Earlier this month minerals minister Gwede Mantashe claimed at the African Energy Conference that oil and gas exploration would lead to 5 to 8% GDP growth. He was not the first minister to promise or suggest great things for the economy. Think of all those growth and job strategies over 30 years that never went anywhere and cost millions to produce.
Of course the Marxist-oriented ANC has never understood how market economies work, not even the liberal-left's heroes Ramaphosa, Manuel, Gordhan and Mboweni (I take issue with the mainstream media's hagiographies of Gordhan and Mboweni, but that's another story).
ANC aside, I contend few if any SA politicians understand how the economy works and what's needed for growth, centre-right DA included. The DA said numerous times that in the WC they "created" hundreds of thousands - the number varied over time - of "new jobs" since 2009 when they took power. They based this on a faulty understanding of StatsSA's quarterly labour survey's and how the economy works at creating jobs.
Now public works and infrastructure minister Dean Macpherson (DA) says by letting SA be a "construction zone", it alone will add 1.5% to the GDP. And they'll fund feasibility studies for "bankable" projects.
It seems he's confusing general commercial construction (another new shopping mall must compete with a glut of existing) with economic infrastructure - transport, energy, water and sanitation, telecoms, minerals even - the backbone for a functioning country that the state is responsible for.
The problem with Macpherson's thinking is his department is not responsible for those portfolios. Anyway, most municipalities, where delivery happens, and state entities are dysfunctional and worse. Public Works can't even manage their assets like government buildings, many of which are in a poor state (in a Capetalk interview recently he side-stepped responsibility for school pit latrines, saying it was Basic Education's). Despite this he claimed they have highly skilled people to help with these feasibility studies. Tell me another.
This call for proposals will cause everyone and their dog to apply. Naturally BEE/cadre rules would apply. A great feast will be had by all, government is paying. More skullduggery and few, if any, projects.
SA's politicians think all it takes is snapping a finger and throwing money we don't have at a problem and magic occurs - presto, 3%, 5% or any number you choose. Jobs for all. Daily Maverick's business editor Tim Cohen wrote Mantashe was "inhaling hallucinogenic fumes" for saying what he did, that it was "bizarre rubbish in multiple dimensions".
Cohen explains the investment capital output ratio (ICOR) is fixed around 5 - every R5 investment delivers R1 GDP growth. "SA’s GDP is around R6-trillion now and has an annual fixed investment level of around 15%, less than a R1-trillion. If you want to increase GDP from 1% to 5% and your ICOR is 5, you will need an investment of four times what you have now, or roughly R4-trillion – 66% of current GDP. In the past 25 years, fixed investment has never been remotely that."
The conditions for growth are complex and simple at the same time. SA doesn't have the conditions to produce the developed world's 3%, nevermind emerging markets' 5%. SA's rate is below 1% for an extended period for a reason: ANC.
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