BLUEPRINT FOR RECOVERY 2024
Part 8: Getting the economy right – SA has plenty of blue-sky thinking, but experts are ignored
In 2017, Pravin Gordhan urged South Africa to ‘join the dots’ between corruption and the Zuma administration. John Matisonn joins those dots in this eight-part series. In this final instalment, he spells out that it is entirely possible to turn around South Africa’s crisis of unemployment.
Ever faster, cheaper Wi-Fi accessible to the poor with more and more free hotspots; a growing black farming sector; a boom in strategic mineral production and the green economy; a boost for township economies, and millions of new jobs.
That vision for South Africa is entirely possible.
The steady decline of South Africa’s global jobless rankings can turn around dramatically. How is that possible? Because South Africa’s shortage of entry-level jobs for school-leavers and university graduates is self-inflicted.
South Africa has clear advantages in most of the big-money industries of the 21st century:
- South Africa’s climatic conditions are excellent for solar- and wind-powered electricity.
- As an English-speaking country that is the most industrialised on the continent, there could be hundreds of thousands of new entry-level jobs in the information economy if we rolled out multiple broadband options.
- We have unused or underused farmland. Both small-scale black farmers and commercial agriculture have proved their potential. Start-up farmers just need the help any farmers in a developing country expect.
- Despite a government-induced falloff in mineral exploration, important finds in gas and oil add to the numerous, increasingly globally important, strategic minerals we already know are here.
- We have a sophisticated, well-regulated financial sector.
- We have a predominantly young, working-age population, unlike ageing and shrinking China, Japan, Russia and Europe.
- South African universities, research groups and NGOs are producing first-rate, implementable research on sectoral job creation.
Most countries would be grateful for just a couple of these windfalls.
Yet we have a higher unemployment rate than most countries, even in Africa, and one of the slowest growth rates, even holding our small regional neighbours back.
This final article in the series explores how ministers’ actions or inactions cost a great many jobs in two jobs-rich sectors – the information economy and agriculture – and how new ministers can fix it.
The information economy has the scope to create hundreds of thousands of jobs. By 2020, jobs created by the information economy in global business services hit 250,000 – more than double the automotive industry. Of these, 50,000 serviced overseas companies, growing at the phenomenal rate of 24% a year.
Those numbers represent the tip of a potentially large iceberg. They could have been achieved at least a decade earlier.
The jobs the information economy creates embrace a wide range of skills ideal for entry-level graduates as well as school-leavers. They include call centres, coding, finance and legal support. Tens of thousands are employed using platforms like Uber, Airbnb and Amazon.
There is also considerable growth in “African tech” – South Africans inventing their own, locally targeted uses for new communications methods.
Buildings in Cape Town, Durban and elsewhere are filled with small-tenant, black consumer tech entrepreneurs starting with a single office.
These numbers were anticipated by sector analysts at the start of the century. By now the sector should have been employing millions.
The problem was that our broadband infrastructure rollout was hobbled by government failure and connection speeds were too slow and too expensive compared with comparable countries. At the dawn of the new century, start-ups left for more web-friendly jurisdictions.
Since then the landscape has changed. Multiple private-sector solutions were rolled out, but our data prices are still higher than in many African countries.
The failure was caused by a litany of missteps in which corruption was often a key component.
For a long time, the main obstacle was the failure to complete the digital switchover – the conversion of transmission of broadcasters such as SABC TV, e.tv and community TV from analogue to digital. The switch frees up valuable frequencies for mobile broadband. Digital can pack enormous amounts of data whereas analogue gobbled up capacity.
It’s a murky story of bribes and pay-offs, as different players made money – or fought over money they hoped to make – either from delaying the inevitable or profiting from new opportunities it would bring. It went on for so long that companies ready to make or sell set-top boxes gave up, forfeiting millions of rands.
When President Cyril Ramaphosa came to power, his ministers acted like they were under orders to speed it up. But they set quick cut-off dates without planning for millions of households who would lose their TV signal, which was why the courts were right to block them.
Ministers were replaced every 14 months on average. There had been six communications ministers in Jacob Zuma’s nine years; Ramaphosa has had four in his five years.
The President has not explained his frequent reshuffles, but the number of changes strongly suggests he was aware they were mishandling the portfolio.
