SHAWN HAGEDORN: Government shuns job-creating globalisation at cost of youth

A government that loses control after its economy collapses is labelled a “failed state”. Our government’s inability to fix its state-owned enterprises hobbles the economy while distracting attention from the larger threat — the youth unemployment crisis.

Most voters being poor after decades of racial oppression made electoral accountability acutely vulnerable to aggressive patronage. Commodity exports funding imports further undermines incentives to prioritise growth through global integration.

Rather than becoming an effective political party, the ANC spurred dependencies and cronyism. Our worsening ratio of private sector taxpayers to government beneficiaries is already unsustainable. 

The July 2021 riots and alleged poisoning of Eskom CEO André de Ruyter reflect an uncontrollable patronage network. Meanwhile, the destabilising effects of extensive youth unemployment intensify.  

Parallels exist with San Francisco’s gay community when the Aids epidemic erupted. Gay men were suddenly dying from various ailments and a common cause had not yet been identified. As media reports chronicled many such men having dozens of partners a year, initial concerns were tempered by moral perceptions. Our concerns for the unemployed are similarly diluted by dismal education outcomes.

Having just moved to San Francisco, I became an AIDS hotline volunteer helping callers interpret their lab results. Blood samples preserved from an earlier outbreak of hepatitis B among gay men showed that the virus had begun circulating broadly, undetected, nearly a decade earlier. Responding to our youth unemployment crisis with subsistence payments creates comparable “silent time bomb” effects.  

Requires integration

The callers rarely showed much interest in the science. They faced a dreadful death and sought compassionate understanding from a stranger. All the volunteers I met were gay and many were infected. As an outsider, I was an obstacle to callers connecting — literally and emotionally — with someone who could truly fathom the terror inflicted on their community.

Our parallel with the long-stored vials of blood is that we still ignore how this era’s economic progress requires intense integration within global supply chains. Our crony-friendly policies, such as BEE and localisation, preclude economic viability.

Local beneficiation of our natural resources appeals to the ANC’s alignment partners but is unworkable. Conversely, successful economies focus on beneficiation of their workers through the diffusion of knowledge. Integrating into global supply chains turbocharges such benefits, yet few of our young adults add value within global supply chains.

In the mid-1990s I worked in a small team in Johannesburg designing innovative investment solutions to help overcome economic blockages for lower-income communities. After I left, the company morphed into becoming the country’s largest microlender. 

My former boss is a charming, clever chartered accountant. Like many accountants and other professionals economics did not appeal to him. As I am fascinated by SA’s social and growth challenges his lack of interest in the science of economic development troubled me. 

While writing a column headlined “Myths and misunderstandings” about 10 years ago I occasionally asked myself “what if Leon is not an outlier?” If his dismissiveness about economic development drivers was common among SA’s leaders, the consequences would be horrific.

Social costs

A few years later the bank he ran imploded. As per my worst fears, it was resurrected by the SA Reserve Bank, run by a communist at the time, and a consortium of top banks. This despite expensive consumer lending being anti-development (it’s the inverse of investment-led growth) and a more efficient low-income lender having achieved formidable success.

Accountants and bankers identify genuine advantages in having banks offer credit products to low-income communities. But they miss social and anti-development costs that are apparent to sociologists and development economists. 

Globalisation has uplifted more than 1-billion people while creating hundreds of millions of jobs over the past three decades. Yet, as the ANC’s patronage model seeks to maximise reliance on the state, it rejects this era’s amazing poverty antidote. 

At least a quarter of our school-leavers should be finding employment within global supply chains. As this path is obstructed, most of our young adults are becoming chronically unemployed. If we fail, it will be through this stoking sufficient social unrest to make the country ungovernable.

• Hagedorn is an independent strategy adviser.