Zuma pledges policy continuity, job creation

Published: June 24, 2009

As South Africa enters its first economic recession for 17 years, analysts and investors watched closely as new president Jacob Zuma laid out his policies in his inaugural state of the union address.

Zuma certainly made all the right noises, touching on issues from the need to address the high violent crime rate, poverty alleviation and access to healthcare and education. On the issue of the unemployment, which hit 23.5% this year, his plans are nothing short of bold – half a million new jobs to be created by December of this year, and 4mn created in total in the next five years, via public work programmes.

"These measures are not a substitute for the permanent jobs that must be created and sustained in the economy," Zuma said. "The steps we take now must not undermine our ability to take advantage of the upturn. We must do our best to retain skills and labor."

He also, importantly for investors, pledged continuity with the economies policies of the Mbeki regime.

“We have not experienced the worst effects of the global downturn, due to the prudent macro-economic policies that had been followed,” Zuma told lawmakers in Cape Town. “The pursuit of our objectives has always been based on the maintenance of a stable macroeconomic environment. This is not going to change.”

Political commentators and opposition parties alike all commended the sentiment but were left wanting on the detail.  Independent political analyst Daniel Silke says most wanted fewer words and less rhetoric: “Observers like concrete plans which were in short supply. The issue of job creation will not be solved with promises.’’

While the details of Zuma’s administration may yet be vague, the need to manage relations with the powerful labour unions Cosatu and Numsa are all too evident.  These large unions are keenly aware of the debt they are owed by the ANC for their election support. The ANC will have to balance the unions’ socialist-leaning demands with private sector reality.

The relationship has already become turbulent, with the unions protesting outside the reserve bank during Monetary Policy Committee meetings and advocating rolling strike action across the country if their demands for significant rate cuts are not met.  Cosatu president Sdumo Dlamini has even called for the resignation of Reserve Bank Govenor Tito Mboweni: ‘’While he has been there, we've been complaining about the same issues. We need change there."

According to Tony Twine, senior economist at Econometrix, developments within the relationship between the ANC and the unions are "being minutely observed" at least on a local level. Silke feels Zuma will need to walk a tightrope for most of his time in office: "The ANC is always a fractious party. Zuma will sometimes disappoint his allies and sometimes toe their line. He has given the unions trust and in return, they will need to compromise with business."

The Zuma administration has won praise for appointing politicians with exemplary track records to key positions in government rather than merely rewarding loyalty. One such key appointment is Pravin Gordhan the new finance minister. He replaces Trevor Manuel, the man the West has largely regarded as "the" safe pair of hands in the ANC government for the past 13 years. Gordhan was previously at the helm of the South African Revenue Service and is, according to Twine, hugely respected for bringing in ultra-modern technology for tax collection, reporting and assessment: "Gordhan comes to his new office with the image of a technically strong achiever, who has solved more problems in the past than he has created."

In his first address to parliament, Gordhan said despite global economic woes South Africa was fortunate that its fiscal positive was strong, public debt under control and that the foreign reserve position of the country in good health: "Our development path is about restoring economic growth, decent jobs and livelihoods, and about a clear understanding of the respective roles of government and the private sector that support the dynamic of an enterprise-based economy while continuing to invest in the institutions and enabling arrangements of a just and inclusive society."

South Africa’s fourth democratically elected president has pledged an end to the corruption and government sloth that the previous ANC administration has been accused of. The words sound right, now the market is watching for concrete policies.