The current minister has set a more realistic timeline, so there may be light at the end of this unconscionably long tunnel, but the SABC’s latest financial decline owes a lot to the loss of audience and advertising revenue while viewers were dark. It’s not guaranteed that this 87-year-old service to tens of millions of citizens will recover.
South Africa is now eight years behind the International Telecommunications Union migration deadline.
Meanwhile, in our region, Zambia and Rwanda successfully cut off analogue in 2014, while Lesotho, Namibia, Malawi, Eswatini and Botswana finished the process several years ago. Some of these programmes were handled by South African engineers while they waited and hoped to do the job at home.
The delay had a direct negative impact on the speed and price of broadband.
It was government policy to “bridge the digital divide” to get the poor internet access. But plans to roll out broadband were side-tracked by other missteps.
The government should have kept its eye on rolling out access to the internet as widely as possible, using a variety of means including free public Wi-Fi hotspots, first in all public buildings, then to as many public areas as possible where people live.
While digital migration floundered, President Ramaphosa announced the creation of three new smart cities: Lanseria in Gauteng, Nkosi City bordering the Kruger Park, and the African Coastal Smart City in the Eastern Cape. The new smart city, the president said, would be a “truly post-apartheid city”.
“A new smart city is taking shape in Lanseria, which 350,000 to 500,000 people will call home within the next decade,” the President promised.
“It will not only be smart and 5G-ready but will be a leading benchmark for green infrastructure continentally and internationally.
“The investment, worth $50-million, is a key contribution to the Lanseria Smart City masterplan that will drive sustainability and recycling, as well as create and sustain 350 jobs,” Minister in the Presidency Mondli Gungubele said at the time.
In February this year, the Mail & Guardian took a look at the 458 square kilometres intended for the Lanseria project, and reported that the land intended for this project “remains veld”.
One critic familiar with this concept in other countries dismissed it as a “techno-utopian vision” that, if successful, would increase digital inequality, distracting government from its task of getting broadband to where the people – employed and unemployed – are.
“A considerable body of literature has developed over this time to demonstrate that poorly planned Smart City Initiatives, in a developing country context, exacerbate socio-economic inequalities, spatial segregation and public funding injustice even further,” wrote the University of Cape Town’s Prof Alison Gilwald, who consults widely for multilateral bodies, governments and developing countries.
In other words, a smart city creates a ghetto – even if it’s done well.
To make real progress in bridging the digital divide, the new minister must drop smart cities.
Put all government’s attention into moving towards universal service, providing free hotspots in all public buildings, and promoting smart townships everywhere instead of one or two smart cities. Bodies set up to do this have been side-tracked in various ways.
The solution is an integrated local government strategy that supports delivery not only within cities, but also between them and smaller municipalities.
Amid government delays, private companies, some municipalities and NGOs have found business models that work.
One project I explored is in the Stellenbosch township of Kayamandi, where a private company, Isizwe Fibre, is installing fibre at a cost to the consumer of R5 a day, profitably.
There are others. Some well-designed NGO projects collapsed for lack of modest government support.
The phenomenon of a “pro-poor government” putting resources into projects that disproportionately service the elite is not unique to broadband.
Researchers into the land reform programme found it began by prioritising the poor. The Settlement and Land Acquisition Grant was largely pro-poor because beneficiaries were means-tested. Only the neediest and poor households qualified for land purchase grants.
But in 2000, the Mbeki administration introduced significant policy changes through the Land Acquisition for Agricultural Development Grant. The means test was abandoned as a key criterion for beneficiary selection.
Several studies have shown that an overwhelming majority of later beneficiaries were urban dwellers whose farms are a second or third source of income.
One recent study found that 82% of farms were allocated to “economically powerful and politically connected individuals”, urban-based business people for whom this is not their main source of livelihood. The other 18% went to farmworkers.
In fact, black smallholder farmers could be a rich source of jobs as well as food. About 250,000 farm successfully despite complaining of government neglect. They have demonstrated their capacity to grow in numbers and size.
Read more in Daily Maverick: South Africa’s elite handsomely benefit from land reform too
A new minister could change this. It is not an overnight fix, requiring the agriculture department to provide extension services with advice, access to the best seeds and methods, access to transport, inputs, capital and credit markets and marketing.
It’s a long-term investment in the country’s future.
Why have government efforts gone awry?
- Inexperienced ministers are appointed too easily and changed too frequently (10 communications ministers since 2011, seven ministers of energy).
