POST-COVID-19 RECOVERY

OUR ECONOMIC RECOVERY

Dr Asghar Adelzadeh and Dr Pali Lehohla suggest that for the country to chart a new economic path and achieve gross domestic product growth, an increase in social cohesion, which will enable stable capital accumulation, is needed

While South Africa plans for a post-COVID-19 era, the most pressing question on everyone’s minds is: what will the economic recovery look like and mean for the 60.1 million people who live in the country?

During the early 1990s, the ANC developed the Reconstruction and Development Programme (RDP), which provided a broad consensus on reconstruction and redistribution as the way South Africa could achieve growth and development. A er the 1994 election, the government distanced itself from the RDP and embraced a variant of free-market capitalism for the country’s post-apartheid economic system. In 1996, the Growth, Employment and Redistribution (Gear) policy framework postulated that the country could achieve transformation and development through economic growth that would result from the expansion of the free market economy through lower taxes, privatisation, deregulation, competition and an independent Reserve Bank. ese measures hoped to stimulate private sector investment, produce high economic growth, create employment and income, and lower poverty. In 1999, the Reserve Bank adopted in ation targeting as its monetary policy framework. is made in ation – rather than employment, growth domestic product (GDP) or a as Usual (BAU) scenario, government spending on goods and services increases by 7.5 per cent a year and continues to weakly support industrial policies. Investment by the government and state-owned companies increases by six per cent a year. e government continues with its current public works and social grant programmes. e Reserve Bank continues with its in ation targeting policy and private sector credit extension grows by six per cent a year. e model’s simulation of this scenario shows that there will be an annual average GDP growth rate of 2.2 per cent a year, and by 2030, the unemployment and poverty rates will be 27 and 34 per cent respectively.

Dr Pali Lehohla

combination of criteria – the primary goal of monetary policy. By the end of the 1990s, the ANC government had basically embraced free-market ideology to inform its post-apartheid economic policy framework. e results have been chronically low economic growth, high levels of unemployment and poverty, rising inequality and deindustrialisation.

Looking ahead, three scenarios are worth considering.

INDLULAMTHI ISBHUJWA SCENARIO

e rst scenario asks: what if the country’s recovery plan continues with the post-1996 policy framework? is scenario captures the Indlulamthi iSbhujwa scenario, which creates an enclave bourgeois nation, a country torn by deepening social divides, daily protests and cynical self-interest. It epitomises a loose-limbed jumpy nation with a frenetic edge. Under this Business

The Gwara Gwara outlook for the future is captured by the model’s results that include an annual GDP growth rate of 1.8 per cent, and unemployment and poverty rates of 29 and 36.5 per cent respectively by 2030.

INDLULAMTHI GWARA GWARA SCENARIO

Over the past two years, Treasury and the Reserve Bank have proposed policy measures that are more consistent with an even more conservative policy framework. ese include supply-side reforms, a more austere scal policy and a stricter in ation target. e second scenario, therefore, asks the question: what if the recovery plan implements even more conservative policies than those that were implemented a er 1996? is “austerity policy scenario” captures the Gwara Gwara scenario – the ups and downs of a false dawn – that embodies a demoralised land or disorder and decay and creates a nation torn between immobility and restless energy.

Relative to the BAU scenario, and in addition to a wide range of supply-side measures, there will be cuts of 10 per cent in government nal consumption spending, and investment by the government and state-owned companies will be cut by ve per cent. e government will abandon its localisation policy and cut subsidies on products and production. e Reserve Bank

will tighten monetary policy by lowering the six per cent upper bound for in ation to four per cent. Under this scenario, the Gwara Gwara outlook for the future is captured by the model’s results that include an annual GDP growth rate of 1.8 per cent, and unemployment and poverty rates of 29 and 36.5 per cent respectively by 2030.

INDLULAMTHI NAYI LE WALK SCENARIO

e third scenario asks the question: what if the government reconsiders the post-1996 policy framework to put the economy on an inclusive path? e proposed six-pillar policy framework is designed to create a nation in step with itself, as in the Indlulamithi Nayi le Walk scenario, which choreographs a vision of South Africa where growing social cohesion, economic expansion and a renewed sense of constitutionalism get the country going. e six-pillar policy framework that creates this outcome requires reforms in macroeconomic,

Dr Asghar Adelzadeh

social, microeconomic, and trade policies, private sector international support and provincial growth and development plans.

Under this Nayi le Walk scenario, South Africa would achieve an annual average GDP growth rate of 6.2 per cent. e economy would create between 8.7 and 10 million jobs and the unemployment rate would decline to 12 per cent. e number of people living in poverty will decline by 10 million and the national poverty rate will decline by almost 50 to 23 per cent. e Gini measure of income inequality will decline by 16 percentage points to 55 per cent. e six-pillar option would achieve a simultaneous expansion of the supply and demand sides of the economy. GDP would almost double over the decade, and average pro t rates would remain above 16 per cent.

Government revenue would grow in line with projected GDP growth, thereby generating the funds needed to pay for the scenario’s expected increase in government spending. e larger size of the economy and lower real interest rates would result in a decline in the debt to GDP ratio to 40 per cent by 2030. Signi cant improvements in the delivery of social services and economic and social infrastructure across the country would result in the improved living conditions of poor families, and social cohesion will improve enabling stable capital accumulation.

THE SIX-PILLAR POLICY FRAMEWORK

In 2021, Dr Asghar Adelzadeh, Sambula Malumisa and Juane Benecke used the Applied Development Research Solutions (ADRS) Linked National-Provincial (SA-LNP) model of the South African economy to develop policy roadmaps for three countrywide Indlulamithi scenarios 2030. Their six-pillar policy framework, which represents the Nayi le Walk scenario, shows how South Africa can break from its past – low economic growth and rising unemployment over the past 28 years – and chart a new development path that achieves six per cent gross domestic product (GDP) growth until the end of the decade.

