A growing economy makes more rapid transformation possible, Finance Minister Pravin Gordhan argued in a 2017 Budget address set against the backdrop of sluggish economic performance, ongoing rumours about his dismissal and President Jacob Zuma’s call for “radical socioeconomic transformation”.

South Africa grew by around 0.5% in 2016 and the National Treasury anticipates that the economy will expand by only 1.3% this year; a projection that is higher than the 1.1% forecast by the South African Reserve Bank, but well below the 5.4% envisaged in the National Development Plan.

Gordhan said transformation without economic growth would be narrow and unsustainable, but that growth without transformation would only reinforce the inequitable patterns of wealth inherited from the past. “We agree with President Zuma that a new perspective on economic transformation is required.”

However, Gordhan framed the debate within the context of growing global concern about the impact inequality was having on social stability and economic performance rather than in the racialised terms used by Zuma in his State of the Nation address.

“This is not a transformation to be achieved through conquest, conflict or extortion, as in our past. We do not seek to reproduce the racial domination that was the hallmark of apartheid nationalism. Our transformation will be built through economic participation, partnerships and mobilisation of all our capacities. It is a transformation that must unite, not divide South Africans.”

Wealth, the Minister cautioned, was still produced and allocated along lines that remain fundamentally unjust. “The ownership of assets and the distribution of income is captured by a minority of the population – a situation that is morally wrong and economically unsustainable.”

He, therefore, appealed for a national conversation on South Africa’s future economic dispensation, arguing that such a forum should seek to assess the root cause of why so many South Africans were still unable to assemble assets and why poverty continued across generations.

No specific forum was proposed for the dialogue, but reference was made to the National Economic Development and Labour Council, which recently had success in negotiating a National Minimum Wage dispensation.

“I think that there will be a fair amount of consensus that we need to get this conversation going  . . . But sooner rather than later . . . certainly we need this engagement,” Gordhan said, while also floating the concept of a ‘charter of economic rights’.

Gordhan also argued that the “litmus test” of the success of the country’s transformation programmes should be what they do to create jobs, eliminate poverty and narrow the inequality gap. South Africa’s official unemployment rate stood at above 26%, while wealth remained concentrated, with 95% of wealth in the hands of 10% of the population.

MASS-BASED TRANSFORMATION
The Minister also argued that transformation should be mass-based, benefiting the most disadvantaged through the creation of new assets, capabilities and opportunities to build livelihoods. However, he added that transformation should also achieve a more balanced structure of ownership and control in our economy.

The Budget Review argued, further, that transformation was not a zero-sum game. “The benefits of empowerment should be accessible to all citizens, not limited to connected insiders.”

The other economic-transformation principles outlined by Gordhan in his address included:
• The need to mobilise both private and public investment in social and economic infrastructure, along with new technologies and new activities to help build a modern and diversified economy.
• A robust confrontation of cartels and collusion to provide new opportunities for access to markets.
• A re-shaping of cities, together with the building of linkages across rural and urban landscapes, to address past patterns of fragmentation and separation.
• Using transformation to strengthen democracy and entrench open, transparent governance and the rule of law.
• Building self-reliance and rejecting the dependence on debt, while protecting fiscal sovereignty.
• And using transformation to build an economy that belongs to all, black and white, where the legacy of race domination is no longer visible.

“Transformation must unleash growth, establish a new economic direction, mobilise investment, empower the masses and create new resources for social change,” Gordhan argued.

The Budget Review also confirmed changes that would be introduced to the preferential procurement policy regulations from April 1, to “enhance transformation".

These included: allowing tenders to target specific groups, such as black women, for empowerment; raising the threshold from R1-million to R50-million for bids evaluated in terms of the 80/20 preference point system so as to help smaller, black-owned firms to compete; allowing public entities to negotiate prices and value for money with preferred service providers, supporting the procurement of locally manufactured goods; allocating preference points in line with a firm’s broad-based black economic empowerment status; and implementing compulsory subcontracting of at least 30% for tenders above R30-million, where it is feasible to advance designated groups.

The Minister also argued that the fiscal system was the most direct vehicle for redistribution and inclusivity. But instead of emphasising the reallocation of spending towards black business, Gordhan linked transformation directly to improved access to services, economic growth and creating jobs.

Budgets alone would, however, be insufficient for meeting transformation goals and he appealed for an energetic coalition between labour, business and civil society, as well as a new consensus on a transformation programme, where “each of us is clear about the contribution and sacrifices we have to make to ensure optimal inclusivity”.

On whether either Gordhan or his deputy, Mcebisi Jonas, would still be in a position to oversee this consensus, Gordhan stressed that “both the Deputy Minister and I serve at the pleasure of the President”.

He said his record since his reappointment to the position on December 13, 2015, was clear. “We should all appreciate that we have been asked to play this role, we have done the job the best we can . . . and if the President chooses, as we say in the ANC, to redeploy us, in whatever form, that’s his decision.”