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The ANC’s developmental state has failed — a synergistic approach is long overdue

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Prof Abdi Ismail Samatar is a research fellow at the University of Pretoria and a professor of Geography at the University of Minnesota. His latest book is 'Framing Somalia: Beyond Africa’s Merchants of Misery' (2022).

A return to the principles of the Washington Consensus to rescue South Africa’s economy shows the hopelessness of the ANC’s current economic agenda. The country has a small window of opportunity to change its economic future — but action must start now.

President Ramaphosa’s State of the Nation Address exposed, beyond any doubt, that the ANC of today is a feeble ghost of the iconic liberation party. The president’s long speech was as uninspiring as any the country has witnessed since liberation. As an African who supported and admired the liberation movement, beginning when I was in secondary school in Somalia, it was heart-breaking to see a South African president tout the discredited ‘Washington Consensus’ as the way forward.

Two contradictory remarks he made showed the hopelessness of the ANC’s economic agenda for the country and the sub-continent. First, he announced the government’s intention to build a ‘developmental state’. Second, he asserted that governments do not create jobs but simply set up the necessary conditions for the private sector. This essay argues that the ANC leaders have betrayed a significant segment of South Africans and those beyond the Limpopo and look at how it can salvage the future of the country and the subcontinent.

The twin betrayals

The ANC took over South Africa at the height of the ‘Washington Consensus’. This ideology prescribed that a free market was the only route to development and that government must play a cheerleading role. That policy had already devastated most African economies in the 1980s, and many in the ANC knew it. However, the aspiring black elite thought they were smarter than others and could manage the traps of neo-liberalism.

Although the original agenda of the party was to build a more inclusive political economy (Freedom Charter) after the demise of apartheid, that rhetoric lasted for a few years before the ANC government’s policy drifted to the right. The liberalisation of trade to meet the WTO framework was the first fatal blunder, as that policy shift devastated the textile and related industries. Such changes signalled the party’s unconscionable subscription to the neo-liberal mantra rather than being guided by the cruel lived experiences and economic aspirations of the majority. There has been employment growth since 1994, but the rate of unemployment grew from 20% in 1994 to nearly 30% of the adult population in 2018 — before the Covid-19 devastation. Such unemployment growth and increased inequality have condemned millions of our people to destitution and hopelessness and fuelled crimes of despair.

President Ramaphosa touted the huge continental market that beckons South African business to exploit it. Unfortunately, he neglected to acknowledge that South African business has failed to exploit its home market before it could march on the continent’s. There are two anchors to any economy: labour and other commodity markets. The dismal and unyielding unemployment figures are proof that South African business and the state have failed to deploy the country’s labour force in ways that expand productive opportunities for the indigent population and at the same time put goods and services on the local market.

One wonders, then: how can South African business serve the African market? Africans, and more particularly southern Africans who paid a heavy price for their support of the liberation movement, are dismayed by the failure of the ANC and the black elite to restructure the country’s economy in ways that would create mutual opportunities for the entire region. The ANC’s attachment to neo-liberal democracy reflects the incapacity of the black elite to do what other ambitious post-colonial and reformist states have done: govern the market.

Governing the market

As Professor Robert Wade (1990) illuminated in his classic book, governing the market entails leading and guiding it, not following it. Only those countries that governed the market have escaped the doldrums of underdevelopment and mass unemployment. Let us take the case of the People’s Republic of China. A little over a decade before Mandela’s release from prison, China embarked on its reformist and developmental agenda. Within 30 years, China became the fourth biggest economy in the world, the factory of the world’s manufactured goods, and expanded industrial and urban employment by hundreds of millions. How was it able to accomplish such a dramatic change of fortune?

China governed the market. The central government of China created and empowered state-owned companies, provided resources, set high-performance targets, and let them loose on the world. Today, these firms are some of the largest and most dynamic in the world.

Secondly, this strategy created spaces for China’s regional governments and small and medium enterprises to flourish. It is this state-governed market approach that has created the mix of enterprises that blankets China and much of the world. Such state-directed effort turned China’s human encumbrance into a source of entrepreneurship, wealth, and strength. This is how China lifted hundreds of millions of Chinese citizens out of poverty and averted crimes of despair.

A fleeting chance

A few of us who worked at the Human Sciences Research Council in the early days of independence mooted the idea of a developmental state but were quickly shunned as the black elites rushed toward conspicuous consumption and quick accumulation of money. Nearly a quarter of a century has been wasted, but there is still a fleeting chance to change the country’s and the region’s fortunes.

A more synergistic approach would be to create a generative governed market system in South Africa that spawns high levels of productive employment. Such transformation would create a hub for the SADC region, just like Japan did for the East Asian Tigers. The energy generated by such a revolution would inject new dynamism and give substance to the dream of a continental market.

Thus, a rejuvenated South African state would revamp the disabled state-owned enterprises and help new and old enterprises by offering serious incentives and instituting high-performance standards. The initial focus of such enterprises will be to produce for local and regional markets and generate productive and sustainable employment for the country’s youth. Taking on this task now may be the last chance the country has to exit pretentious neo-liberal democracy and march toward a truly 21st-century African social democracy. DM

 

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  • No what really did Africa in was corrupt politicians that turn into semi and full on dictators that steal everything in conjunction with a select number of private business with preferential procurement, dodgy tenders and puppet administrations. Africa is not some innocent all pure place that followed the wrong economic policy.

  • In Africa state owned enterprises are a way to employ large numbers of people at high salaries and becomes a way to buy votes. In China a policy of low wages and high expectations led to highly profitable enterprises. This profit was then used to capitalize the industries which then made more profit. An enterprise which does not make profit has to be subsidized by the poor or close down.

  • South Africa has become a welfare state with an economy that is too small to provide the welfare. It is the consequence of a long history of extractive strategies that have benefitted the privileged and completely excluded the majority. The ANC has taken extraction to new heights. The consequence is widespread social disintegration and increasing anarchy which is only going to get worse with negative implications for attracting investment – unless meaningful change takes place. South Africa’s challenge is how to steer investment into the undeveloped people and areas so that the welfare burden can start to release human energy in its place. Simply trying to expand the developed sector by attracting investment is failing and will continue to fail because it will never get ahead of the welfare needs of the massive abandoned sector which increases each year as more young people enter the labour market without a basic education let alone skills. Politicians, business leaders and economists need to make a paradigm shift. Someone needs to look at how West Germany pulled East Germany up when Germany was re-unified. There are important parallels.

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