Looking at the DA’s manifesto

On Saturday the Democratic Alliance launched its manifesto.

Now the manifestos themselves aren’t really going to be the central issue this coming election – because what we’re looking for isn’t really about manifesto issues, but just the plain day-to-day running of government.

That said the manifestos do matter, and the DA’s manifesto should give some idea of what they’re about.

My first criticism is that you can more or less skip the first nine pages, whereas the EFF’s manifesto more or less got straight into it. The DA could stand to learn from that just as a stylistic point.

So, the first element of this that struck me was how basic some of it really is. They want to guarantee private property rights, oppose expropriation without compensation, protect the property rights of foreign investors by repealing the Protection of Investment Act and improving the supremacy of Bilateral (multilateral) Investment Treaties etc…

This is all fairly basic, investors need to be sure that they get what they’re buying, and without these basic protections we’re not getting anywhere. So far so sane.

They also oppose nationalising SARB, as well as changing its constitutional mandate.

Here I half disagree with the DA, because inflation targeting doesn’t really make sense in a young population, you worry about inflation when you’ve got a large retiree population not really when you’ve got mass youth unemployment. A bit more flexibility in SARB’s mandate I think would do us a lot of good.

Onto their jobs act, I’m going to quote line by line.

The right to repatriate profits in the case of international investments. This is one of the biggest barriers to attracting foreign investment that can create jobs and is a vital incentive our government will offer.

Relaxed foreign exchange controls for individuals/businesses willing to invest in the country to provide assurances that they can access their funds as needed.

So basically this means that we will have less controls in place to ensure money made in South Africa, stays in South Africa, with the DA gambling on the idea that foreign investors will put in more than they take out.

That’s not really how investment works. Part of the problem we’ve had since 1994 has been losing economic diversity – which means that big international operations have come in and bought out a lot of our local business, and the profits have flowed out of the country.

This is just going to make that happen faster.

Access to a specialised team of arbitrators, located in the Department of Trade and Industry (DTI), who will assist medium-sized businesses in terms of the International Arbitration Act, when necessary. This will assist medium-sized businesses who may find the cost associated with arbitration prohibitive and will unlock the growth potential of the bill for these companies.

This on the other hand is a good idea, it improves our ability to compete with foreign firms, giving them the resources to know exactly what the state of our trade agreements are is something that should have been being done already.

A labour market flexibility exemption clause aimed at making the process to hire and fire employees simpler and allowing potential employees to opt-out of the relevant sectoral minimum wage (which would have a new minimum of no less that the old age grant) while still ensuring occupational safety and the human rights of all employees are upheld. Labour costs are one of the biggest inputs that businesses consider when investing, and this clause has the potential to unlock hundreds of thousands of jobs.

This is part of why I don’t support the DA. I have generally been basically an employee for most of my working life, and what the DA is offering here is lower pay and lower job security.

I don’t think minimum wages are really our big problem regarding economic growth. I think the actual effect of what the DA’s proposing here won’t be higher employment, but rather lower inflation.

The reason I think this is that you don’t hire more people than you need. Overhiring simply creates labour unrest because if you’ve got a lot people who’re paid badly but have a lot of time on their hands, they’ve got the time to talk about how badly paid they are.

A business should always operate on just slightly more people than it strictly needs, because that way they’re kept too busy to get really unhappy.

Lowering wages and elements that provide job security thus doesn’t really encourage employment, it just lowers demand, which results in less inflationary pressure on the market.

Also making things better for business that wants to fire people doesn’t strictly help employment. This past month Activision Blizzard announced record revenues, and followed that up with another announcement, they were going to get rid of 800 members of their staff.

This was after they gave their new CFO a signing on bonus of $15 million.

Corporations will abuse workers as far as they’re allowed to – and allowing more abuse doesn’t lead to better employment opportunities.

Increase the transparency of the recruitment process by:
– ensuring high-profile public sector jobs are properly advertised through a variety of media; and
– making a hotline available to report instances of employment corruption.

This would be really good news for newspapers. One of the things that really hit the news industry hard was the loss of government advertising that came through the introduction of government’s tender portal.

