SHAWN HAGEDORN: Why it suits the ANC that the SA economy scorns global norms
Even if investment were to stream into the country, the jobless youth crisis would not be alleviated
18 March 2024 - 05:00
byShawn Hagedorn
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
People walk past the ANC's headquarters, Luthuli House, in Johannesburg. Picture: VELI NHLAPO
A recent analysis by German engineers outlined how Eskom’s dysfunctional management structures diverge sharply from international norms. Meanwhile, multitudes of well-supported accusations of incompetence and corruption distract us from unpacking why our political economy is a stark international outlier — and why this suits the ANC.
If our political economy was as dispassionately analysed as the German engineers’ analysis of Eskom, youth unemployment would stand out as the most deeply entrenched threat to SA’s democracy and economy. Polling has shown that 75% of voters list jobs as their top concern.
SA’s most prominent economic growth initiative of recent years featured CEOs working with government leaders in pursuit of investment-led growth. As attracting investment suits our patronage-dependent governing party, its leaders laud the virtues of policy reforms at investment conferences. Yet as actual reforms have been lacking, investors demand high yields or invest elsewhere.
Investment flows were to unlock high growth with job creation surging. However, domestic growth cannot tame our youth unemployment crisis in less than a generation. This jams our intersecting politics and economics into a cul-de-sac by amplifying the appeal of patronage — thus undermining electoral pressures for pro-growth policies.
A majority of SA’s black twentysomethings are becoming permanently marginalised. This same demographic is criticised for its low voter participation rates. Yet SA’s rampant youth unemployment, and its long-term consequences, are immune to the overly domestic-focused growth strategies under consideration.
Collaboration for the sake of investment-led growth was to first advance the interest of political and business elites, with broader benefits then trickling down. But even if investors had responded enthusiastically, jobs would have remained elusive for a majority of today’s younger black South Africans.
The German engineers traced Eskom’s persistent performance shortfalls to a management structure starkly out of line with international norms. But is this not a symptom of our political economics being sharply out of line with international norms?
Our national dialogue is not confronting the implications of combining the world’s worst youth unemployment with sliding into a debt trap. Purging the remnants of pre-1994 injustices always required that the vast majority of blacks become solidly middle class through their productively integrating into a healthy economy.
Using redistribution to create a new set of political elites dismissive of commercial principles is not progress. Our political dispensation is not delivering for the majority of black South Africans entrenched in poverty. Many more must integrate into the far healthier global economy.
Our economic growth is now suppressed by enormous unemployment amid rampant poverty, while demand cannot be spurred by government entities or households buying on credit. Both sectors are struggling to service heavy debt loads from having funded consumption with increasingly expensive debt.
We can only sustain high growth by accommodating international norms. SA’s economy — or at least its younger would-be workers — must become far more intensely integrated into the global supply chains, as this is the common denominator among today’s successful economies. Attracting international capital to fund a localisation-focused domestic economy was never viable.
Whereas the global economy has become extraordinarily dynamic and integrated, “localisation” is our local synonym for the “import substitution” policies with their long record of failure. SA’s core political-economic disconnect is that the ANC’s reliance on patronage is incompatible with focusing on competitiveness and this is central to adding value to exports — this era’s proven high-volume job creation path.
As sanctions had amplified the political risks of investing in a country seeming to be on the verge of civil war, access to international capital was a binding constraint for SA’s pre-1994 economy. Conversely, large cross-border flows are now routine.
While the political transition was smoother than expected, a path never emerged for the vast majority of black people to transition from poverty to the middle class. For such a plan to be scalable and sustainable productivity must surge, and this requires high workforce participation. The primary binding constraint acting on our economy today is access to sufficient purchasing power to meaningfully accelerate employment gains.
Our youth unemployment crisis being entrenched by localisation policies reinforces the poverty trap that ensnares our economy. As the upcoming elections are unlikely to trigger the required policy shifts, we must rely less on our national leaders.
We aren’t close to coming together as a nation to provide adequate electricity or jobs. Just as many of us have given up on our leaders resolving Eskom’s woes and install solar panels instead, our school-leavers must be inspired by their colleagues who achieve micro-credentials and earn a living working online within international teams based outside SA.
As ANC policies discourage capital mobilisation in SA, we must delink job creation from domestic capital formation.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
SHAWN HAGEDORN: Why it suits the ANC that the SA economy scorns global norms
Even if investment were to stream into the country, the jobless youth crisis would not be alleviated
A recent analysis by German engineers outlined how Eskom’s dysfunctional management structures diverge sharply from international norms. Meanwhile, multitudes of well-supported accusations of incompetence and corruption distract us from unpacking why our political economy is a stark international outlier — and why this suits the ANC.
