The Economic Implications of Political Manifestos: Part 2

Introduction.

The first article explored the economic implications of the left-leaning policies proposed by the EFF. This article aims to investigate the short-term economic policies of parties that occupy a centrist position on the political spectrum. The ANC holds a center-left stance, while the DA, ActionSA, BOSA, and Rise Mzansi lean toward the center-right. From a policy perspective, these parties are largely interchangeable, with only minor differences in policy implementation.

Energy.

There is no marked difference in the solutions proposed by these political parties to address the energy crisis. Two noteworthy areas of commonality among these organizations are:

Competitive Energy Markets: This involves privatizing the state-owned parastatal Eskom. In this proposed competitive landscape, electricity generation would be supplemented by Independent Power Producers (IPPs) and "Prosumers," as the DA and Rise Mzansi refer to them. However, it should be noted that the Energy Availability Factor has declined from an average of 66% in 2019 to an average of 52% in 2023. Despite the liberalization allowing private institutions to enter electricity generation, this has not been sufficient to compensate for the loss of energy availability from decommissioned coal power stations. Over this period, the price of electricity has increased by 54.91%. Thus, despite the move toward privatization, lower prices and higher output of electricity have not yet materialized; in fact, the opposite has occurred. Yet, these political parties remain firm in their belief that this is the solution to the energy crisis.

Just Transition: This climate change initiative advocates for greener technologies in energy production, implying the decarbonization of Eskom's electricity generation. However, according to an Eskom report, South Africa has 200 years of coal reserves, which means that, according to Ricardian economics, South Africa has a comparative advantage in coal energy production. Thus, it would be uneconomical to decarbonize while there are clean carbon technologies available to ensure competitive energy production and a cleaner environment. This proposition destabilizes energy availability and compromises South Africa’s ability to move away from a stagnated economy.

Surprisingly, the ANC makes a radical proposition to address the energy crisis by proposing the development of gas, nuclear, and hydro power projects to increase energy generation.

Employment.

There is a greater diversity of proposals from these centrist political parties regarding South Africa’s unemployment crisis. The ANC views the state as the primary institution for creating employment opportunities, aiming to sustain 2.5 million work opportunities through public employment to deliver public goods and services in communities. In contrast, the DA and ActionSA take a more right-leaning approach, proposing less state involvement in the labor market. They suggest easing labor market regulations to make it easier for employers to hire and fire employees, including weakening the bargaining power of unions, particularly for employees in SMMEs. While this approach might make the labor market more dynamic by reducing employment security, there are no guarantees that it will lead to lower unemployment.

BOSA and Rise Mzansi propose digitizing government administrative processes, which may increase efficiency and enable those with the requisite skills to fill government vacancies more effectively.

There are three central tenets to their proposals that have proven to foster job creation:

SMME Support: The backbone of job creation lies in the flourishing of small businesses within the economy. All five political parties aim to support SMMEs by fostering innovation, ensuring access to finance, and creating a conducive regulatory environment.

Infrastructure Development: Improving connectivity and reducing costs through infrastructure development attracts investment, creating a favorable environment for new businesses and job creation.

Rising cost of living.

The average salary in South Africa has increased by 67% over the past 10 years, while the cost of living, measured by consumer price inflation, has risen by 64% in the same period. The DA recognizes this issue and proposes that progressive taxes be adjusted for inflation. This adjustment ensures that as prices rise and incomes increase to keep pace with inflation, people don’t get pushed into higher tax brackets unfairly (a phenomenon known as "bracket creep"). Essentially, it keeps the tax system fair by preventing inflation from increasing the tax burden on taxpayers simply because their incomes have increased to match rising costs.

The ANC aims to curb the rising cost of living by providing access to healthcare through the controversial National Health Insurance (NHI). Both the DA and the ANC prioritize food security by proposing VAT exemptions on essential food items. Additionally, the ANC proposes regulating rent for student accommodation, while ActionSA offers a practical solution by proposing the release of hijacked and abandoned buildings in the central business district (CBD) for housing.

With the exception of BOSA, the rest of the political organizations propose some form of grant intervention scheme. The DA suggests a 50% increase in the child support grant to align it with the official food poverty line. The ANC proposes making the Social Relief of Distress (SRD) grant permanent by converting it into a Basic Income Grant. ActionSA is bolder in its proposition for a universal basic income, planning to pay R1,622 monthly to recipients. ActionSA believes that through the multiplier effect, this stimulus will increase growth by an additional 2 percentage points, leading to the creation of 1.6 million jobs.

Immigration and Trade Policy.

With the exception of the DA, all other political parties propose streamlining the immigration process for foreign nationals with critical skills to bolster South Africa’s economic performance. The ANC proposes a complete overhaul of the immigration system in line with the Draft White Paper on Citizenship, Immigration, and Refugee Protection. This plan aims to address irregular and illegal migration, simplify visa application procedures, and introduce a unified law for citizenship, refugees, and migration. ActionSA, on the other hand, proposes securing the border through the establishment of a Border Management Authority (BMA) to reduce crime and harmful illegal trade in South Africa. Additionally, it plans to improve deportation processes for foreign nationals.

Conclusion.

In summary, South Africa’s centrist political parties present a slightly diverse array of policies aimed at addressing the nation's pressing economic and social challenges. While there is some convergence in their approaches to issues such as the energy crisis, unemployment, and the cost of living, the nuances in their proposals reflect differing ideological perspectives and priorities. The ANC emphasizes state intervention and social welfare, aiming for comprehensive reforms in healthcare and immigration, alongside regulatory adjustments to ease living costs. Conversely, the DA advocates for market-driven solutions, pushing for tax reforms and deregulation to stimulate economic dynamism. ActionSA introduces pragmatic solutions, such as repurposing unused buildings and advocating for a universal basic income. Meanwhile, Rise Mzansi and BOSA focus on digital efficiency. As these parties vie for influence, their policies collectively underscore the complex and multifaceted nature of South Africa's path to sustainable development and social equity. Voters will need to weigh these diverse approaches to determine which vision aligns best with their aspirations for the country's future.