It isn’t a big point but it is interesting to see how the influence of the DA leadership journalistic background comes into their politics here.

Introduce legislation to protect job-seekers, particularly women, who are vulnerable to coerced transactional sex requests. The legislation should:
– codify sexual exploitation as a distinct form of corruption;
– protect individuals who report incidences from self-incrimination, therefore changing the charge from bilateral to unilateral; and
– increase awareness of rights that job-seekers and employees have.

While I think this is a good idea, I think the net effect of making it easier to hire and fire people. Abuse of this nature tends to rise with the power of the abuser, and a lot of what the DA’s pushing here is a reduction in the power of the worker.

Their points on labour unions, while I think the internal running of a union should be up to the union, I also think that unions should pay for any damage their protests cause and people who threaten others for not taking part in protests that they don’t agree with should go to jail.

Most of it is fair enough.

The voluntary national service year – is a good idea. I think however there are far too many young South Africans coming into the job market to restrict it to the three streams the DA has cited – policing, healthcare and education.

I think to absorb the number of new workers every year there is going to have to be an overall expansion into other categories.

Also one must note that in terms of healthcare we’ve already got a mandatory period of public service.

On government spending,

Our gross national debt-to-GDP ratio stands at 55.8% meaning that it would take 55% of the value of everything our country produces in a year to pay off the debt this government has racked up.

The UK’s debt to GDP is 87.7%. France has a debt to GDP of 97%. The US has a debt to GDP of 105%. Japan has a debt to GDP ratio of 253%.

55.8% I don’t think is panic stations. Also, austerity programmes have generally led to higher degrees of national debt.

This is because of the problem of cost cutting in business in general – you never quite know why a specific cost came into the system in the first place so when you cut it, you don’t realise that you’re cutting something that actually saves you money somewhere else.

The one that leapt out to me in this section though is:

Requiring that government guarantees to SOEs do not increase as a percentage of GDP.

Eskom right now has a gun to our heads. It is the single biggest bottleneck to South African economic growth, and if it goes under so does the economy. It is in a position of being too big to fail.

This is why it is good that it has not been privatised, because privatisation of a business in that position wouldn’t lead to better delivery of services, it would just lead to a situation similar to the California brownouts where Enron was messing with the power supply in order to manipulate the prices they could charge for electricity.

In other words exactly what Eskom’s doing right now, so no real difference, except that we can vote out the people who appoint Eskom’s board, so we do get a little bit more of a chance to tamp that sort of behaviour down in this next election.

Anyway, Eskom’s got this gun to our heads, so if it requires a bailout it is going to get its bailout eventually, that includes increases in government guarantees, whether we introduce legislation to limit that or not. Introducing new legislation only to have to get rid of it later is just pointless busywork.

Institutional independence is all good, and so is a lot of what they have to say on fiscal security except for…

Reject the ANC’s proposed National Health Insurance (NHI) which is little more than the creation of another enormous state-owned entity which is very concerning considering the current government’s dismal performance in managing SOEs and its equally dismal performance in providing healthcare. The NHI presents an idea that could sink South Africa financially. Instead the DA proposes Our Health Plan, which will improve healthcare in South Africa without threatening the financial health of South Africa – see our full plan for providing a working and quality healthcare system in the Health section.

Most of the first world has some form of universal government healthcare, and the NHI is patterned on one of the most successful examples in terms of bang for buck – France’s system. While it would probably fail under the ANC, because the ANC are bad, it is not in and of itself a bad idea.

A well managed NHI could be a major boon to our economy, because not having to deal with private insurers and medical aids actually can significantly reduce the cost of business for other companies, as well providing preventative healthcare that reduces the amount of sick leave our workers take.

The DA’s view on empowerment, as I’ve said business shouldn’t overhire because that causes problems, so I don’t think measures to encourage business to hire more are really going to make any real difference.

Mentoring is good and all, as are employee share ownership schemes, but personally I still think mandatory profit share bonuses would be a good idea too.

The big thing in the DA’s land reform policies that hasn’t already been covered is releasing government land to the private market, which sounds good. If we’ve got land that is going unused, so long as it isn’t something like our national parks (Which are major tourist draws) there isn’t really any reason not to use it to deal with landlessness.

