Why Treasury’s ‘surprise’ document on South Africa’s economy is a big deal

Finance minister Tito Mboweni’s decision to release a detailed and well researched economic policy document late on a Tuesday evening caught many by surprise – but analysts say it’s likely exactly what was intended.

The policy document, which covers 77 pages and includes politically controversial recommendations like selling off Eskom assets and reforming many government departments, was known to be floating around government, and had passed departments for months, but was expected to be released closer to the mid-term budget in October.

The document was unexpected, and is likely because of politics at play, according to Intellidex analyst Peter Attard Montalto.

The document places emphasis on evidence-based recommendations, grounded in research, and is “tightly argued and heavily referenced”, he said.

It’s this aspect of the document that makes it the most controversial – as it puts forward government policy on evidence, rather than social motivations (which often do not carry the necessary research to back them up).

This is a break away from typical government policy, which tends to focus on the ‘social compact’ – the ‘social arrangement’ where citizens and businesses work with government to meet its policy goals, which are often broad, ill-defined and focus on inequality and welfare.

“It is quite clear this paper is meant to be divisive – and this is where the politics is really key, and ultimately we believe the purpose of publishing now,” Attard Montalto said.

“We view this paper as drawing fault lines around evidence based policy and leadership in getting reform done. The language is hard hitting and frank and it exudes a can-do attitude, asking simply how to get faster growth – it is also uncompromising, starting off by saying that SA’s current trajectory is unsustainable.

“It seems, then, to want to divide people in camps of people who want to follow the evidence and just get on with it, and those that are happy to be continually distracted by ‘social compacting to death’ policy.”

Attard Montalto said that the fact the public comment has been asked for is also significant, as this will also likely build more support for some of the changes.

“If (the policy document) can mobilise and solidify a more robust evidence based debate on policy (lacking in so many forums like NEDLAC) as well as additional pressure from business on the president for reform – then it will have been a success,” he said.

The release of the document will also carry political fallout for those who compiled it.

According to the Institute of Race Relations, the policy paper is an attempt to circumvent obstacles to structural reform in both the cabinet and the ANC and is likely to trigger an angry reaction from within the government and parts of the party.

Frans Cronje, chief executive officer of the IRR said that the document is likely to be welcomed in analyst and investor circles – but not sufficiently enough to change investor sentiment, and will rather be read as further evidence of the contradictions and confusions that continue to bedevil government policy in South Africa.

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