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New political leaders who actually know how to run a modern economy are needed for SA

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Mandla Lionel Isaacs is head of policy for Rise Mzansi.

The ANC is making us poorer, not solely because of its economic management incompetence but because its leaders have made a conscious choice to enrich themselves and a small, symbiotic class of rent-seekers, even if it impoverishes the majority.

South Africa should be an economic success story.

We are the richest large country in Africa, in GDP per capita terms. We have the most technologically advanced industrial base. We have abundant mineral resources. We are one of the most beautiful countries in the world, with a variety of tourism attractions. We have capable entrepreneurs and businesspeople running innovative businesses. We have sizeable savings pools to deploy and sophisticated financial markets. We have a young population that can be put to productive work, with a low ratio of workers to retirees.

With this platform, we should be leading the way for Africa — as Japan once did for East Asia — in harnessing economic development towards steadily higher average incomes, living standards and life expectancy. Towards increasingly better human and societal well-being and happiness.

We are not currently on such a path.

GDP per capita has declined since 2013, and is below 2008 levels. While our economy has languished, our emerging peers in Africa and Asia have grown significantly richer over this period.

We have the highest unemployment rate in the world, which has worsened over the last 15 years. At least half of our population lives in poverty. We have the highest inequality in the world.

Many of our people live in dwellings without piped water and flush toilets. Cholera is reemerging. One in five adults experience hunger. As many as one in four children are physically stunted for lack of adequate nutrition.

This extraordinary inequality drives political and social dysfunction and instability.

Desire to escape poverty

Aspiring to wealth, but in an economy with few accessible pathways to productive accumulation, some seek wealth through political power and access to it, distorting and toxifying our politics. Politics becomes a zero-sum game, with some literally willing to kill for political positions, and the accompanying influence over contracts and jobs.

Criminologists will tell you that idle, disaffected young men are trouble waiting to happen. Young people find it fiendishly difficult to enter the labour market, with youth unemployment at 62%. With so many young people excluded from pathways to prosperity — and violence deeply woven into our social fabric — some resort to violent crime. Tragically high rates of violent robberies, violence against women, murder and kidnapping are now persistent and increasing features of South African life.

The overwhelming majority of South Africans — 83% — believe the country is headed in the wrong direction according to a recent Ipsos survey.

Reconfiguring our political economy towards the acceleration of economic development which benefits all South Africans is the issue of our time. Next to keeping people safe, ensuring economic well-being is the most profound responsibility of modern government. Economic wellbeing is defined here as ensuring citizens can fulfil their basic needs, earn decent livelihoods, pursue happiness and achieve financial security (wealth) for their families.

Developmental, competent governments create conditions for their citizens to live soft lives. Venal, incompetent governments — like ours -give their citizens hard lives.

Too many South Africans needlessly live hard lives.

I use the term political economy as a lens and point of departure, to be explicit that much of what is political is economic and much of what is economic is political. Economic outcomes are shaped to a large degree by political processes, formal and informal. This is true of every society and is especially evident in our society, where the prosperity and disadvantage as experienced in South Africans’ daily reality are the direct consequence of colonialism, apartheid and post-apartheid political choices (and failures.)

ANC Polokwane conference

The decisive turning point which led to the developmental cul-de-sac we are in, was the ANC conference in Polokwane.

Post-democratic political-economic governance to that point was far from perfect. The Nelson Mandela and Thabo Mbeki administrations made a number of questionable decisions: placing too much faith in promises of foreign direct investment to drive increasing growth and employment; underinvesting in industrial policy; allowing some of our biggest and best companies to move their primary listings abroad; etc.

The later Mbeki ANC did, however, show interest in effective economic governance. Asgisa sought to eliminate constraints to faster growth. Finance Minister Trevor Manuel convened an international expert panel to make a comprehensive suite of recommendations on how to achieve job-rich growth.

He later shepherded the creation of the National Development Plan (NDP) Vision 2030, which set out many of the key policy choices that we needed to make to accelerate inclusive development. While president Jacob Zuma presided over its creation, as will become evident, it was clearly an Mbekiite/Manuellian intervention rather than a Zuma one.

It is important to understand the post-Polokwane turning point in the context of the political economy of late developing countries, especially in Africa and Asia.

Achieving rapid development is extraordinarily difficult. Success is the exception, with limited success or failure the rule; over the last 70 years, most developing countries have failed to catch up with high-income countries.

The few who have — with the exception of those who lucked into massive oil or gas reserves — demonstrated the only proven formula there is: focus on exports of increasingly sophisticated goods and services; develop manufacturing in particular; and focus on increasing fixed investment. These are the keys to rapid economic development post-World War 2 (and are far more difficult to achieve than to outline).

Get rich or lie trying

Tragically for South Africa, and many developing countries, there is an easier option that can be lucrative for political elites and a small class around them, if disastrous for the wider population. This path has been called many names by observers: rent-seeking, crony capitalism, tenderpreneurship.

Politicians sell political influence over procurement contracts, mining licences, cheap loans from state-owned banks and myriad other lucrative concessions in their gifts to connected businesspeople in exchange for outright bribes, employment or enrichment of family members and/or party or individualised campaign financing.

An abiding characteristic of the most successful developing states is that they managed to work closely with their domestic business sectors to incentivise productive investment, without being captured by narrow interests.