- We have policies without up-to-date strategies. Compare the 2012 National Development Plan jobs targets with actual jobs created.
- We don’t implement our policies.
- We change our policies too easily.
- Institutions set up to serve the poor get hijacked, due to either inability to perform or corruption.
- Decisions that should be made in months are bogged down in endless politics and corruption for years and even decades.
- We fail to take advantage of the intellectual resources of our educational institutions. Government action is not driven by the search for the wisest paths. Despite constitutionally entrenched transparency, too many decisions are taken in the dark.
In the 21st century, it is impossible to get the job-creating growth we need without keeping up with global trends and adapting to change timeously.
One reference to the problem was implicit in the recent Multi-Party Charter signed by opposition parties demanding “evidence-based” policies. Surely all policies are based on evidence? Except they’re not.
Ideology is not the only reason or even the main reason. Factional and commercial interests and appointments without expertise or longevity are far more important.
This series aimed at starting with the quick fixes. What could an incoming minister do right away? But the real fixes require extensive strategic thinking, linked to desired outcomes and followed through doggedly.
South Africa must reverse what former Trade and Industry Minister Rob Davies called its “premature deindustrialisation” to succeed as an economy. The job numbers for non-graduates would be considerable.
Government has constantly mismanaged and even misunderstood where the jobs are. It often speaks as if the Fourth Industrial Revolution will create millions of jobs, but it won’t.
Prof Tshilidzi Marwala, chairperson of the Presidential 4IR Commission, assured me that, on the contrary, 4IR has the potential to be a “jobs bloodbath”.
There is no better authority. Marwala has no fewer than 17 books on artificial intelligence to his name. He is a strong advocate for 4IR, but the benefits are in niche areas. South Africa has to be part of 4IR innovations or it will be left behind. But as for hundreds of thousands of jobs? Look elsewhere.
Over 29 years, government has got into extremely unhealthy decision-making habits. How it makes appointments is far from the intention of the Constitution.
The result is that continuity – accumulated decades of experience and know-how – is repetitively destroyed. New boards contain almost entirely new slates. Everybody should get a turn. Does that mean the last board was badly chosen, or is it just a sharing of the spoils? This is an extra effect of cadre deployment – jobs are given out like sweeties.
This too incentivises corruption. Once you’ve had the taste of money and power at the heart of decision-making, what next, if not getting in on some of those deals you’ve seen crossing your government desk?
Yet even a sector expert would take up to a year to get on top of a minister’s job, appoint the right people, learn from mistakes, and correct misguided assumptions. But most ministers walk into their ministries with little sector expertise.
In commonwealth countries with the same system of appointing ministers from the ranks of MPs, there is greater stability. They inherit a skilled civil service that can guide them. In many of our ministries, we don’t have that either. Our civil servants were weaned in the system we have.
To write this, I spent hours talking to former colleagues I worked with in government 25 years ago, and their frustrations are about the same issues we thought were resolved then.
South Africa has the expertise, but experts are ignored.
A new minister who will leave a mark by really fixing things will have to be frank and dig deep to admit what the errors were and use all South Africa’s resources and expertise to fix things.
The next government could excite the nation and grow jobs with a small number of initiatives done well.
Of course, the first step must be: get the basics right. Stop corruption, hold crooks accountable in court. Employ competent managers. Promote people on merit, because they have served the country effectively and honestly. Keep spending within budgets. Don’t waste money. Don’t employ consultants to do jobs you are paid to do in-house.
These are the basics, the essentials.
There is no economic explanation for a country with South Africa’s endowments to be near the top of unemployment lists.
South Africa does face a watershed.
Imagine if those gas and oil finds are true. With so much potential, the vultures will be circling. The incentives will all be there for a mafia state, and the poor will get poorer.
So much blue sky. If only someone would reach for it. We need visionaries in government.
What about you? DM
South African journalist, author and policy consultant John Matisonn’s book Cyril’s Choices, An Agenda for Reform, explains how South Africa’s missteps led to the current malaise and how to change. It is based on four years in the Mandela administration, on the SABC interim board in 2017, work in the United Nations as chairperson of the Electoral Media Commission in Afghanistan and acting project manager of the UN’s election project, and a lifetime study of successes and failures in national economic turnarounds that started at the University of Chicago, where he studied the cases of Japan and Russia.