The ANC and EFF being excluded from a 2024 coalition government would be a great leap forward. Yet this will remain both unlikely and insufficient in the absence of a robust growth plan.
Behavioural economists, like Nobel Laureate and best-selling author Daniel Kahneman, spotlight how the ‘status quo’ bias creates resistance to change at the individual and group levels. This effect, and its close cousin, the endowment bias, mix with South Africa’s national dialogue being politically distorted by the opportunistic exploitation of past and present injustices to block focusing on solutions.
People talking themselves into staying with the same bank or insurance company even when there are clear advantages to switching reflects a status quo bias. Voting patterns show similar effects. An owner’s unrealistically high valuation of an old laptop exemplifies an endowment effect. As services and digitisation increasingly dominate global growth, a somewhat similar technological obsolescence effect undermines the relevance of coal and many other natural resource endowments.
Changes which generally benefit a society will almost always be negative for some, particularly in the transition phase. Such resistance to change frequently leads to governments providing short-term compensation. South Africa’s situation is ominously different.
The ANC’s policies and practices produce broadly negative results while unsustainably benefiting a narrow number of people and groups closely aligned with our ruling party. Matters have deteriorated to the point where millions of healthy young adults, among others, must rely on government subsistence payments.
Surveys and anecdotal data show people want jobs but the ANC’s policies and practices ensure a very low absorption rate of school leavers into formal employment. Their policymakers must hope strong commodity demand will fund subsistence payments for most South Africans. The quality of our debates has hit a new low by entertaining the notion that subsistence payments for idled young adults will stimulate growth.
Basic income grant debates
The basic income grant debates have been further distorted by our governing party’s suggesting that it is genuinely scrutinising the issue’s pros and cons. At 2024 election rallies, the ANC will argue that other parties will cancel the payments. Conversely, acknowledging now that they are permanent would increase pressure for pro-growth policy reforms.
It had long been reasonable to see resource endowments as this nation’s fountain of wealth, yet the global economy continues to evolve in ways that contradict this view. While their harvesting must be better managed to help fund government expenditures and debt servicing, the ultimate source of the nation’s wealth-producing potential is our youth. Undermining their productive potential while expecting to purchase their political support – with meagre subsistence payments funded in perpetuity by resource extraction – is as dangerous as it is foolish.
It is also imprudent to think that a robust growth plan will emerge from a flurry of post-election workshops among diverse coalition parties united only by their opposition toward the ANC and the EFF. The quality of economic debates must be upgraded now so that the sober among us can objectively agree on the basics. ANC electoral support has benefited greatly from the party’s success at framing the national dialogue around values-based issues rather than evidence-based solutions.
Instead of confronting how out of sync the ANC’s policies and practices are with globally determined success drivers, big business and other groups have supported President Ramaphosa by endorsing his view that our economic woes trace to a lack of investment capital. At best, this confuses symptoms with causes.
Adopting a solution-directed perspective involves focusing much less on values-based criticisms and it leads, invariably, to recognition that exports must rise sharply to meaningfully reduce unemployment. This, in turn, requires an enterprising, cooperation-inclined mindset which is vastly more productive than having each group compete at criticising the others.
We must better recognise how public sector incompetence, as expressed through policies and practices, is more detrimental than corruption. Many countries, such as China, maintain impressive growth trajectories despite their being rated more corrupt than South Africa. The ANC has shown that it can withstand the electoral costs of being seen as a deeply corrupt party.
As there are 5.5 million South Africans over age sixty and ten million funeral policies, meaningful intergenerational wealth transfers are the exception. Our governing party is now embarking on making a huge portion of young people perpetually dependent upon the state. This resembles China’s ‘iron rice bowl’ which perpetuated massive poverty until that country pivoted to embrace capitalism and global integration.
Horrific education outcomes
The ANC’s subsistence programmes are, however, different from China’s long-discredited iron rice bowl subsidies in that there are no work requirements – and thus no prospects for even rudimentary on-the-job training to at least slightly offset horrific education outcomes.
Per capita income is unlikely to return to its 2011 peak within a decade, as economic growth will struggle to exceed population growth. Rather than focusing on solutions, our national dialogue has the ANC blaming capitalists and inequality versus those who lay the blame on the ANC’s inability to tamp corruption and patronage, thus exacerbating inequality, unemployment and poverty.
The core blockage is access to sufficient discretionary income. If our domestic discretionary income was growing, per capita income and intergenerational wealth transfers would be far higher and the need to surge exports would be less urgent. It isn’t growing, as productivity and savings trends are horrific.
Mixing meagre education attainment with obscene youth unemployment erodes prospects for minimally acceptable productivity gains. Meanwhile, government entities and most households are addicted to expensive debt, thus ensuring low savings rates.
The ANC’s high command is beholden to its ubiquitous patronage network. This cements in place a redistribution-focused policy framework which precludes adequate growth. But an objective assessment of solutions options makes clear that removing the ANC and tamping corruption constitutes little more than a starting point. Our growth impediments are manageable but they won’t succumb to good intentions any more than Eskom’s woes can simply be remedied by ending cadre deployment.
To maximise the ANC’s electoral vulnerability, the national dialogue must pivot from debating values-based charges about injustices and corruption to focus on how redistribution-focused policies block adequate growth. From there it can be shown what is possible.
To achieve a sufficiently constructive political outcome in 2024, and adequate economic outcomes from then onwards, we must swiftly reconstruct our national discourse using hard evidence to debate solution options. This is what the ANC seeks to avoid and what the nation requires.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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