Typically, the objectives of macroeconomic policy are the attainment of full employment (or the reduction of unemployment levels), within an environment of low inflation, high and sustained economic growth, and a ‘healthy’ balance of payments. The emphasis on one or the other objective is a choice that is informed by a number of factors. Some of these may be informed by ideology, others may be the result of pressures external to the economy (especially for a relatively small, open economy like South Africa which is dependent on external financial flows and trade).

Some of these objectives (at least in the short to medium term) may be mutually exclusive. For instance, a low inflation (not factoring in inflationary expectations), high interest rate environment may negatively impact economic growth and employment levels. The opposite may also hold true.

There’s general consensus (and empirical evidence clearly upholds this) about the inverse relationship between the level of the interest rate and the rate of economic growth and the level of employment. Put simply, high interest rates lead to lower levels of economic growth and therefore lower levels of employment (or higher unemployment). High interest rates may attract speculative international financial flows, but these are generally fleeting and mostly do not lead to productive investments.

The current inflation target (range), with the resultant relatively high interest environment, is incompatible with the stated growth and employment objectives. In other words, the current monetary policy stance of the SARB harms the country’s growth prospects and is not supportive of the government’s stated growth and employment objectives. This is not an ideological. It is a view formed on the basis of the objective conditions and international empirical evidence. The apparent failure to realise that it is the contractionary policies of the SARB  which pose the largest domestic risk to growth, is puzzling as there’s ample theoretical and empirical evidence to suggest this. It is also unhelpful to talk about a ‘low-growth world’ as if this is a given, especially when there are countries that are growing at rates higher than the world average. Why should our growth aspirations be so low?

The government and the SARB should dispassionately and non-ideologically take stock of the situation and accept that they will not attain their growth and employment targets with the current policy incompatibility. It is inconsistent to persist with an inflation target range that clearly is at odds with the growth target and the creation of employment. What compounds the situation is the observed unstated goal of the SARB to target the median of the range. What is the point of the 6% upper limit if the SARB conducts policy in such a way that the rate of inflation is generally restricted from testing this upper limit?

I would argue that low growth is the most pressing challenge for South Africa as most other economic, social and political challenges flow from it. The reduction of unemployment, and not a low rate of inflation, should be the key objective of macroeconomic policy in the short to medium term. This would have a positive impact on the budget deficit through reduced social spending while revenue collections increase. This would allow the government space to increase spending on growth enhancing items like education, even as the number of those who cannot afford fees reduces (or they require a lower ‘subsidy’). In other words, creating a ‘virtuous circle.’

Clearly, this macroeconomic policy has to be complemented by strategies implemented by government and the private sector to ensure that growth is in sectors with the greatest employment creation potential. In other words, avoid the curse of jobless growth.

It is interesting to note in passing that the (cost of living components of) wages demanded by unions, particularly public sector unions, clearly indicate that their inflationary expectations are high. This is puzzling as the SARB has maintained consistently low and relatively stable rates for a long time.

Smart decision making is about knowing that you cannot remain still, knowing that the country has to keep moving forward, adapting to changing internal and external dynamics. It is also about developing a culture of smart execution, and not just having supposedly great paper strategies. For without smart execution, you have nothing.

Execution is not just about taking decisive action, it is also about taking timely action. Unresponsive 5-year plans, or rigid priorities that are set once and cannot be revisited even when conditions change, are a recipe for disaster. Continuous consultation, perpetual and timid postponement of action, are enemies of progress.

In these turbulent times it is sometimes necessary to turn on a tickey. Smart leadership is having the confidence to execute this without skipping a heart beat.

Smart decision making is also about making tough choices. It is about creating the conditions where your citizens know and accept that to have a prosperous future, they have to accept and endure the pain of today, the pain of transition from one phase in their forward motion to the next.

Easy choices are easy to make, and they make for transient happiness and satisfaction, but they mean harder and more painful decisions later. The time for hard choices is now.

Do mineral riches matter at all for economic development? No, otherwise mineral deficient countries like #Singapore would be begging nations. On the other hand, many mineral-endowed countries seem cursed to a perpetual state of underdevelopment or continually playing catch-up. Mineral riches also seemingly create lazy thinking, a thinking that fails to take cognisance of global market conditions and responding timely to changes coming over the horizon. It also engenders a thinking that depends solely on a fortuitous piece of natural luck that put a nation on top of mineral abundance.

