Affluent European voters allowed authoritarian-led Russia to exploit their ideals and trust. This led to a war which triggered devastating sanctions. Similarly ruthless exploitation of voter trust has wrecked SA’s economy. How should we respond?

As our governing party benefits politically from the fiscal windfall of high commodity prices, the ANC now appears even less likely to enact desperately needed policy reforms. While recognising that the ANC’s leadership is as detached from moral principles and 21st century realities as Russia’s, voices of reason must sell solutions.

The ANC has managed to frame our current debates about subsistence grants for the majority of healthy young adults who are idled as a moral-versus-fiscal issue. Rather, the need for such payments should be triggering urgent policy reforms.

Both Putin and the ANC are illiberal actors who have crippled constitutional protections by exploiting historic grievances to avoid accountability. Resource endowments are then milked to fund an expensive patronage network.

The ANC has blocked pragmatic, solution-focused discourse by repeatedly framing issues around race and inequality. The Black Lives Matter movement and woke-stoked culture wars provided an accommodating  international backdrop.

Events of the past two weeks have provoked a decisive pivot toward pragmatism across much of the world. As values-shaped lenses suddenly seem outdated, it has become much easier, and more essential, to see SA within an up-to-the-minute global perspective.

Elections are essential to hold politicians accountable. Unfortunately, illiberal leaders of resource-endowed nations can thwart electoral accountability through funding much patronage.

Between 1990 and 2020, extreme poverty declined globally from just under 40% to less than 10%. The World Bank’s trend analyses point to nearly 90% of the world’s extreme poverty being in sub-Saharan Africa by 2030 – which is already home to 27 of the 28 poorest countries, most of which rely on commodity exports.

Productivity and export competitiveness

The world is rapidly evolving in ways that presidents Putin and Ramaphosa seem to under-appreciate. Resource endowments are still important, but much less so. High-growth nations focus on increasing productivity and export competitiveness. Thus, they very much favour a stable, rules-based world order where national sovereignty and borders are sacrosanct.

Countries that can create wealth are more attractive partners than those which are run by reckless economic stewards who rely on depleting the resources they inherited. Thus, Putin’s Russia was already unpopular before its Ukrainian invasion spurred Western governments to sharply constrain its cross-border financial transaction capabilities.

The US and China have been the two locomotives dominating global growth for decades. That China has often contributed more to global GDP in recent years is frequently misinterpreted.

By importing huge volumes of finished goods, the US has supported the creation of hundreds of millions of jobs – predominantly in Asia. This paved the way for many emerging nations to save and invest prudently as their growth wasn’t constrained by their domestic purchasing power. This has resulted in a tremendous expansion in middle class households in many countries, most particularly China.

Conversely, China runs a large trade surplus. Its importing of raw materials creates relatively few jobs for commodity-exporting countries. While it has been the top beneficiary of the rules-based global order, it has often supported illiberal governments through helping to fund their patronage networks.

Our ruling elites are using the fiscal windfall from high commodity prices to fund subsistence payments for the majority of our young adults who are healthy but idled. This shows how commodity exporting can be used to stifle development while benefiting a ruling party through creating dependencies.

Rules of the road

We are about to find out that gold’s ability to settle international transactions is quite antiquated, while crypto currencies lack the acceptance which comes with stability and regulatory burdens. The global economy’s success requires rules of the road.

The post-Cold War period was characterised by middle class prosperity rapidly expanding. There were winners and losers, with some individuals becoming massively wealthy. But Russia’s oligarchs are a dying breed. Most of today’s new ultra rich made their money not through commodities or real estate but rather through innovative offerings which were endorsed by many millions of consumers.

Whereas Putin undermines democracy through aggressively suppressing free speech, the ANC exploits racial tensions and inequality to justify the BEE legislation it needs to feed its patronage network. This undermines competitiveness thus precluding sufficient integration into global supply chains to sustain high-volume job creation.

The ANC’s policies can’t create wealth or reduce inequality.  Zuma launched his 100 black industrialists (SA oligarchs) initiative upon returning from Russia to create a new layer of redistribution-funded cronies. Ramaphosa’s localisation programme is similarly designed to benefit the politically connected at great cost to the poor and unemployed.

Yet we live in a world which is deeply averse toward large clusters of poverty and high unemployment. To achieve such dire economic outcomes, thus spurring dependencies, policy makers must actively block their young workers from integrating into the global economy.

The only ruling elites which will choose to block such integration are those that can benefit from exporting commodities. To avoid extreme youth unemployment – and its lasting consequences – South Africa always needed to mimic the economic transformation paths followed by dozens of successful emerging countries.

Inequality and race

Whereas Putin suppresses free speech through patently assertive means, the ANC’s use of inequality and race to suppress the open contestation of ideas has been just as effective. We know this is true as necessary policy reforms are not under consideration and none of our leaders can offer a workable growth plan.

Our voters have been as taken in by ideals as their German counterparts had been.

The ANC’s messaging prioritises race and inequality to justify the redistribution-focused policies which are central to funding its pervasive patronage network. That is, ideals are manipulated to block solutions.

The only path to adequate job creation is through increasing value-added exports. We must unite our voices in calling for broad regulatory relief to promote such exports.


The views of the writer are not necessarily the views of the Daily Friend or the IRR

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Shawn Hagedorn worked in banking, finance and capital markets in New York City and London before emigrating to South Africa. He holds degrees in finance, economics, and international business and his writing has appeared in a number of publications including Business Day, Sunday Times, Mail & Guardian, and Politicsweb, amongst others.