Speaking on the sidelines of the BRICS Summit after a meeting with Brazilian president Lula da Silva, Minister Gwede Mantashe appealed to South Africans to take responsibility for lifting themselves out of poverty.
‘One of the things that we must change in South Africa,’ he said, ‘is to change the passive nature of our society, where society thinks that it must be taken out of poverty instead of working with government in taking itself out of poverty. I can tell you, if you don’t put your skin in the fire you don’t change the reality, the reality around yourself. This is an issue that we need to start building on. We will only succeed if society participates in fighting poverty and other ills of society.’
This is a familiar theme, though one that is often lost in a contradiction at the heart of South African policy. The ANC and the government talk a good deal about ‘empowerment’ and ‘participation’ of ‘the people’. Yet at the same time they have promoted an environment in which that is impossible.
This has been the case since the 1990s.
The most effective and accessible means for economic empowerment is demand-driven employment – the key proviso being that these jobs must be productive, contributing to the overall economy and not simply activities to channel money to their incumbents. This is a maxim that is accepted by everyone, across whatever boundaries one might wish to suggest. It’s also been a top priority in polling for decades. Back in 1994, one of the ANC’s campaign slogans was simply ‘Jobs, jobs, jobs’. But with an almost single-minded devotion, successive governments have failed to make this a reality.
Rather, the focus has been on providing benefits to the employed – understandable, given the ANC’s ideological lineage and the influence of its trade union allies – which has (possibly) delivered handsomely to South Africa’s labour aristocracy, but has upped the costs of doing business and the risks of hiring. This has erected a significant barrier to employment against the young and the unskilled, precisely those who need it the most.
Another avenue was small business development. But here, the regulatory burdens imposed on the economy – think labour laws in particular – were dumped onto small firms. Small business, and the small-scale entrepreneurship that should have sustained it, failed to come into its own. Ironically, the regulatory regime worked to the advantage of larger firms. The economy became more concentrated instead of more diversified.
Not that big business has done that well either. A number of South Africa’s flagship corporations have effectively exited the country, looking for more favourable opportunities abroad. Even with the country’s great historical advantage – minerals – South Africa is losing out.
‘Policy uncertainty’ is the great, vague omnibus alibi that the State will concede, although ‘harmful policy’ would be a better descriptor. Add to this the failure of the logistics networks and the omnipresent power crisis, now heading steadily towards its second decade, and the reality is clear: South Africa is just not an environment primed for opportunity.
And herein is another bizarre contradiction: the ANC has long held up the idea of a mighty, interventionist state. The developmental state. This has become a bad parody of itself, and the government in its dysfunctional state is now probably the single biggest obstacle to South Africa’s prospects.
Carol Paton recently argued persuasively about the afflictions plaguing the State, echoing arguments the IRR has made for many years: ‘Two ANC policies drive state incapacity: cadre deployment and preferential procurement. Both have been categorically reaffirmed by the ANC government, which denies the damage being done.’
Incidentally, this reflects comments made at the BRICS Summit by a Chinese official, that dealing with the cataclysmic power crisis demanded a relaxation in BEE and tender requirements. Merit in pursuit of outcomes, in other words; though it’s doubtful that South Africa’s government would listen to this piece of advice from the Summit.
‘Working with government’, as the Minister put it, is a forlorn hope.
The palliative that the State has offered South Africa’s immiserated masses – and it’s an important one – is the system of social grants. According to the SA Social Security Agency, at the end of June 2023, just under 19 million grants were being paid out each month to some 11.3 million beneficiaries. The latter number is roughly the same as the number of people in formal, non-agricultural employment, and not too far behind the 16.3 million in some form of work.
President Cyril Ramaphosa has called these grants ‘one of the greatest achievements of our democratic society.’ In a sense he is correct, in that they have provided a cushion against the worst ravages of poverty (and in an entirely non-racial fashion, a curiosity for a government so obsessed with colour-coding). But they also represent a failure to shift the direction of the country on to the self-sufficient path to which Minister Mantashe exhorted the country, and which job-rich growth would enable.
This can be turned around. The key will be to get investment going, which will fuel growth and thus the virtuous cycle that will create demand for employment and open opportunities for entrepreneurship, large and small.
The goal must be to raise growth to 7% per year, and annual fixed investment to the 30%-of-GDP goal that the National Development Plan envisioned.
The first step is to embark on serious policy reform. The attack on property rights through the Expropriation without Compensation agenda did a great deal to dissipate the wave of euphoria and goodwill that accompanied President Ramaphosa’s rise to power. Take EWC off the table – it offered no solutions to any of the country’s problems in any case, and misdirected the ‘debate’ around land reform in so doing. At the same time, recognise the importance of safeguarding investments across the board, not just in tangible assets but in intellectual property too. BEE, effectively a tax on productive investment, must be abolished.
Needless to say, something like the proposed National Health Insurance scheme – certainly in its current form – needs to be abandoned. Not only does it signal enormous intrusion into business operations, but it proposes vesting control over unprecedented sums of money in the hands of a state whose record on this has been dire. Plus, it would do this over people’s healthcare, a life-or-death matter. It’s hard to see anything other than tragedy coming from it.
Crime and corruption need to be tackled. This will be a difficult process, but some serious signals and quick (potential) wins would be made possible by depoliticising the police and civil service, capacitating investigative and prosecuting bodies, and partnering with private entities to these ends. Cadre deployment must speedily and publicly be abandoned.
The rehabilitation of South Africa’s infrastructure would be the next priority. Getting private sector investment in will be imperative. Outright privatisation of certain assets and services must be considered where necessary – with due regard for the dangers of crony deals and monopolisation. This has long been seen as an ideological issue, although properly conceived it’s not. The State simply lacks the ability at present to manage its assets, and a change of direction is essential.
The labour market must be reconfigured with the imperative of job creation in mind. Barriers to entry, especially for young people, need to be torn down. Minimum wages, central bargaining and so on must be abolished. Particular care should be taken not to destabilise labour-intensive sectors such as agriculture, which have the potential to draw in large numbers of people.
Perhaps most importantly, South Africa needs to rethink economic participation. Foremost here is to dispense with the failed race-based BEE model, and to refocus on socio-economic upliftment. Brian Pottinger wrote more than a decade ago that racial policy was not doing much to bring new entrants to the real economic mainstream. The so-called black middle class, the community of civil servants and businesspeople, to say nothing of the country’s elites were now the mainstream. Just so.
The IRR advocates a model of empowerment, Economic Empowerment for the Disadvantaged, which leverages economic growth and promotes advantage and assistance to those in need of it. It proposes vouchers for education, healthcare and housing, and rewarding businesses that invest and employ – in other words, do what they exist to do and what society wants them to do, but which present policy dissuades them from doing.
Meanwhile, a growing economy would create the resources to sustain the social grants lifeline – even expand the expenditure over time – for those still unable to find work.
All in all, this is a formula for people to do what Minister Mantashe wishes they would do. If only the Minister and his colleagues could see it too.