And of course making the process work better by eliminating corruption is always a nice idea.

On education I think one of the problems we have as a country is we how we approach it from the national standpoint – we tend to look at it from the perspective of the student’s welfare.

So these bursaries sound great, but if they’re for subjects where we’ve already got an over-abundance of students, you’re just wasting the students’ time. They’re going to university to learn skills for which the market is flooded.

I think a better approach, rather than having an emphasis on bursaries for students from poor backgrounds is to do it on a subject basis – gear it towards our shortages so that when these students get out of university they can go on to get jobs.

Scrapping the NYDA to replace it with what looks like another NYDA, honestly I don’t see the point. Just manage what we’ve got properly.

Merging the Department of Higher Education and Training (DHET) and the Department of Science and Technology (DST) to form the Department of Post-School Education, Research and Innovation.
It will direct and fund research and innovation as well as attract investment.

I would rather have these remain separate. The reason for this is that if they are combined, they end up dipping into each other’s budgets more – and the net result I think would be cutting our investment in science and technology.

That investment’s pretty important because it gives us an edge in developing new patents and products which can then be taken to market.

Unleashing small business, the biggest that could be done for that is fixing up Eskom. Small business doesn’t have generators, and that means a restaurant during load shedding could lose both a day’s work, and its stock.

That said, this is what leaped out at me:

Thirdly, improving cash flow by implementing a temporary amnesty on tax penalties for small businesses and ensuring government and big business pay suppliers within 21 days.

One of the major issues with government and business is the fact that government under the ANC hasn’t been good at paying on time, which has played merry hell with contractor’s cash flows. Sorting this out shouldn’t be a policy position, it should be basic, and its just sad that this has to make its way into the DA’s manifesto in the first place.

Most of what the DA’s got to say on small business is good for it, but its going to have to find funding for that and that’s a bit at odds with its call for a tighter fiscus.

So next up – is the DA basically saying they’re going for city led growth. This is in stark contrast to the ANC and EFF, who push for a more rural based approach.

My view on it is that we should actually push for taking the pressure off of our cities. If we look over the past few years, Cape Town very nearly ran out of water because it’s infrastructure just cannot keep up with its population growth.

I think a push to improve our smaller municipalities, and reinvigorate the small towns is more in order. That doesn’t mean we go for an agricultural basis for our economy, but rather we look at how we can improve access to things like the internet and reliable power for rural areas so that there are more jobs there, rather than continuing with the massive urbanisation we’ve seen over the last two decades.

Trade and investment, well there’s this:

Auditing key basic infrastructure (such as roads, railways and air-freight facilities) with the aim of identifying the most serious maintenance backlogs holding back regional and international trade.

Which is just another thing that is sad to see that this has to make it into a manifesto – it something that should go without saying but under the ANC it needs to be said.

In fact that pretty much goes for most of the stuff here. A lot of this is just the basics that haven’t been being done.

The whole plan for making manufacturing work again looks good, except…

Lowering corporation taxes for manufacturers to 15%, conditional on re-investment in capacity that expands production in a manner which absorbs labour, skills training and Corporate Social Investment (CSI). The criteria to qualify for this tax cut would be spelled out in our Jobs Act.

I criticised the EFF for ‘where’s the money coming from’ with regards to all their promises, and I’m starting to see something similar here. There’s tax cuts, there’s hostility to borrowing, where’s the money coming from?

What I like in their agricultural policy is the fact that they’ve actually got climate change making its way into there.

That’s going to be a central concern for agriculture going forward, so thumbs on actually tackling that.

Their ICT policy is generally good, not much to really say there, but lets get onto what the DA’s government would mean for Eskom.

  • Implement our plan for the entity which was introduced in our Independent System and Market Operator (ISMO) Bill.
  • End Eskom’s monopoly by breaking it up into electricity generation and transmission entities. This will be done by establishing an independent body owned by the state tasked with buying electricity from electricity generators. The operator will function as a wholesaler of electricity that sells electricity to distributors and customers at a wholesale tariff.

This is more or less Ramaphosa’s plan. An important thing to note here is what they’re saying will end Eskom’s monopoly won’t end Eskom monopoly, they’re still going to be the only ones selling electricity.