The first pillar comprises macroeconomic policy reforms. Fiscal policy will include an increase in government current spending of 10.5 per cent a year over the next decade – three percentage points higher than the Business as Usual (BAU) scenario – to provide the necessary funding to expand the delivery of individual and collective social services. Investment by government and state-owned companies in social and economic infrastructure will increase by 10 per cent a year – four percentage points higher than the BAU scenario.

A new monetary policy framework will upgrade the inflation targeting policy to a dual mandate that targets inflation and six per cent GDP growth. The Reserve Bank will adopt the necessary measures to raise the growth of annual credit extension to the private sector to 15 per cent – nine percentage points higher than under the BAU scenario.

The second pillar introduces three new policies. The government makes the public works the employer of last resort for the unskilled unemployed and increases the daily pay rate to R160. The government also introduces a R1 000 monthly grant for the skilled unemployed and those who lost their jobs due to COVID-19. There will be a caregiver grant of R500 a month for the family member who takes care of a child. Both grants will increase by six per cent a year. This proposal can be replaced with a Basic Income Grant scenario.

The third pillar of microeconomic reforms models the effect of government policy interventions: lowered prices in the transport, storage and communications sector, improved competitiveness and labour productivity in certain sectors, and increased agricultural exports.

The fourth pillar refers to trade and industry policy measures that would increase total annual investment in the manufacturing sector to R10-billion in 2010 prices, stimulate total exports, reduce import dependency and raise the employment intensity of economic growth.

The fifth pillar mobilises private and international support. The public-private growth initiative would increase investment by R500-billion over the next 10 years. The Public Investment Corporation would increase investment in the manufacturing sector by R100-billion between 2021 and 2025. Foreign direct investment would increase from 1 to 2.5 per cent of GDP by 2030.

Finally, the sixth pillar considers the successful implementation of provincial growth and development plans.

DRIVING INCLUSIVE SOCIAL ACCOUNTABILITY

After 36 years of leading transformation in the accounting profession, ABASA has appointed its fth woman president to carry the leadership baton for the next three years

Since taking over the reins of the Association for the Advancement of Black Accountants of Southern Africa (ABASA) on 2 December 2021, President Linda Maqoma has hit the ground running, setting up the organisation for what promises to be a revival of the advocacy role that ABASA is known and respected for in the industry, the country and globally.

While the biggest crisis faced by the accounting profession is the various scandals casting doubt on the credibility of the CA(SA) designation, ABASA will have to walk the tightrope of advocating for the removal of barriers that keep black professionals from accessing careers that are to this day painfully untransformed. In addition, ABSA strives to ensure that black excellence is maintained under the banner of ethics, which remains the cornerstone of the profession.

ABASA was established in 1985, under the leadership of its rst president Je van Rooyen and founding stalwarts, to promote the professional interests of black persons engaged in the accounting profession. e association is committed and dedicated to this pursuit and is driven by the need to ensure that every black accountant and aspiring accountant can realise their full potential and aspirations.

A CULTURE OF INCLUSION AND COLLABORATION

Ms Maqoma has, throughout her leadership journey to the top o ce, set an inclusive tone, ensuring that the organisation is known not only as a home for black chartered accountants, but also professionals from other accounting and regulatory bodies. is continued commitment to inclusion will be cemented by the implementation of ABASA’s newly established national council, which will include representatives from SAICA, SAIPA, SAIGA, ACCA, CIMA, IIASA and others in accordance with the organisation’s Memorandum of Incorporation.

“It is important that ABASA drives collaboration within the transformation space, and aligning with organisations such as the Black Management Forum (BMF) is of national importance as we strive to move the needle on the slow pace of meaningful socioeconomic participation of black people in our country and increase the number of country and increase the number of black professionals in top levels of black professionals in top levels of management,” says Ms Maqoma. management,” says Ms Maqoma. e association’s “cradle to grave” e association’s “cradle to grave” membership structure ranges from membership structure ranges from student chapters, trainees, and general student chapters, trainees, and general members to stalwarts of the organisation. members to stalwarts of the organisation. It also includes a business and corporate It also includes a business and corporate membership. At each stage of this value membership. At each stage of this value chain, ABASA, through its national chain, ABASA, through its national strategic leadership structure and strategic leadership structure and focused committees, assesses the needs focused committees, assesses the needs of its constituency to better advocate of its constituency to better advocate its members’ interests. Creating its members’ interests. Creating strong leadership pipelines with strong leadership pipelines with particular focus on ensuring women take up top decision-making positions is central to the transformation mandate of ABASA.

As ABASA turns 37 this year it will host its h Annual Wiseman Nkuhlu Lecture in honour of the rst black African chartered accountant in South Africa who is also a past president of the BMF and a patron of the ABASA Subvention Fund, which aims to provide a solution to the shortage of passionate black academics in historically disadvantaged universities. is fund was founded by Dr Futhi Mtoba during her tenure as the rst woman president of ABASA from 2002–2004. is coincidentally overlapped the tenure of the BMF’s rst woman president, Nolitha Fakude, between 2003 and 2006. ese are just some of the links that serve as a reminder of the thread that binds our organisations together.

We look forward to working together with President Andile Nomlala and his leadership team to achieve socioeconomic transformation and develop ethical leaders who will be the solution to the ethical crisis in our country and restore the ethos of black excellence that both ABASA and the BMF strive for.

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communications@abasa.org www.abasa.org.za