Address by Minister Trevor Manuel to the Sunday Times Top 100 Companies Awards, Johannesburg
25 October 2011
Master of Ceremonies
Sunday Times Editor, Ray Hartley:
Ladies and Gentlemen.
Having accepted your kind invitation to be here this evening, I should submit my resignation as Minister responsible for planning forthwith. The idea that I could be in Parliament for the tabling of the MTBPS this afternoon, rush here for this event and be back in the Cabinet Room by 08h30 tomorrow, without either a private jet or blue lights speaks to the kind of calamity that should be avoided by serious planners.
Clearly, the MTBPS speaks bravely to the challenge. Budget-making in a time such as this is unbelievably difficult. The global environment is risky, with growth prospects middling at best; the bond market remains under severe pressure; in South Africa we have used up more than our fair share of luck in revenue collections and the quality of budget spending is in decline as a consequence of the rapid growth of the wage bill. Minister Pravin Gordhan must therefore be commended for providing a positive signal with the announcement of the R 25 Billion economic support package in these times.
The Economist magazine last week had an absolutely wonderful one-liner. It said, “The global economy is sicker that a man with a bellyful of bad oysters.” Whilst much of the focus is, and has been on Europe, there is little to celebrate from anywhere. It does actually not matter whether we are trying to understand the depth of the rut in the US economy, a rut that will deepen as the Presidential elections next year grinds everything to a halt; or the likely impact on Europe and the world of the 60% haircut that Greek bondholders will now take – and it is unlikely that bondholders of other European sovereigns will not be similarly affected; or whether, in respect of China, we agree with the Economist (this past week) “Perhaps the only thing growing faster than China’s economy is worry about the country’s economy.” Or, consider the fact that Britons now retiring will receive an income 30% less than those who retired three years ago. The world is not a happy place.
The solution is embedded in the views articulated by Larry Summers in a recent article, explained in his own Summeresque way, “The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.” But who has the confidence and the war chest to spend? The truth of the matter is that the solutions, as well as the problems, are global in nature. The problems arise from global imbalances that have been left unattended – not ignored, but unattended – coupled with ideological decision-making and weakening supervision; and now the solutions must be found at a global level. The fundamental problem is that the electorates, especially in large countries, cannot conceive of allowing their Heads of State or government to work with peers to find global solutions.
It does not matter whether we are looking at the Tea party in the USA, or Conservative back-benchers in the UK, or the electorate in almost any country; there is a deep fear of global collaboration. The same people who benefit tremendously from globalisation will do everything in their power to prevent supranational solutions.
The global crisis is actually not about economics. It exists because of the deep fragmentation in political systems that make finding solutions so excruciatingly difficult. The US battle over the deficit ceiling and more recently over the Jobs Bill is evidence of the inability of the political establishment to lead, to find each other in the interests of their people and the world at large. The unwillingness of European leaders to take bold, decisive and clear action to prevent another meltdown in the global economy is further evidence of dysfunctional political systems.
It is this sad feature of contemporary politics that diminishes the value of gatherings such as the Commonwealth Heads of Government meeting (CHOGM) to be convened in Perth this week and the G20 Leaders in Cannes next week. Similarly, we are witnessing the most extraordinary dance by countries as they try to wriggle away from the commitments made to finance climate change at COP 15 & COP 16 convened in Copenhagen and Cancun respectively; and containing emissions to hold temperature increases to the “less than 2° Celsius” that appears in every document as a mantra, is being pushed way beyond the horizon. Actually, this narrow-mindedness that prevents the search for solutions also fuels the rage that we see evolving in movements such as Occupy Wall Street.
The lessons for us are clear. We need to be able to work together as business, labour and government to find solutions to the present economic challenges that confront us, partly because of our own economic circumstances and partly because of those imposed on us by the global economic slowdown. This raises serious challenges for our own political system, our own forms of social dialogue and the quality of leadership in our economy to be able to recognise the dangers that we are facing. We owe it our citizens, and especially the poor to sit down together until we have thrashed out a set of solutions to address both our short-term economic perils and our longer term growth and development challenges.
We need to be conscious of these trends to appreciate that there is no likely short-term let-up in trends in the global economy. So we must appreciate better what the opportunities are in South Africa.
Minister Gordhan said this afternoon, “South Africa has benefitted from the boom in commodity prices over the past several years, but this has not led to significant growth in mining production. Energy constraints, inadequate transport capacity and uncertainty in the regulatory environment have held back progress. In contrast, mining production expanded by 30 per cent in Australia, and 44 per cent in Brazil and more than four times in Chile between 2003 and 2010. This has provided a huge boost for investment, tax revenues, jobs and incomes in these countries. Minister Shabangu’s engagement with the Chamber of mines on increasing investment in our mining resources is therefore to be welcomed.”
But, in welcoming the engagement, we owe it to ourselves to pause and evaluate why investment and output are lagging, why there is no resonant voice raising the issues appropriately and why we, as a generation of South Africans that lifted this country from a political abyss just twenty years ago now are impotent to solve the problems. This country desperately needs investment, more specifically, investment in that which we know we have – and that is our rich mineral endowment. And, if for no other reason than we need investment, we must declare repeatedly that the nationalisation of the mines is a seriously bad idea. Even reading the MTBPS with half a brain will confirm that there are no fiscal resources available through taxes or borrowing to pay for mines or invest in them, even if government were to get these mines gratis.
So our responsibility must be, yours and mine, to remove the obstacles to investment in the mining sector – we need investment, jobs and taxes if we are to raise living standards. And we must focus on expansion through that which we know and understand – the manufacturing of capital goods for mining and related industries. We need to understand the enormous advantage we still have in relation to the African continent, and use it. This advantage is not permanent, and it would be reckless in the extreme to test the boundaries of its durability.
What this situation demands is that South African decision-makers need to behave very differently, both in respect of those sectors or segments of society that we lead, and in relation to each other. We need to stop acting as though every point of disagreement between ourselves is a fight to the last drop of blood. We need to be bold enough to stand up to each other in order to persuade the other side of our views. We need a commitment to this country and its people that is focused on a longer term view. Moreover, we need to use the knowledge we have of the world, to draw on the strengths of each other and transform this place, South Africa. Opting out and looking after only kith and kin, and then hoping that nobody will notice, is not an option.
I am reminded of the words of the Nobel Laureate, Sir Ernest Rutherford, “Gentlemen, we have run out of money. It is time to start thinking.”
Let me extend my congratulations to the worthy nominees and winners here this evening. Thank you for your patience in listening