The late Malawian development economist Thandika Mkandawire wrote that the difference between the more successful Asian tigers and Africa’s development laggards is that while Asia had rent-seeking businesspeople who grew wealthy through cooperation with political elites, they were forced to make productive investments along the way.

As my late father, activist and scholar Henry Isaacs often lamented, repeating a quote he attributed to Julius Nyerere: “The difference between Africa and Asia is that in Asia the contract will go to the family of the minister responsible, but the road will be built.”

Capture, not rapture

Sixteen years after Polokwane, what happened is clear. President Zuma tolerated the NDP for appearances’ sake, but had no interest in driving its implementation. Instead, Zuma and the clique of hungry political and economic aspirants around him set their sights on South Africa’s state-owned enterprises (as well as provincial and local procurement budgets).

A frenzy of corruption and rent-seeking ensued for most of the next decade at Eskom, Transnet, Prasa and SAA. It is important to remember that Eskom and Transnet are two of Africa’s five biggest companies by revenue. Transnet and Prasa in particular stand out.

The infamous Guptas allegedly scored R26-billion of their estimated State Capture haul of more than R50-billion from Transnet’s huge locomotive procurement deal, adding “success fee” mark-ups of millions per locomotive which the Chinese state-owned bidders passed on to Transnet. Our economy now pays for this in higher logistics costs and worse performance, which are a self-constructed obstacle depressing our exports, growth and job creation.

The ANC claims to be the champion of “the masses”. And yet it presided over the looting of Prasa, hitherto a form of affordable public transport for the very same masses. After years of questionable deals and despite billions in allocations from the fiscus for investment, the number of commuter trips serviced nationally by Prasa declined from 543 million in 2014, to 15 million in 2022.

Not only can the ANC not create decent work for the people, it makes it harder for them to even get to work!

That our economy has not grown in per-person terms since 2013 is therefore not an accident. It is the direct consequence of political choices.

Economic analysts grow hoarse repeating that the two biggest factors limiting our economic development potential are electricity and logistics constraints, problems which both date back as far as 2007 when rolling blackouts began, and when we missed out on the full effect of the mid-2000s commodity boom because Transnet could not rail all the commodities the world wanted to buy from SA Inc.

We’ve since missed out on the full benefit of another commodities boom. One leading expert on the logistics sector — Prof Jan Havenga at Stellenbosch University — says Transnet’s rail and port incapacity cost our economy R400-billion last year, or 6% of GDP.

The ANC is making us poorer, and is doing so not solely because of its economic management incompetence but because its leaders have made a conscious choice to enrich themselves and a small, symbiotic class of rent-seekers, even if it impoverishes the majority of the country.

To change our current disastrous course to the difficult but necessary path of inclusive development, we must make new political-economic choices.

To increase growth and employment, we need to build a modern, inclusive and competitive industrial and knowledge economy. We need a new government with a clear vision of export-led growth, which can unite a new coalition of economic actors and social partners behind this vision.

It will require political leaders who know how to run a modern economy, and who can rebuild capacity in key state institutions. It will require us to reimagine economic justice, by investing in productive black enterprise: small and big business; formal and informal; urban and rural.

Re-examining and re-imagining our political economy is central to determining whether we will reach 2034/2044/2054 celebrating our beloved country’s positive transformation, or lamenting our long, slow decline into dysfunction, instability and social strife.

We must aspire to be better than this, our people deserve no less. DM

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Comments - Please in order to comment.

  • Cheryl Siewierski says:

    An extraordinarily adroit reading of the room. Thank you for putting this into words. Some excellent points here, and I especially wish we would do more analysis and solution-building from our political economy perspective. As you so beautifully put, we DO have both the young people and those with experience and motivation to turn the country into a knowledge economy – if we can get them aligned with the politics (and ugh, politicians) we can make it work. The Western Cape still has its own problems, but it is doing well and thinking creatively so it probably wouldn’t hurt to start there for suitable models to apply across the country.

    • Veritas Scriptum says:

      Zimbabwe is too far gone to correct.
      We are still in time so get our house in order from the destruction caused by looting and incompetence.
      Let’s ensure we preserve our organs of state and fix them before it’s too late.

  • Hiram C Potts says:

    Intelligence, integrity, competence, cognitive ability, critical thinking & financial literacy are all prerequisites for making informed political & financial decisions in running a country’s economy.

    Looking at the menagerie of inept, corrupt buffoons from the top down in SA’s govt, it’s difficult to see how we’re going get out of this shambolic mess anytime soon.

  • Gerrit Marais says:

    Indeed!

  • thebe.phoko00 says:

    Wheew!!

    You painted the picture. I was part of a group that tried to help entrepreneurs in Soweto to improve their businesses. We discussed some of theses issues, especially the ticking time bomb of youth unemployment. I was not surprised when we had looting two years ago and I expected a repeat. As for rent-seeking in tenderpreneurship: wheeew!

  • Steve Davidson says:

    I really don’t know what the fuss is all about. There is a perfectly brilliant example down here in the Cape of how to carry out honest and competent provincial and municipal government, even national if they were given the chance, where the thieves and incompetent idiots from the rest of the country could be sent to learn how to do it, despite continuing problems caused by those selfsame idiots trying to prove exactly the opposite.

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