The need for public debate on macroeconomic policy

Dear President Ramaphosa,

We have read with great interest and appreciation the broad comments by Deputy Minister of Finance Dr David Masondo in an interview with Business Day on Thursday 4 July.

While some may feel that parts of his comments are controversial – such as those on monetary policy – we nevertheless welcome the frank views on politically sensitive issues, indicating that there is still scope for discussing difficult choices without being labelled as dogmatists. It was refreshing to have a contribution that got to the substance of the policy matters at hand from someone who clearly possesses a serious intellect. We should continue in this vein, insisting on separating the substantive policy debate from politicking and alarmism.

We do not wish to get entangled in the debate on the SA Reserve Bank (SARB) except to say that a recognition of the independence of the bank does not preclude proper consultation with the Treasury. Fiscal and monetary policy must work in tandem.

We particularly welcome Dr Masondo’s comments on the need for a developmental state. We are reminded daily that South Africa is a developing country with huge numbers living in desperate conditions. These conditions are not being improved significantly by welfare payments and it may be that over the years we have lost some focus on development in favour of welfare spending.

While welfare is necessary, we need a primary focus of spending on development. It is abundantly clear that poverty and unemployment can only be overcome by deliberate interventions by the state to draw people into economic activity. Investment itself, however, will not lead to redistribution. We have to develop redistributive fiscal mechanisms which ensure that not only the wealthy benefit from such investment, and here social policy can play a role.

We also agree that a priority is to encourage investment to boost demand for employment to grow. This applies to both the state and the private sector. The primacy of investment is now a common cause by all commentators on the economy. The challenge, however, is to identify by what means this is to be achieved and where such investment should be directed so that it serves the majority of our people. There is ample room for debate on this now.

We need to consider providing a meaningful stimulus to grow the economy using all available instruments at hand to do so in the spirit of the developmental state. This can be done responsibly and within the bounds of our fiscal position along with other market realities, and in this effort monetary policy too has a role, as Dr Masondo has alluded to, albeit not in isolation from other policy interventions and structural reforms.

There are some prospects that government, business, labour and civil society can find common ground here and we, the undersigned, offer our support.

Yours,

Prof Ben Turok, with and on behalf of the undersigned. DM

Signatories:

Prof Ben Turok – Director of the Institute for African Alternatives (IFAA)

Prof Vishnu Padayachee – Distinguished Professor School of Economics and Business Sciences at the University of the Witwatersrand (WITS)

Prof Matthew Ocran – Professor of Economics and Deputy Dean Academic Affairs Faculty of Economics and Management Sciences at the University of the Western Cape (UWC)

Prof Ari Sitas – Former Head of Sociology Department at the University of Cape Town (UCT

Dr Vishwas Satgar – Associate Professor International Relations at the University of Witwatersrand (WITS)

Prof Anthony Black – Professor School of Economics at the University of Cape Town (UCT)

Prof Bill Freund – Department of Economic History at the University of KwaZulu-Natal (UKZN)

Mr Bradley Bordiss – Adjunct Lecturer, Department of Economics, University of Cape Town (UCT)

Prof Rasigan Maharajh – Chief Director, Institute for Economic Research on Innovation, Tshwane University of Technology, RSA

Dr Nicolas Pons-Vignon – Senior Researcher, School of Economics and Business Sciences at the University of Witwatersrand (WITS)

Dr Firoz Khan – Senior Lecturer School of Public Leadership University of Stellenbosch

Mr Dominic Brown – Economic Justice Program Manager Alternative Information and Development Centre (AIDC) Mr Michael Nassen Smith - Deputy Director Institute for African Alternatives (IFAA) Ms Carilee Osborne – Researcher, Institute for African Alternatives (IFAA)

Mr Redge Nkosi – Executive Director First Resource Mone

Ms Joan Fubbs – Former Trade and Industry Committee Chairperson

Mr Riaz Tayob – Researcher Southern and East African Trade Institute (SEATINI-RSA)