SHAWN HAGEDORN: SA’s plight should warn Africa not to do the same

Without a major pivot to pro-growth policies, our economy will wobble until it tumbles. An ANC-EFF coalition looks increasingly likely. The new MK party might then support coalition efforts to cripple constitutional protections necessary for legitimate elections. 

If in 2029 sham elections are held amid rising misery and social decay, SA will have gifted the world proof of cultural Marxism’s dangers. Might our neighbours then see SA’s experiment with democracy as a cautionary tale? 

A prosperous and democratic SA was to serve as this region’s role model. Would a failed SA persuade regional leaders to adopt effective pro-growth policies, or would they be impressed by how our governing elites have enriched themselves through state capture?

While it is difficult to imagine other countries benefiting from SA not being able to find its stride, we should consider how the Middle East has evolved. Iraq’s Saddam Hussein and Iran’s ayatollahs contested for regional hegemony until the ayatollahs benefited from the Hussein regime’s removal. 

That region’s Shia-Sunni rivalries roughly resemble our black-white tensions. The ANC prevailed in 1994, and a decade later Iran’s leaders found that they had outlasted senior Iraqi rivals. Few countries with substantial but troubled economies have resisted international norms as emphatically as Iran and SA. 

The lust of ANC leaders for international pageantry blurs its anti-Western style of isolationism. They rarely have anything substantive to show for attending Brics or Group of 20 (G20) summits or a court spectacle in The Hague. Yet the declining appetites of international investors for rand-denominated assets reflect the ANC’s disdain for international norms alongside its lack of interest in building a robust economy. 

As few companies in the Middle East or Africa add value within global supply chains, upward mobility and vibrant middle-class societies remain rare. Rather, patronage and commodity exports depict the political economics of countries across both regions.   

If SA continues to mimic Iran’s economic isolationism, as signalled by ANC localisation policies — and its geopolitics, as indicated by our governing party’s support for Hamas and Russia — will our neighbours follow SA’s lead or learn from ANC mistakes? Trends in the Middle East suggest the latter. 

Various Middle Eastern leaders have pivoted in favour of global integration. The United Arab Emirates’ (UAE) neighbours have been inspired by its successes, for example. That region’s history as a trading centre reflects its positioning at the intersection of Asia, Africa and Europe. The UAE has become a transport and trading hub as well as a significant tourist destination, and Saudi Arabia and Qatar now pursue similar transition plans.

While over-reliance on resource extraction has constrained development in both regions, a key takeaway about how SA’s economy has been mismanaged is summarised by the politically contrived term “beneficiation”. Rarely is there a commercial case for locating a factory near a mineral or hydrocarbon deposit. 

Political support for beneficiation typically traces to union influence or patronage. Rather than pursuing ill-conceived beneficiation projects to exploit their enormous hydrocarbon deposits, the UAE, Saudi Arabia and Qatar are going in the opposite direction and building enormous solar farms. 

Today’s driver of economic and employment growth in lower-income countries — value-added exporting — is incompatible with the ANC’s embrace of localisation and beneficiation delusions. As leading countries in the Middle East have rejected such unworkable paths, this leaves only Africa sitting on the outside of an intensely integrated global economy. Elsewhere, countries, companies and workers achieve high productivity through carving out niches in international supply chains.

As this continent’s most economically advanced country, SA should be identifying and developing paths where African countries can meaningfully integrate into the global economy, as the UAE and Israel have done in the Middle East. Instead, the ANC wants to revive its glory days as a much-feted social justice ambassador — notwithstanding a majority of today’s 20-something black South Africans being condemned to perpetual poverty due to corruption amplifying incompetence.

Whereas beneficiation is a politically contrived term, global integration provokes diffusion of the latest skills, technologies and concepts. The accelerating pace of disruptive innovations punishes economies that indulge beneficiation and localisation delusions. Conversely, today’s global economy rewards intercontinental integration through generous knowledge transfers. Yet, not unlike Iran’s leaders, the anti-Western ANC favours localisation. This greatly constrains growth and job creation.

Our patronage-minded governing elites rely on commodity exports to fund SA’s bulging welfare state. Meanwhile, global economic growth is ever more dominated by services, which are increasingly being reconceived by digital and artificial intelligence possibilities.

Our leaders should note how successful Middle Eastern countries are reshaping their economies. If they don’t, other African countries should learn from our leaders’ lapses.

• Hagedorn is an independent strategy adviser.