Complicating the structure won’t change anything.

Licensing the right to generate power (above a certain threshold) and using the proceeds to service Eskom’s debt. Breaking up the failing entity will not make its debt disappear.

In order to service Eskom’s remaining debt and ensure the maintenance of the grid going forward licensing fees from IPPs will be crucial. Licencing fees would not be prohibitive and would only be charged for as long as it took to eliminate the fiscal risk posed by Eskom’s debt.

The introduction of IPPs is necessary at this point, not so much from the need to pay off Eskom’s debt, but to improve generation capacity. We need the extra power supply in order to fuel the rest of our economy, so this is a good emergency measure.

For SOE’s in general we’ve got:

Analysing all SOEs with the aim of identifying those which should undergo full or partial privatisation by bringing in private equity partners and disinvesting from non-core SOEs urgently.

This will bring in vital cash injections, skills, systems and expertise to turn-around a number of SOEs, while ridding the fiscus of the burden of the worst performers. State-owned companies that perform tasks that can be more effectively delivered by the private sector can and must be privatised.

What goes through my head in this is that you need a willing buyer to sell something. You can say you want to privatise SAA, but who wants to buy it? Also, you’ve got issues like with Denel.

The Saudi Arabian government wants to buy that so that they’ve got a reliable source of weapons, the problem is they want a reliable source of weapons because they’re a human rights horror show and the rest of the world is increasingly uncomfortable selling them guns. They’re looking to us because we’re desperate.

We need willing buyers that we can sell to in good conscience, and I’m not seeing a lot of that kind of buyer stepping up.

Depoliticising the boards of the boards is a good idea, in fact having cadres there never made sense in the first place. They should be running as well as they can whoever is in power.

Moving the SOEs to their relevant departments makes sense, having two bosses never really works out well.

Energy policy is mostly good but take note that they are in favour of fracking in the Karoo.

The DA’s alternative to the NHI – is to ask health insurers and medical aids to create lower priced plans that will cover the poor. If they wanted to do that they’d be doing that, and honestly are honestly are there any fans of Discovery Health?

I still think the NHI looks better than this.

The DA’s position on education is all stuff that should go without saying, which makes it very sad that they have to say it. I mean take this for example:

Ensuring ALL schools have sufficient taps and toilets and eradicating all remaining mud/asbestos schools and pit toilets in South Africa, as well as classrooms or facilities containing asbestos. This will be achieved by:
a. reversing the current government’s slashing of the school infrastructure budget;
b. taking out the ‘dodgy’ middle-men – provincial governments must not use ‘Implementing
Agents’ with bad track records and corruption; and
c. no longer blocking donors who want to fund or companies willing to build schools at no, or cut, costs from working with the department to deliver schools (subject to strict quality controls).

That this has to make it into a political manifesto says a lot about the ruling party, and none of it good.

With regards to gender inequality an interesting thing I saw there was regarding sex work:

Exploring possible legal models around sex work and adopting an alternative legal framework that will reduce exploitation, abuse and rape of young women and men.

Cyril Ramaphosa a long time ago argued for legalising sex work as a means of helping control the AIDS pandemic, so its interesting to see the DA considering something similar here to reduce violence against sex workers.

A lot of the rest of the DA’s manifesto continues the theme of including a lot of stuff which is doing the basics, like having enough soldiers on our borders to maintain our borders.

That I think is what people who vote DA are really looking for. There is a lot of trade-off for those basics, so I don’t think anybody who doesn’t vote DA is being an idiot, I think there is a lot here to oppose, but at the same time, there has been definite hard work and thought put into this.

It isn’t entirely pie in the sky, and a lot of what I have to say about the economics of it is from the standpoint of a neo-Keynesian, someone who follows the Chicago school of economics would say the opposite to me on a lot of these things, so there is actually a school of thought that has gone into this, there’s a logic here and it isn’t pandering.

The upshot of this being that it has given me food for thought in the upcoming elections. I’m not entirely keen on the DA, but for once I think they’ve put forward something people can vote for or against, rather than just being a vote for a “strong opposition”.

  • Picture courtesy of the DA via Facebook.

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