suitability as Bric material.

Has monetary policy independence been undermined?

Address by Gill Marcus, Governor of the South African Reserve Bank to the 1926 Rand Club, Johannesburg - 30 November 2010 

We are nearing the end of a difficult year, a year that began with so much promise but is now ending on a note of high uncertainty. On the global front, the expectations of a normalisation in the advanced economies were proved to be wrong, and indications are that low growth and accommodative monetary policies are likely to be sustained for some time. This has contributed to the strength of the rand exchange rate as capital continues to flow out of the advanced economies in search of higher yields. Domestically, growth has also disappointed. However the strong rand has contributed to the more benign inflation environment which, along with a persistent negative output gap, has contributed to lower interest rates.

South African development finance institution debt levels to jump

Speaking at the Industrial Development Corporations (IDC) annual results presentation yesterday, CEO Geoffrey Qhena said the IDC will spend ZAR100bn on industrial development over the next five years.

Qhena said that the corporation’s “involvement with the Industrial Policy Action Plan (Ipap) will result in us investing much more”.

Ipap, which was tabled in Parliament in February 2010, builds on the country’s National Industrial Policy Framework and represents the South African government’s efforts to “promote the countries long term industrialization and industrial diversification”.

The price of freedom

Since embracing full democracy 16 years ago, South Africa has made huge strides. But, says Diana Geddes (interviewed here), not everything has changed for the better

Sport matters in South Africa. In his new year’s address to the nation, President Jacob Zuma described 2010 as “the most important year in our country since 1994”. To outsiders, playing host to this year’s football World Cup seemed perhaps a less momentous event than holding the country’s first fully democratic elections that established a black-majority government 16 years ago—especially when the national team, Bafana Bafana, may be knocked out in the first round. But with the kick-off on June 11th, just days after the country’s 100th birthday on May 31st, the world’s eyes will be on Africa’s leading economy for the next few weeks.

Gordhan pours cold water on Patel’s bond idea

Finance Minister Pravin Gordhan yesterday dismissed suggestions that the government needed a development bond — mooted by Economic Development Minister Ebrahim Patel — to finance its national budget.

This leaves open the question of whether a development bond could be used for off-budget financing to promote economic growth.

Gordhan’s reply to a parliamentary question appeared to demolish one of the key proposals of the strategic plan for Patel’s department released last month. The strategic plan proposed that funds for development could be raised by requiring that pension funds invest 5% of their investible funds in an appropriate mechanism, possibly a government- issued development bond.

Last night Treasury spokeswoman Lindani Mbunyuza said the Treasury was “in constant contact” with the economic development and other departments to consider various funding options.

Five percent of these funds — about R700bn in private sector retirement funds and about R800bn in the Public Investment Corporation — would amount to an estimated R70bn.

Source: Business Day

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.

The policy debate resumes

Following calls for the nationalization of the mines and ultimately much else, there was the Presidential indication that nationalization was not government policy.

Clearer was the green light given to Trade and Industry to resurrect the old import-substitution policies linked to infrastructure and other state procurement opportunities, with much of manufacturing apparently targeted in the process and suggestions of nearly three million decent (formal) jobs these next ten years.

Once the Finance Minister had reconfirmed inflation targeting as a policy, the target of 3%-6% and SARB independence, with a letter written to the SARB Governor requesting that the state of the economy at all times be flexibly taken into account in policy deliberations, there followed another explicit public call from the ranks of labour for the abolition of inflation targets and their substitution by employment targets.

The National Planning Commission revised

National Planning Minister Trevor Manuel has reassured that the Cabinet will have the final say on policy formulation.

Manuel said the revised green paper on national strategic planning clearly stated the National Planning Commission would have no executive powers and that Cabinet would make the final decisions.

This comes amid a fierce contest between the ruling African National Congress and its alliance partners — the Congress of South African Trade Unions (Cosatu) and the South African Communist Party — over the powers the commission will have over the formulation of economic policy. It suggests Manuel and the commission would have no executive powers and play an advisory role to the government, but also that the alliance partners would not be allowed to monopolise SA’s economic policy formulation arena.

It will also take some political pressure off Manuel, who has faced claims from the alliance left that he would be an “imperial” prime minister.

Manuel said although he was confident the revised document would receive support from different sectors and organisations, not everyone would be satisfied. “There is a fair amount of support now.”

The green paper — which was first released by the Cabinet in August and approved last month following a consultative process in Parliament — dealt with the work of the commission and how it would function, said Manuel.

The document states that the first output of the commission would be to draft a Vision 2025 and a long-term strategic plan.

“The Vision 2025 will be an articulation of the type of society all South Africans would want to see in about 15 years’ time. It will set out the high-level aspirations for the nation in terms of social, economic and political development,” the document reads.

Manuel said the commission would release a draft vision and long-term strategic plan within 18 months.

The commission would also produce research reports and discussion papers on key “cross- cutting issues” that affect development. “These thematic papers will cover issues such as food security, climate change and human resource development trends and will be tabled in Parliament for discussion.”

Manuel called for the public to nominate people to serve on the 20-member commission. “We seek the best, brightest minds in our country that can use their sectoral expertise to contribute towards a broad development plan.”

Nomination forms are available on the Presidency website and the closing date is February 10. Manuel said President Jacob Zuma would announce the names of the commissioners before the end of March.

Manuel said a secretariat based in the Presidency would be established to provide technical, administrative and professional help to the commission.

Source: Business Day
Read the full text of the briefing at Times Live