If our political economy was as dispassionately analysed as the German engineers’ analysis of Eskom, youth unemployment would stand out as the most deeply entrenched threat to SA’s democracy and economy. Polling has shown that 75% of voters list jobs as their top concern.
SA’s most prominent economic growth initiative of recent years featured CEOs working with government leaders in pursuit of investment-led growth. As attracting investment suits our patronage-dependent governing party, its leaders laud the virtues of policy reforms at investment conferences. Yet as actual reforms have been lacking, investors demand high yields or invest elsewhere.
Investment flows were to unlock high growth with job creation surging. However, domestic growth cannot tame our youth unemployment crisis in less than a generation. This jams our intersecting politics and economics into a cul-de-sac by amplifying the appeal of patronage — thus undermining electoral pressures for pro-growth policies.
A majority of SA’s black twentysomethings are becoming permanently marginalised. This same demographic is criticised for its low voter participation rates. Yet SA’s rampant youth unemployment, and its long-term consequences, are immune to the overly domestic-focused growth strategies under consideration.
Collaboration for the sake of investment-led growth was to first advance the interest of political and business elites, with broader benefits then trickling down. But even if investors had responded enthusiastically, jobs would have remained elusive for a majority of today’s younger black South Africans.
The German engineers traced Eskom’s persistent performance shortfalls to a management structure starkly out of line with international norms. But is this not a symptom of our political economics being sharply out of line with international norms?
Our national dialogue is not confronting the implications of combining the world’s worst youth unemployment with sliding into a debt trap. Purging the remnants of pre-1994 injustices always required that the vast majority of blacks become solidly middle class through their productively integrating into a healthy economy.
Using redistribution to create a new set of political elites dismissive of commercial principles is not progress. Our political dispensation is not delivering for the majority of black South Africans entrenched in poverty. Many more must integrate into the far healthier global economy.
Our economic growth is now suppressed by enormous unemployment amid rampant poverty, while demand cannot be spurred by government entities or households buying on credit. Both sectors are struggling to service heavy debt loads from having funded consumption with increasingly expensive debt.
We can only sustain high growth by accommodating international norms. SA’s economy — or at least its younger would-be workers — must become far more intensely integrated into the global supply chains, as this is the common denominator among today’s successful economies. Attracting international capital to fund a localisation-focused domestic economy was never viable.
Whereas the global economy has become extraordinarily dynamic and integrated, “localisation” is our local synonym for the “import substitution” policies with their long record of failure. SA’s core political-economic disconnect is that the ANC’s reliance on patronage is incompatible with focusing on competitiveness and this is central to adding value to exports — this era’s proven high-volume job creation path.
As sanctions had amplified the political risks of investing in a country seeming to be on the verge of civil war, access to international capital was a binding constraint for SA’s pre-1994 economy. Conversely, large cross-border flows are now routine.
While the political transition was smoother than expected, a path never emerged for the vast majority of black people to transition from poverty to the middle class. For such a plan to be scalable and sustainable productivity must surge, and this requires high workforce participation. The primary binding constraint acting on our economy today is access to sufficient purchasing power to meaningfully accelerate employment gains.
Our youth unemployment crisis being entrenched by localisation policies reinforces the poverty trap that ensnares our economy. As the upcoming elections are unlikely to trigger the required policy shifts, we must rely less on our national leaders.
We aren’t close to coming together as a nation to provide adequate electricity or jobs. Just as many of us have given up on our leaders resolving Eskom’s woes and install solar panels instead, our school-leavers must be inspired by their colleagues who achieve micro-credentials and earn a living working online within international teams based outside SA.
As ANC policies discourage capital mobilisation in SA, we must delink job creation from domestic capital formation.
• Hagedorn is an independent strategy adviser.
READ MORE BY SHAWN HAGEDORN
SHAWN HAGEDORN: SA’s problems and solutions lie beyond identity politics
SHAWN HAGEDORN: SA’s policy landscape a good place for faux PhDs to hide
SHAWN HAGEDORN: Why Africa remains poor
SHAWN HAGEDORN: Boosting growth is no panacea for joblessness
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Post-election coalition ‘won’t work’ for ANC, says Mokonyane
We definitely had the funds for SAA, says Takatso chair
IFP in Newcastle wins three wards from ANC
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.