28 October 2009

PRESS STATEMENT BY
PRINCE MANGOSUTHU BUTHELEZI MP
PRESIDENT OF THE INKATHA FREEDOM PARTY 

We received the MTBPS with a mixed reaction of satisfaction and deep concern.  We are satisfied that all safety nets and social spending remains unaltered in spite of the depression and that more money is invested in the education of our children.  We appreciate the incentive given to employers to hire students that have just graduated. 

However, for the rest we fear that the MTBPS reflects the old British generals' attitude of muddling it through, and does so on the basis of the recession being over by the end of the year, and next year the economy being on a growth rate of 1,5% to increase to 2.7% in the following year and 3.2% in the next one.  We cannot design our response to South Africa's worst economic crisis on the basis of unrestrained optimism and wishful thinking. 

Because of this attitude, the MTBPS is 'business as usual' with a few adjustments to get us through what it regards as a transient sticky patch requiring no strategic adjustments. The interim solution is borrowing our prosperity into interminable debts raising the deficit from 1 to 7.6% of GDP, again on the assertion that this will be sustainable because next year the economy will flourish again. 

However, if it does not, this single action will place us in a vicious economic cycle in which it will become necessary to raise interest rates sky high to attract foreign lenders to buy more state obligations to finance an ever-increasing budget, as the economy shrinks under the combined negative effects of high rising inflation, interest rates and a credit crunch. 

The MTBPS fails to take the necessary measures to restructure our economy to make it viable after the depression. It continues to pour good money after bad in non-performing State owned enterprises and parastatals, missing the opportunity to make necessary cuts which would have reduced the deficit and improved future economic performance, such as avoiding giving one billion Rand to the Land Bank in the hope that after 20 years of solid management problems it will now turn around, rather than merely merging it as a land division of the Industrial Development Corporation where it would receive proper management. 

Similarly, billions of Rands are allocated to overlapping agencies which all provide basically the same financial and other assistance to SMMEs and which all could be merged into one in a matter of weeks, as happens in the private sector with similar entities. 

The list of possible savings is endless and reflects a list of missed opportunities flowing from having insufficient appreciation of how dramatic this economic crisis really is. Under the present conditions, it may just be the case that this year's MTBPS will become the beginning of a process which will disintegrate South Africa's middle-class, commencing from its newly emerging segments which are the most vulnerable and consist of those of us who were previously disadvantaged. 

Another opportunity has been missed to learn the lessons of the global depression and make interventions which finally promote a viable industrial basis for the post-depression environment. The MTBPS merely increases the amount of subsidies and assistance to what it styles 'vulnerable' sectors of our economy, such as the automotive and textile industries, without questioning whether they are indeed 'viable', thereby setting the basis for long-term, ever increasing financial assistance to these sectors. The end result is that we not only need to pay highly inflated prices for a vehicle bought in South Africa, but with our taxes we discount the price that foreigners pay for the same vehicles sold abroad, while our textiles only remain cheap because the estimated social cost of maintaining a single textile job is R33,7 million a year. 

The opportunity has been missed to make investments in which Government operates as the nursery for new industrial sectors which can produce the widgets by which our country can survive in the global village. At the risk of oversimplifying, one can think how Switzerland has ensured a very good living for all its citizens by providing the world with two products, watches and chocolate, and one service, banking. For fifteen years I have called on the Government to focus on the need to develop an industrial basis as the prerequisite to job creation, but no attention has been given to such a difficult task. 

By the same token, what has been identified as the Employment Generation Programme attached to the Department of Public Works has the flavour of multiplying people on a job rather than multiplying jobs. At this crucial juncture of our history, we need an infrastructure building programme which not only creates employment but sets the basis for economic recovery and assists the formation of a new industry. 

This programme needs to be set in place before we are hit by the additional recessionary effects of the post-2010 Soccer World Cup and the fading out of major construction work envisaged for next year, which one fears will become coupled with a foreseeable massive depreciation of the real estate market and an increased wave of foreclosures and non-performing loans. 

I appreciate the indication given in the MTBPS that the policy of devaluing the Rand has been adopted. However, this too will need to reflect an overall industrial strategy and the understanding that things may not be as rosy as one would hope. I appreciate that in my reaction to the MTBPS I am taking more the side of fear than that of hope, but on this one my duty to protect the people of South Africa calls on me, as it should on everyone else, to plan for the worst and act on that basis rather than making plans on the basis of our fondest dreams.