Economic development is about making the smart choices that will propel the nation along a sustainable growth trajectory. It is also about harnessing comparative advantages, and where none seem to exist, smartly ‘creating’ these. Doubtless, mineral endowments offer a comparative advantage in a world that craves and depends on these. But this comparative advantage has to be exploited with smart strategies that are adaptable to changing global conditions. For if there is one lesson from modern economic history, it is that global conditions are always changing. This comparative advantage may not always be the same through the ages, so it is important to discern when it is time to change direction and harness or create new advantages. And mineral endowments are not forever…

Crying over the spilt milk of changing global conditions that mean your minerals may no longer be as valuable as they were yesterday is a sign of lack of forward planning, as are empty barns in times of drought.

Leaders flying economy is good. It sends a message of austerity, and that it is no longer business as usual. It is also good PR, especially in an election year.

But here’s the thing: it distracts us from focusing on the big prize.

These initiatives will, at best, save a few millions, while on the other hand the country spends billions bailing out the likes of SAA. Or being tardy in implementing national projects, with the result that they cost millions and billions more when they are eventually undertaken. The priority should be fixing SAA, putting in place a competent board, hiring the best management team, striking the necessary alliances. The priority should be implementing growth policies. Which would you rather applaud?

By all means, let us do the PR. But let us also do the real work.

And while at it, legalise marijuana too.

The main reason sex work is illegal in South Africa, a country with a progressive, secular constitution that recognises same sex partnerships, is an appeasement to the religious lobby. Interestingly, though, sections of these self-same religious groups have reduced their sensitivity towards same sex relationships and they now even ordain gay priests. Why then still leave sex work out in the cold?

And as far as marijuana is concerned, it seems indisputable that it has medicinal properties that are advantageous towards the treatment or amelioration of the pain of cancer sufferers. In addition, the criminalisation of marijuana use discriminates against the cultural beliefs of some indigenous South Africans, which surely violates the constitution.

The legalisation of both sex work and marijuana can enable the tax authorities to bring both into the tax net and generate additional revenues. And it would also free the police to focus their resources on more debilitating crimes.

I was having my own personal frustrations, thinking: Where are the ANC or left intellectuals?

Not the top six officials or government ministers or Parliamentarians, but members whose pursuit and interest is intellectual debate, polemics, ideas. And then President Mbeki reappeared on the scene with his letter series. I must confess that my initial instinct was one of annoyance, a feeling that he should just be quiet and enjoy his retirement. I instinctively felt that he’s trying to make himself relevant by resurrecting old issues. Why not, as some argued, just write his memoirs? Then it hit me.

Mbeki is an intellectual, and he has every right to write on any topic of his fancy. In fact, he has initiated debate on a number of topics, including his motives for writing these letters. For far too long what passed for intellectual discourse has been dominated by neoliberal analysts and newspaper columnists. The reappearance of Mbeki in the past few weeks has created a much needed counter-balance to the dominant narrative. And those who are calling for him to shut up are either misguided or disingenuous. Are these not the same people who accuse the ANC of stifling debate? The fact that Mbeki is a former president is perhaps irrelevant. Or not. But he has every right to apply his great intellect to any topic he wishes. That is not to say we should agree with him. Disagree if you must, but embrace the space he’s creating for debate on a number of issues.

I listened to his keynote at the anniversary celebrations of the Human Rights Commission this morning. I was happy that he had been invited to be the main speaker; after all, he was there at the birth of the HRC, the constitution of the republic and all chapter nine institutions. And he didn’t disappoint me. I sat (unplanned) in front of my screen watching, listening, fascinated. The issues he addressed, racism, sexism, transformation and the two-nation paradigm, were not new. What fascinated me was, here’s an intellectual who’s been missing from the scene. And it’s better now because he’s not the president anymore, but someone who can and should be engaged without fear of potential victimisation.

Instead of complaining we should rejoice that he’s re-entered public life and embrace the space for debate that he’s opened up.

By all means, let the people pray for rain. Let those who want do the rain dance.

But…

Leaders should refrain from burying their heads in the sand. The science, the economics are long settled. Do the work the electorate expect of you and leave the metaphysics to the citizens.

Red Card for some South Africans (including journalists & commentators.) Since when is it wrong to have ambition and the cojones to go with it?

Many of us have ‘armchair’ ambition and are too timid to act. Why, then, deride Tokyo for his chutzpah? To succeed, you have to embrace the possibility of failure. We should be celebrating & applauding one of our own for trying. Countless times South Africans complain about our under-representation in continental & international bodies, and yet those few who dare to throw their hats in the ring are not supported, and when they meet difficulties & even fail, we express glee.

How are our kids going to be inspired when we label a person with courage to try a “Mampara?”

In Silicon Valley, where failing is not only encouraged but celebrated, the motto is “Fail often, and fail fast.” Perhaps we would be more successful as a nation if we embrace such a culture.