The NDP and the great good policy myth – Politicsweb, 7 March 2016

By John Kane-Berman 

Many investment analysts, business leaders, and newspaper commentators proclaim that South Africa has "excellent policies but poor implementation". At best, this is a half-truth.

The fount from which all current good policies supposedly flow is the National Development Plan (NDP) adopted in 2012. It proposes such things as "urgently" fixing the country's infrastructure, promoting entrepreneurship, "giving clear certainty over property rights", allowing private investors to buy minority stakes in state-owned enterprises, and appointing school principals on merit. None of these has been implemented. Nor have proposals to simplify the regulatory environment to "boost mass entrepreneurship".   

Although failure to implement these and other bits of the NDP has been criticised, the economy would be better off if other aspects had also not been implemented. These include various "active and intensive" measures to bring about "rapid transformation". Recent legislation on investment and a new bill on expropriation are designed to accelerate "transformation", as are various other measures in the pipeline dealing with agriculture and land reform. All are likely to be detrimental to investment and growth.  

Also on the agenda is a national minimum wage, in line with the NDP's proposal that agreement between unions and employers on entry-level wages be "facilitated". This despite the NDP's own recognition that many workseekers cannot enter the labour market because it "locks out" new entrants. The NDP also wants stricter regulation of labour broking and labour placement - another proposal that has been implemented.     

Even though the NDP also recognises that South Africa's "developmental agenda could fail because the state is incapable of implementing it", it favours continuation of affirmative action policies, there and elsewhere. Not only must race "continue to be given the greatest weight in defining historical disadvantage for at least the next decade", enforcement of racial policies must be made "more robust". This has now happened with the enactment of amendments to affirmative action and empowerment legislation providing for heavier fines and prison sentences for violations.

If these provisions are enforced, company directors and managers may one day face fines or imprisonment for failure to adhere to equity and empowerment requirements. For their predicament, they will be able to thank the business organisations that endorsed the NDP and are today calling for it to be more decisively implemented. And if directors and managers find themselves one day hauled before unsympathetic judges, they will also have the NDP, and those who endorsed it, to thank. Judges, says the NDP, should have "progressive credentials". And the law "must be interpreted and enforced in a progressive, transformative fashion".

South Africa's business leadership has recently come in for renewed criticism for its failure to stand up to the African National Congress (ANC) and for its general political timidity. Its track record is actually worse than that. By endorsing the NDP, most of the country's business leadership has endorsed some of the policies that are doing such harm to the economy. And if taxes are raised to finance the proposed National Health Insurance system, business will have no cause to complain, for the NDP endorsed that too. Nor can business complain if a carbon tax - also endorsed by the NDP - puts up operating costs and slows down growth.

Although the NDP highlighted the importance of the private sector in generating enough jobs to reduce unemployment to the hoped-for rate of 6% by 2030, its proposals do less to liberate the private sector than to empower the state. "Active and intensive intervention" is what was promised, and that is what has been delivered. Contrary to the conventional view, our economic plight arises less from good policies poorly implemented than from the harmful policies that continue to be piled on to the Statute Book. Unless this problem is more widely recognised, we are unlikely to see sufficient pressure for the policy changes necessary to reverse our downward slide.    

* John Kane-Berman is a policy fellow at the South African Institute of Race Relations, a think-tank promoting political and economic freedom.

Read the column on Politicsweb here.