ISMAIL LAGARDIEN: Economic logic of the governing alliance does little for investor confidence

It’s getting tedious to write or even comment about the failings of the governing alliance. It’s just as well I am not terribly interested in domestic or national politico-economic matters.

That does not mean I don’t break out in laughter or tears whenever one of the alliance members says something about “the economy” that is profoundly ignorant yet expressed with such arrogant certainty.

Actually, the way the governing alliance’s rank and file — especially the “radical economic transformation” faction — have so little sense of the toxicity of the things they say and do in public is becoming embarrassing. They remind me of people who learnt to write before they learnt to think.

Those who have recast themselves as performance economic justice warriors are no different. Here is something you tell a toddler: be careful with the way you use words. Words have meanings. Words can cause hurt or harm. And so you get to former/still ANC secretary-general Ace Magashule, who once overheard a conversation about quantitative easing and repeated the words when he clearly did not know what he was talking about. 

It really is difficult for me to say this given my aversion to conceiving “the economy” as some dehumanised technical activity like “physics”, but there seems to be no understanding in the governing alliance of the ways markets respond. Here, “markets” refer to those millions of people who buy and sell goods and services every minute of every day around the world. In these markets there is no invisible hand that, like a mythical and omniscient god in the sky, reaches down to Earth to peek into people’s bedrooms.

The alliance is greater than all gods. It was former water & sanitation minister Nomvula Mokonyane who said, after Fitch and S&P downgraded SA to junk status in 2017: “Let the rand fall, we will pick it up.” Yes, we know the ratings agencies are private institutions that work for private corporations, but people who buy and sell (goods, services, stocks and shares) listen to these institutions and take them seriously. As do investors.

The ratings agencies, the Bretton Woods institutions and the Bank for International Settlements, among many others, have the power to “certify” countries, and they use that power. This brings us to the latest exercise in logic and wisdom. It comes from no other than the radical economic transformation faction, and the poisoned well of crackpot economics.

Mzwanele Manyi — who invested in the New Age newspaper, which swiftly went out of business, a veritable insight into his wisdom — has said the arrest and court decisions concerning Jacob Zuma send the wrong signal to investors. This “logic” went viral on social media, never mind that it is completely illogical. On the contrary, the people who make decisions to invest or not may actually be impressed that SA is a country that can hold its once highest office-bearers to account.

The fact that Jacob the Supplanter (a Biblical reference to Jacob as one who trips up, circumvents, seizes or usurps) has been hauled before the courts, that he has been sent to prison, that he is and will continue to be held responsible for alleged corruption, are positive signs.

Though business people will almost always try to corner markets (that’s why we have competition policies and antitrust laws) or circumvent ethical considerations (that’s why we have regulations), they generally seek political stability, economic certainty and returns on investment, and are deterred by corruption, especially among political office bearers.

I have some theories on why there is a lot of hesitation towards investment globally — it has to do with the current state of capitalism and an uncertain future. But to believe that investors would be turned away from SA because Zuma has been brought to face charges of corruption is just wrong. It is not even roughly right.

The economic logic of the governing alliance and its offshoots reminds me of someone urinating down their own leg; everyone can see it, but only they feel the warmth of their own wisdom. The horror of it all is that for more than two decades — from the time that Julius Malema, once usurper of the ANC Youth League presidency, and Neil Coleman, once of Cosatu, were in the alliance — it has been voted back into office over and over again.

The political economy is in decline, never mind the “green shoots” we may hear about (it’s a bad analogy anyway, because said green shoots may be of the poisonous perennial plant variant). There is a growing infrastructure deficit, and rampant and potentially socially explosive unemployment (among so much else).

As one columnist in the Sunday Times asked over the weekend, when does a state fail? Well, we are not there yet. But for as long as the governing alliance’s miracle hand has replaced Adam Smith’s hand there is little we can do but sigh.

• Lagardien, a visiting professor at the Wits University School of Governance, has worked in the office of the chief economist of the World Bank, as well as the secretariat of the National Planning Commission.