Economics matters. Periodic and frequent supply and consumption of statistics, be they demographic, social or economic, matter even more for economic policy. Yet our South African democracy has monumental lapses when it comes to statistical information.
Our policymakers, instead of mobilising statistics for illuminating complex phenomena for policy action, look at statistics like a drunkard who uses the lamppost for support when it is there to light his way home. Statistics are only an incidental verse in the bible of policy space in SA.
Those who have influenced the public policy and economic systems of the world know how crucial statistics are. For instance, when it comes to the dilemma and demise of capitalism, crucial statistical analyses are led by Karl Marx in Das Kapital, Friederich Engels in Socialism: Utopian and Scientific, and Vladimir Lenin in his Imperialism, the Highest Stage of Capitalism.
In 2003 Hernando de Soto provided deep genetic markers in his seminal work The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere else. He illustrated how digitisation and digitalisation transform dead capital, resulting in economic inclusion. Since the 2008 financial crisis, Joseph Stiglitz has taken a deep economic and statistical dive through a number of his books.
Towards the end of the first decade of the 21st century two economists shook the world. They are Thomas Piketty, who stepped on the scene with Capital in the Twenty-First Century, and Mariana Mazzucato, who in her book The Value of Everything dismisses the long-accepted binary view of the agile private sector and the lumbering, inefficient state. She cites many of the massive investments that the state makes in areas such as the internet. Mazzucato serves on President Cyril Ramaphosa's economic advisory panel.
Towards the end of my first year in office as statistician-general I made the assessment that there was a need to re-engineer our economic statistics as a matter of urgency. In March 2003, then finance minister Trevor Manuel asked: "Are you sure that your [consumer price index] measures are right?"
I said there was nothing to worry about, but I would look into it. We did runs and I demonstrated that there was no problem. I then asked the team to dig deeper into this matter. I had a nagging worry. Alas, there was not a small but a big problem. I called Manuel and told him the big problem with the CPI and how I was going to solve it.
A week later, John Stopford of Investec made public claims about a CPI gone rogue, and all hell broke loose. This is the story of the 2003 housing index in the CPI. The country paid a high price. However, all's well that ends well and the CPI became the first major re-engineering project by default.
What is worrisome today is the amount of attention given to the debt-to-GDP ratio and inflation targeting. These are but a modern-day fire pool and a scandal of measurement that will turn 2003 into a picnic by comparison. This will not end well at all. It is going to sink not only Stats SA but the country.
Let me explain. Stats SA over a 10-year period has not run an income and expenditure survey (IES). The last one was run in 2010/2011. One was supposed to be run in 2015 but was not because the Treasury, cabinet and parliament did not allocate the resources to run it. Stats SA has not run a living conditions survey (LCS) nor an economic census for the same reason of financing.
What is worrisome today is the amount of attention given to the debt-to-GDP ratio and inflation targeting
The IES covers 600 products and provides data for producing the basket of weights upon which the CPI is determined. The CPI is used to deflate the GDP, thus transforming it from a nominal growth outcome to a real growth GDP. The LCS provides measures on poverty. The economic census provides data that would enable Stats SA to update the structure of the GDP components and ultimately make SA comparable globally and address its information on global competitiveness.
Why are the debt-to-GDP ratio and inflation targeting relevant in this context? GDP is measured in real and nominal terms. For it to be measured in real terms, it has to be deflated by the CPI. Inflation targeting policy has to be driven by the CPI. If the housing index was the only factor in the basket and created the 2003 CPI debacle of biasing the basket to the extent that the economic implication of that miscalculation was severe, can we countenance the impact of 600 products in the basket that are out of date on the CPI today?
Here is the scientific malaise poisoning the debt-to-GDP ratio and the CPI. The GDP - just in terms of relative weights and classification of new sectors - has hitherto not been updated, and the CPI that should deflate it to real GDP has also not been updated.
What use is the noise about a debt-to-GDP ratio whose GDP could be any number? It is about to lose fidelity if it has not yet already. Secondly, what fidelity is there in the inflation targeting story?
Leading with the headline "A new coach for our fractious team", the Sunday Times dubbed Mazzucato Ramaphosa's secret weapon. In an interview, she made the point that she was appalled to hear that SA had introduced heavy budget cuts for state research entities such as Stats SA and the Council for Scientific and Industrial Research.
I concluded a long time ago that our policymakers refuse to use the searing light of data to remove their cataract.
Mazzucato said: "Research, data and information is a core part of the capacity of the state - without it the state cannot lead, innovate and exploit the new opportunities offered by Covid-19. High-technology manufacturing is a product of high research and development and relies heavily on data."
I am inclined to conclude that Mazzucato may well be blunted as Ramaphosa's secret weapon and instead could be transformed into Ramaphosa's secret economic eunuch.
• Dr Lehohla is the former statistician-general of SA and the former head of Stats SA. Meet him at the PIE website and @Palilj01
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