Making citizens wards of the state clashes with the constitution
The preamble demands that everyone’s potential be freed, but the ANC lacks a proper high-growth plan to make this possible
Why have none of SA’s leaders been able to articulate a commercially robust and politically saleable growth plan? For such a plan to be effective, in addition to being economically potent, it must help the ANC abandon a central strategy. This sidelines business leaders. Thus opposition politicians and public commentators must better grasp how high-growth countries align commercial vibrancy and economic development goals.
Systemic patronage, corruption and incompetence are severe threats. Yet their featuring so prominently in the 2019 election removed pressure on parties to compete by offering growth plans. This led to the elections being largely ineffectual. Such growth plans remain conspicuously absent.
Capturing voter loyalty through policies provoking chronic dependency on state assistance is as devastating to the political economy as corruption. While it produced electoral dividends last year, this strategy is a ticking time bomb for the Treasury and the ANC. Defusing it has been postponed.
The antibusiness sentiments within the ANC and among its key alignment partners undermine its economic stewardship. Unions must have a voice, not a veto. SA’s communists must awake to see that the workers of the world have united. Poverty has been pummelled through integrating workers from low-income nations into global supply chains.
SA has never been on track towards achieving broad prosperity. China reformed 40 years ago when 88% of its population lived in extreme poverty. Its extreme poverty is now below 1% whereas SA’s is more than 25% and rising.
SA averaged 5% growth for five years starting in 2003. However, this traced back to China’s booming demand for resources leading to rand strength triggering lower interest rates which spurred rising property prices and debt-funded consumer splurging. Not only was such growth unsustainable, it borrowed consumption capacity from the future while discouraging necessary reform.
Hopes that the IMF will sort out our mess are not valid. Our core disconnect is that voters don’t hold the government accountable. Outsiders can’t change this
Since the Soviet Union’s collapse, global trade has surged and extreme poverty has dropped from 38% of the world’s population to under 10%. Conversely, SA’s initial postapartheid poverty reduction progress proved unsustainable as it relied on government transfers, and not commercial gains.
Our economic ills reflect a political disposition dismissive of today’s global growth drivers: competitiveness, integration and adaptability. Yet prevailing policy biases won’t be dislodged in the absence of a profound crisis; or a new political regime; or a commercially robust growth strategy which is persuasively packaged for political acceptance. All of the above might be required but the current focus needs to be on the last option.
No-one desires a financial crisis. Nor are hopes that the IMF will sort out our mess valid. Our core disconnect is that voters don’t hold the government accountable. Outsiders can’t change this.
The 2024 elections are a long way off but the high likelihood of a coalition government will soon focus minds. Deep disconnects inspire reference to foundational documents.
The preamble of our highly regarded constitution begins with a veiled tribute to the liberation movement, then concludes on the twin high notes of, “free the potential of each person; and build a united and democratic SA able to take its rightful place as a sovereign state in the family of nations”.
ANC emphasises inequality
These two goals could form an ideal preamble for a high-growth blueprint. A growth plan should be crafted, as the constitution was, with various components being imported and then adapted to suit domestic conditions. This is how successful emerging nations design and update their economic policies; but not SA.
Those preamble goals are irreconcilable with the thrust of our economic policies. Wanting to “free the potential of each person” in a rampantly poor country should spur adoption of global best practice for eradicating poverty. Rather than targeting poverty reduction, the ANC emphasises inequality, which it depicts, with limited merit, as a perpetual legacy of apartheid. This vanquishes accountability while most of their supporters become dependent on the state — which ANC messaging then seeks to translate into electoral loyalty.
SA’s preamble language “free the potential of each person” is perfectly worded to guide social and economic policies. That SA is to take its rightful place in the family of nations is also exactly correct. But neither goal has been pursued.
A majority of South Africans are poor. The poor half of the population relies on government beneficence for roughly half of their income. They are, in effect, wards of the state.
Most South Africans are in no position to achieve their potential. Most are chronically poor and poorly educated. Far too many are trapped and state-dependent. Having such dependencies inspire loyalty to the ruling party is an affront to the constitution’s ideals and those who championed the democratic transition.
Our domestic economy can only employ a modest portion of our poorly educated surplus labour whereas it has never been more doable for such people to be employed in global supply chains. The necessary linkages require entrepreneurial flair. Our foreign and economic policies undercut such initiative.
SA’s most senior politicians and economic policymakers are profoundly inward-focused except when seeking investment commitments. But, when domestic consumption is stagnant, investments to displace incumbents don’t spur jobs or growth.
SA’s history, geography, politics and economics all oppose this country taking its rightful place in the family of nations. Routinely blaming colonialism for the nation’s ills feeds the politics of dependency economics. No country is as geographically distant from a top-three economy as SA but what impedes the surging of value-added exports is anticompetitive policies.
How our policymakers see the world and global integration are further distorted by SA being the most industrialised country in the world’s poorest region. They underappreciate how economic interlinking advances relations among successful and striving nations. Taking our rightful place among the family of nations requires leaders with objectively informed, and up-to-date, worldviews.
Perhaps the strategy best conforming currently with the constitution’s preamble is tourism promotion.
Improving governance is necessary but insufficient. SA must adopt a powerful vision which makes prioritising export competitiveness politically appealing. This is only moderately difficult. Dozens of countries have tried and eventually succeeded.
None of our leaders is proposing a high-growth plan as this requires challenging the centre of the ANC’s political-economy positioning. Yet dependencies are clashing with budget stresses. A coalition government is likely in 2024; but what is the best we can do this year and next?
Designing and implementing a high-growth strategy is not prohibitively difficult until the proviso is added that it must conform to the biases of the ANC and its alignment partners. Perhaps the strategy best conforming currently with the constitution’s preamble is tourism promotion.
Value-added exporting initiatives must be aggressively encouraged by regulatory relief and trade-development support. This might best be packaged as small business development to blunt resistance from unions and others.
We must free the potential of each person as SA takes its rightful place among the global family of economically integrated nations.
• Hagedorn is a strategy consultant with a background in accounting, banking and investment analysis in New York and London. He has a graduate degree in international business and qualified as a CPA and CFA.