The first official signs of the direction in which the new leadership of the ANC under Jacob Zuma will seek to shift economic policy have emerged with the public release of the organisation's conference resolutions.
The final resolution on economic transformation - first discussed at the ANC policy conference in June and adopted by the recent Polokwane conference - contains subtle but important additions which alter the emphasis of how economic policy has been implemented over the past 10 years under President Thabo Mbeki.
First and most significant is the addition of a clause that makes "the creation of decent work opportunities the primary focus of economic policies".
WHAT IT MEANS
 Jobs not inflation the problem
Debate on role of the central bank is needed
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This makes jobs government's priority, an objective which though generally shared has at times been downplayed or traded off against other objectives by different government ministries.
"This central objective should be reflected in the terms of reference of development finance institutions, bodies such as the competition commission, the terms of public procurement s, the sequencing of industrial and trade policy reforms and our macro economic policy stance," continues the clause.
Though not mentioning the Reserve Bank by name, the intention of the above clause is to, among other things, allow for a debate on the mandate of the central bank beyond the confines of dealing with inflation. At present, the mandate of the Bank - as contained in the constitution - "is to protect the value of the currency in the interests of balanced and sustainable economic growth".
The importance of creating or preserving jobs is not part of the Bank's mandate, a fact that many critics, particularly on the Left, deplore, arguing that its narrow focus on inflation leads to a stringent interest rates regime that chokes growth and job creation.
A commonly used argument in ANC circles is that even the world's biggest market economy - the US - requires that its central bank consider, first and foremost, the effects of monetary policy on employment.
A member of the ANC's economic transformation sub committee says " though the resolution doesn't mention the Reserve Bank, it will give strength to those arguing about its mandate. The resolution makes jobs the first objective. There will have to be a debate on the Bank's mandate this year, though not its independence."
Closely linked to discussions on the Bank is the practice of inflation targeting, the tool used by the Reserve Bank since 2000 in which a target is set (by national treasury) towards which the Bank attempts to steer actual inflation, by increasing or decreasing interest rates.
Cosatu has described inflation targeting as "disastrous" and as being responsible for falling economic output in some sectors and static jobs growth. Though not quite so firmly, the ANC's other key ally, the SA Communist Party (SACP), has also criticised the present target range of 3%-6% for being too rigid under present conditions.
Inflation targeting is certain to be up for discussion at the ANC's lekgotla this weekend, as well as at the cabinet lekgotla to be held in the week thereafter.
Since Zuma's election as ANC president last month, key positions in the ANC have been filled by his supporters in the Left of the alliance, Cosatu and the SACP. They are now in a position to sway economic thinking in the party and exert their influence on state policy.
The SACP's Jeremy Cronin, now a member of the ANC's influential national working committee, this week reiterated his party's and Cosatu's strong opposition to inflation targets.
Private-sector economists are divided on the merits of revisiting the target. While some argue that widening the band undermines the key role of the Bank, which is to provide certainty around inflation expectations, there are others who believe that interest rate hikes are not having the desired effect of curbing consumer spending or inflation, which is being driven by high prices of oil and food - factors outside consumers' control.
A second subtle shift in policy in the resolutions is the greater emphasis given to industrial policy. The resolution makes a clear statement about the relative importance of trade and industry, arguing that "industrial policy should lead our overall approach to sector development, while trade policy should play a supportive role and be sensitive to employment outcomes".
This is in line with the direction already being forged by the department of trade & industry and embodied in its new industrial policy strategy. However, the resolution gives the department an extra boost by stating that industrial policy must be "active and well-resourced". This will strengthen minister of trade & industry Mandisi Mpahlwa's hand in discussions on the 2008/2009 budget, already in their final stages.
On the recent debate between Mpahlwa and finance minister Trevor Manuel on whether tariffs should be further reformed, the ANC resolution seems to have come down on the side of Mpahlwa, arguing that SA should continue to use trade tariffs to protect industry and should avoid obligations to significantly "liberalise" the manufacturing or services sector.
"The resolution recognises that tariffs have been brought down substantially since 1995 from an average of 23% to around 8%. In terms of our action plans, tariffs are already being reviewed in areas which make key inputs into the infrastructure programme and where SA firms are not competitive, for example in capital goods and transport," says a DTI official.
Statements on the existence of monopolies have also been beefed up, though the suggestions made on how to deal with the problem are in line with existing regulation. For instance, a clause has been added to the original resolution calling on government to "find ways and means to intervene" in monopolies based on state resources.
One way would be to take "custody of these resources on behalf of the people", such as through the new mineral rights regime. Another would be to ensure competitive pricing for downstream industries through regulation - government's on going wrangle with ArcelorMittal being a case in point.
Some of the other things that the resolution is demanding include:
- "An institutional centre for government-wide economic planning" along the lines of the economic policy unit already located in the presidency or a new ministry of economic planning;
- Expansion of government's public-works programme;
- New ways of "alleviating the burden of low-income earners" - some ideas being further rebates on rates and taxes or services; and
- Establishment of an ANC policy institute to monitor and evaluate government policy. The policy institute, which seems likely to be established, will aid the ANC in monitoring the implementation of policy by government.
ANC resolutions carry enormous weight and should filter through to government policy for the next five-year period. Though the executive in government does have a large amount of leeway in interpreting how policies are interpreted and implemented, cabinet ministers or government departments are bound by the resolutions and cannot act outside them.
There are at least two ways in which their compliance can be insured. The first is through ANC structures, especially the national executive committee (NEC), which meets regularly and also has standing committees which focus on areas of policy and implementation.
The second is by using the oversight mechanisms of parliament. Many of the new NEC members are members of parliament and are expected to play an increasingly vigilant role over members of government. This is in marked contrast to the weak oversight of ANC ministers and departments over the past few years before the Mbeki-Zuma split.
Keeping the executive in line will begin with summoning ministers or directors-general to portfolio committees or asking hard-hitting questions in parliament.
