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It is hard to imagine that we could one day view 2021 as having been a good year for SA, never mind volatility in popular metrics such as GDP and related debt ratios. Are we closer to or further from pivoting towards a healthy growth path? 

The economy and its trajectory are both horrific. Yet stronger commodity exports and a rerating higher of GDP suggest that policymakers have room to manoeuvre. Conversely, postponing a tightening of credit conditions reduces pressures to adopt much-needed policy reforms.

Early this century high commodity demand spurred five years of 5% growth for SA. That can’t occur now despite very low interest rates. SA’s economic policies have long ensured rising rates of unemployment, debt and poverty. Each had been reinforcing the other two before the pandemic accelerated this trio of debilitating trends.

The earlier surge in commodity prices traces to China becoming a member of the World Trade Organization (WTO) in 2001, followed by it initiating a huge infrastructure buildout. Overcoming widespread poverty now, even more than then, requires adding value within global supply chains. That has become as basic to upliftment as industrialisation was in an earlier era.

The first three decades of this century will have continued the global trend of rapidly declining poverty that began in the 1980s. Projections point to almost all of the world’s extreme poverty being in Sub-Saharan Africa by 2030, mostly in resource-endowed nations.

Obscene unemployment

The last surge in commodity prices provoked a consumption splurge in SA, largely funded by expensive debt. Malls expanded at the expense of investments to expand our global competitiveness. Rather than pursuing growth through adding value within global supply chains, our economy became increasingly reliant on household and government debt to fund domestic consumption.

A decade of corruption ratcheting ever higher distracted us from appreciating how our policies have long ensured that poverty and debt traps would block adequate growth. Obscene youth unemployment now risks social unrest, further bewildering policymakers.

This year will end with the pandemic magnifying our economic woes. Tourism has taken another harsh knock while commodity demand now wobbles. Earlier this year our economic positioning became even more outdated when, with the investment community taking the lead, global leaders committed to substantially accelerate decarbonisation. This further undermines prospects for some of our key commodity exports, particularly coal. 

Our exports of manufactured goods to Europe are becoming vulnerable to carbonisation-linked content regulations. Meanwhile, Sub-Saharan Africa’s appetite for our manufactured goods is limited by the region’s meagre discretionary purchasing power. Asia rapidly reduced poverty through exporting to affluent markets.

Cracked hegemony

If the 2024 elections don’t provoke sweeping policy pivots, another five years of sustaining ultra-high youth unemployment amid horrific education outcomes will quell economic growth for decades. Yet it is quite possible that near-term global credit conditions will remain benign while our current exporting successes continue. The ANC’s likely path would then be to continue to postpone desperately needed policy reforms.

That the November elections cracked the ANC’s electoral hegemony could mark a turning point. The party’s political machinery had seemed bullet proof. This led to excesses that provoked a backlash, which looks set to endure.

The governing party’s playbook has relied on anchoring economic conversations to inequality. This was effective at squashing criticism of the party prioritising redistribution ahead of growth, jobs and poverty alleviation. 

Framing the economic discourse around racial inequality was consistent with building out a huge patronage network — for which voter tolerance has now been exhausted. The diverse leaders will remain unable to articulate a potent plan until growth and jobs are prioritised.

Tenderpreneurism is dreadfully harmful, but legal policies and practices, such as BEE and comrade deployment, are far larger impediments to growth. The ANC is vulnerable to a powerful job creation plan as this requires abolishing, or at least substantially tamping down, BEE.

Patronage network

The official opposition’s recent electoral showing was down only marginally. This was considered a not-so-bad penalty for switching from a black to a white leader. What has attracted little public attention is how the party was not punished for its rejection of race-based quotas. Might this prove to have been the year’s most momentous development?

Next year will begin with fervent debate over basic income grants. There are credible arguments for and against it. What isn’t defensible is the ANC prioritising inequality ahead of growth. These pro-patronage policies explain SA’s inability to employ most school leavers.

All of us can support a far more effective national dialogue by being as critical of the counterproductive racial biases inherent to BEE-type policies as we are of corruption. There are dozens of countries ranked as being more corrupt than SA, and most of them have far healthier economies. We wouldn’t need to debate basic income grants if BEE policies didn’t preclude healthy growth and adequate global integration.

Big business and other leading voices must use the basic income grant debate to reframe the national economic conversation around jobs and poverty. Accomplishing this would unleash a sharp upgrading of proposed growth plans. 

This combination would devastate the effectiveness of the ANC’s political machinery. As the party’s confidence in retaining control after 2024 would suffer, real policy reforms could follow. If so, our recent elections will be considered far more consequential than they are now.

• Hagedorn is an independent strategy adviser.


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