PARTIES DEBATE ECONOMIC POLICIES AHEAD OF 2009 ELECTIONS

UNCLAS SECTION 01 OF 02 DURBAN 000077 SENSITIVE SIPDIS FOR AF/S E.O. 12958: N/A TAGS: PGOV ECON EFIN SF SUBJECT: PARTIES DEBATE ECONOMIC POLICIES AHEAD OF 2009 ELECTIONS DURBAN 00000077 001.2 OF 002 ¶1. (SBU) Summary: On November 26, 2008 South African political parties confirmed their optimism about the future of the South African economy and highlighted areas of concern in a lively university-sponsored debate in Durban. The political party representatives did not have major ideological or policy differences on the economic policy issues they discussed, but the opposition took the opportunity to critique some policies of the ruling African National Congress (ANC). The tone of the discourse was generally serious, but as the opposition party debaters "ganged up" on the ANC, the ANC representative resorted to political tactics rather than persuasive rebuttals. End summary. Introduction ¶2. (U) The Graduate School of Business at the University Of KwaZulu-Natal (UKZN) invited five parties to participate in a structured debate of economic policy issues on November 26, ¶2008. Four political parties participated in the economic policy discussion: the African National Congress (ANC),Congress of the People (COPE),Democratic Alliance (DA),and Inkatha Freedom Party (IFP). The ANC was represented by Sihle Zikalala, Provincial Deputy Secretary, COPE, by Phillip Dexter, National Policy Coordinator, IFP, by Narend Singh, MP and Spokesperson on Finance, DA, by Mike Walters, MP and Spokesperson on Finance. Minority Front leader Amichand Rajbansi was invited, but did not attend the debate. Over 200 people, including faculty, students, journalists, politicians, and members of the business community were in the audience at UKZN. Lively Debate: Opposition Unified in Criticisms of ANC ¶3. (U) All party representatives agreed that the current global economic meltdown has been unprecedented and posed serious challenges for South Africa (SA). However, they noted that the South African economy has so far been protected due to its positive economic policies. Opposition party debaters repeatedly raised concerns about the uncertainty caused from "mixed signals" on the country's economic policy sent by senior leadership of the the ANC (namely ANC President Jacob Zuma). The ANC representative, Mr. Zikalala, denied that there were conflicting signals about ANC economic policy, noting that all statements were consistent with the policy determined at the Polokwane National Conference in December 2007. He argued that current economic policies were working, but just needed to be revamped in some areas. ¶4. (U) All debaters agreed that the gap between the rich and the poor remained huge and that unemployment was still the biggest challenge facing South Africa. The speakers also agreed that rural economic development and skills development needed to be addressed for South Africa's economy to prosper. The speakers also addressed a range of more technical issues including inflation targeting, interest rate hikes, fiscal policy, labor law flexibility, and deregulation. COPE's Dexter cautioned against government interference with the work of the Reserve Bank. ¶5. (U) Opposition party representatives argued that BEE has failed and a new empowerment strategy was needed. The ANC's Zikalala said that BEE is working but he conceded that it should be fine-tuned and monitored more closely to ascertain its success. All the opposition party representatives backed tax relief for businesses, particularly small and medium enterprises. ¶6. (U) The debaters discussed the role of the state in the economy and the degree of necessary intervention. The DA representative strongly opposed the idea of state intervention in the economy. COPE's Dexter raised concerns about the inefficiency of state enterprises and called for a re-evaluation of public enterprises to gauge their impact in the economy. COPE also suggested that a new, clearer industrial policy was needed in SA and that it must take into account the diversity and competitiveness of the South African economy. ¶7. (U) Opposition party representatives also raised concerns about the poor state of the public service and government workers. They claimed that rampant corruption and patronage in the public service has negatively affected South Africa's economic growth. ANC Politicizes Discussion ¶8. (SBU) When he found himself under increasing pressure from opposition party criticism and unable to provide solid answers, the ANC's Zikalala blamed apartheid for current inequalities and argued that in 1994 the ANC inherited a dysfunctional economy. He raised tensions when he attacked COPE on the issue of its name and called Mr. Dexter a "traitor" and "former comrade." DURBAN 00000077 002.2 OF 002 During a question-and-answer session, ANC supporters also directed criticism at the IFP, raising decades-old issues. Zikalala's political statements prompted supporters of the ANC (mainly students from the university) to shout at the COPE representative Mr. Dexter and other opposition party representatives during the debate. Comment ¶9. (SBU) The debate was an important platform for political parties to "market" their economic policies to an audience made up of influential academics and private sector representatives. The ANC was at the receiving end of many criticisms of its economic polices, and it was striking to see that the party sent a fairly junior official to argue its case. Mr. Zikalala was clearly unprepared to debate facts and figures. One of the few senior ANC leaders in KZN who could have engaged in a more serious level of debate is provincial party chairperson Dr. Zweli Mkhize. It is disappointing that not many other suitable alternatives come to mind--and makes us wonder if this lack of deep thinkers and articulate debaters may keep the ANC from participating in other meaningful public debate. Also, although South Africa's well-regulated financial sector and exchange controls against derivative purchases protected its economy from first-round impacts of the global financial crisis, the country will not be able to avoid the second round effects caused by the broader economic crisis. DERDERIAN