Can the ANC turn South Africa’s economy around?


South Africa in 2017 is an infinitely better place than it was in 1990, when negotiations for the country’s future started between the National Party, the African National Congress (ANC) and others. The past decade, however, has been wasted. Things have not been getting better fast enough to allow South Africa to move ahead in terms of key development indicators, such as levels of extreme poverty, employment rates and reductions in inequality.

For things to improve, South Africa will need to grow its economy much more rapidly and it will need to channel that growth into improvements in income and the living standards of poor people, while reducing the gap between the various income classes. Only sustained higher levels of employment can achieve this goal.

The country needs to make a choice between its current strategy of high-wage, high-productivity over labour-intensive job creation.

The extent of unemployment in SA is severe, it is disempowering and debilitating

As economist Nicoli Nattrass writes, ‘Post-apartheid development strategies [have] contributed to an economic growth path that benefitted insiders (those with jobs), exacerbated unemployment and thereby undermined inclusive development.’ This, she argues, ‘reflects the power of organised labour (to determine labour policy), economic constraints on government policy (notably the need to avoid a debt crisis) and the political appeal of a growth path premised on “decent” jobs’.

For South Africa, labour-intensive growth would constitute meaningful radical economic restructuring.

Ahead of its national policy conference in June, the ANC circulated a series of discussion documents. According to the report on economic transformation, radical transformation was about ‘fundamentally changing the structure of South Africa’s economy from an exploitative exporter of raw materials, to one … based on beneficiation and manufacturing, in which our people’s full potential can be realised’.

‘A clear objective of radical economic transformation must be to reduce racial, gender and class inequalities in South Africa through ensuring more equity with regards to incomes, ownership of assets and access to economic opportunities,’ said the document.

Few South Africans will disagree with this understanding of the need for change. But here, like elsewhere, the focus is on the potential impact of trickle-down economics – the belief that the creation of a small black, moneyed elite (like the sprinklings of chocolate on a cappuccino) will filter down below.

South Africa’s national soccer team, Bafana Bafana, has had 22 coaches since 1992 but it has not succeeded because we have not created a pipeline of talent that feeds and sustains the team. The ANC wants instant gratification. However, it takes more than throwing money at the coach to build a successful team. It takes sustained investment over decades by an entire system geared towards excellence.

In its current configuration, the ANC is an obstacle to inclusive growth

Without a generational and a policy revolution, the ANC won’t prosper and South Africans will suffer, because it is likely that the party will govern until the 2024 elections as part of a coalition, although not in Gauteng.

South Africa needs policies and approaches that will equip the country for a different future – and ones that allow the economy to gain momentum over time, for this is a long road that needs to endure beyond even the 2034 time horizon set out in Fate of the Nation.

‘The economy has to walk on two legs,’ argues UCT economist Anthony Black in his book Towards Employment-intensive Growth in South Africa, ‘with massive growth in employment at the low end, accompanied by increased dynamism in the “advanced” sector. More rapid growth in the labour-intensive sectors will create new sources of demand, upgrade skills and produce new, small firms. All of this will galvanise the “advanced” sector.’ 

Much more decisive steps are needed to change the country’s current mediocre growth and employment prospects. 

The extent of unemployment in South Africa is severe; it is disempowering and debilitating. It will destroy us if we do not confront this challenge. More than any other problem, it points to the need for innovation in thinking about the country’s economic future, the courage to implement policies and to hold one another accountable. The country needs meaningful radical economic reform.

Only significantly higher levels of employment can reduce inequality in South Africa, and only significantly higher levels of employment can reduce poverty. None of this is possible without growth. In its current factional and confused ideological configuration, the ANC is an obstacle to inclusive growth. Its most likely future configuration – which is increasingly black nationalist, populist and ruralist in orientation – will compound that challenge.

Decisive steps are needed to change SA’s mediocre growth and employment prospects

Getting to a high growth and employment trajectory, as modelled in Fate of the Nation, will require, for one, modernising the ANC and reversing its current rural and traditionalist mindset, replacing it with one that is appropriate for the two economic legs that Anthony Black refers to.

Education also needs to be dealt with – particularly the hold that the South African Democratic Teachers’ Union has on schools and on the Department of Basic Education. Senior government officials simply cannot serve both the union and government. 

Partnership with the private sector is required, where the state is responsible for regulation and redistribution, and the private sector for growth and employment, necessitating a smaller, more capable civil service and a positive partnership with business.

There also needs to be a focus on growing small and medium-sized business as the main employment and wealth creators, and reducing the capital intensity of the economy in favour of labour intensity. This can only be achieved by moving towards a more flexible labour market and embarking on a new partnership with labour and business.

Government must benefit all South Africans – whether they are black, white, poor or wealthy – by adopting an inclusive, non-racial, class-based interpretation of society. Class, not race, should determine our analysis if South Africa is to find an appropriate theoretical framework that sits comfortably within its Constitution and Bill of Rights, and that will support economic progress.

The question is, who within the ANC can provide this quality of leadership?

This article is an extract from the concluding chapter of Fate of the Nation written by Jakkie Cilliers and published by Jonathan Ball.

Jakkie Cilliers, Head, African Futures and Innovation, ISS Pretoria

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