With Eskom’s, Transnet’s and the National Treasury’s woes reinforcing one another, prospects for the ANC being booted out of the Union Buildings next year seem less remote. Would that reverse our economy’s dreadful trajectory or merely slow the decline?

The ANC lost interest in creating a healthy economy long ago. Instead, they gambled, very aggressively, that creating a massive patronage network would ensure electoral dominance even if the economy persistently sputtered. Now it seems that their reckless economic stewardship could scuttle much of their capacity to fund patronage.

Many who oppose ANC rule expect the electorate to dispatch them, probably in 2029. But, as most of our twentysomethings are becoming permanently marginalised, threats of a fiscal crisis, amplified by unreliable infrastructure, could put next year’s election in play. 

The ANC’s patronage-focused electoral strategy demands they fund sub-subsistence grants to avoid social upheaval and an electoral backlash. But, due to anaemic growth, that would either require budget cuts, which would inflict much pain on patronage beneficiaries, or reckless borrowing which could trigger a debt crisis.

If the ANC were to exit the Union Buildings next year, they would be leaving a monumental mess. Being able to sharply upgrade their low-governance standards would not be difficult – but nor would it be sufficient. 

Most countries which reach our level of youth unemployment are failed states. Thus, our public sector governance is highly vulnerable to organised social upheaval. The rioting in July 2021 was a warning shot. How hard would it be for a new national government to ensure law and order when most young adults are desperate and if the ANC’s patronage bigwigs are cut off from funding and facing criminal prosecution?

Definitions of a ‘failed state’ vary but the term is mostly about an inability to govern. Would a new government prefer a negotiated settlement with bad actors or invest in fleets of casper-like equipment? How long would it take to achieve an effective national police force?

But if, as still seems likely, the ANC maintains its electoral dominance at the national level, their inability to fund their patronage network will create cascading financial and governance problems for the party and the country. Organised high-volume violence and robust international tourism are incompatible. Expect some unsavoury accommodations mixed with much violence.

The simmering budget crisis makes it more relevant that none of our leaders has a plan to overcome our youth employment crisis. Rather, thecommon refrain is that vastly upgrading public sector governance alongside investment-led growth will unleash adequate growth. It won’t, but it is sensible from a campaigning perspective. People want to hear simple solutions that validate their views. 

Criticising corruption is easy while purging it would be woefully insufficient. Until rather recently, China’s corruption was considered worse than ours.

Easily recruited

As fiscal tensions are now suddenly threatening the ANC’s patronage-reliant electoral strategy, we need to promptly unpack why our youth unemployment crisis is so severe and how it can be most rapidly remedied. If young adults have no hope, many will easily be recruited to challenge the government through rioting and looting.

Most of our young adults are on track to become life-long grant recipients. This isn’t viable socially, politically or economically.

The late twentieth century global economy had advanced to the point that mass famines had been eradicated so long as governance was not both highly incompetent and corrupt. The same is true of rampant poverty and unemployment today. 

Poverty has been plunging due to globalisation whereas resisting global integration invariably triggers harsh outcomes. And neither our pre- nor post-1994 governments haveprioritised employment, skill development or global integration.

Trickle down

We are ranked number one in the world at both income inequality and youth unemployment because our economy isn’t structured to ‘trickle down’ the growth benefits which cluster among our higher income households. Thus, commodity prices could surge or there could be a mammoth discovery of underground riches, yet job creation would be meagre.

This highlights why China’s commodity purchases are far less valuable for South Africa than Western countries’ purchases of value-added exports – though this was ignored during the recent BRICS summit. Nor was the summit’s use of purchasing power parity to inflate the value of BRICS and African countries as trading partners challenged. Trade accounts are not settled with such theoretical multiples. It is countries with high discretionary purchasing power that make ideal trading partners – and most of those are in the West.

It is as if a bus full of jobseekers has broken down and the engine is being dismantled on the side of the road with the passengers looking on – but the parts and knowhow are as slow to arrive as those required to complete an Eskom power plant. Meanwhile, there is a nearby onramp leading to vehicles with abundant capacity.

Sufficient spending capacity

Even under highly favourable growth scenarios, it would take two generations for South Africa to have sufficient domestic spending capacity to support a normal level of employment. The ANC embraced localisation policies to advance their patronage-focused electoral strategy, yet relying on our depleted domestic spending power ensures that youth unemployment will remain obscenely elevated. As with accessing reliable electricity, spurring rapid job growth mustn’t be unnecessarily reliant upon governance upgrades. 

Irrespective of expectations for next year’s elections, we need to promptly get our heads around the necessity of vastly greater global integration to rapidly accelerate job creation. Unfortunately, however, we tend to think that our young adults can’t compete internationally due to horrific education outcomes. This reflects South Africa’s experience with mostly higher skilled workers integrating into the global economy. Conversely, over the past generation, Asia has employed hundreds of millions of initially low-skilled workers adding value to exports.

21st century economic development

A related point is that as SA has a massive over supply of low-skilled workers this creates the impression – given our geographic isolation – that such people have very little potential. Yet, the phenomenally rapid rise of Asia, possibly humanity’s most impressive accomplishment, was fueled by upgrading the productivity of low-skilled workers through finding niches to integrate them into global supply chains. This is how 21st century economic development is achieved.

Even if our economy maintained rapid growth for a long time, there would still be an enormous skills mismatch given our huge oversupply of low-skilled workers. Meanwhile, many other countries have an overskilled, or shrinking, workforce. 

South Africa has never embraced integration into the global economy through today’s standard path of niched specialisation. What niches might those be? As continually demonstrated by high-growth countries, that question must be answered by entrepreneurial successes and failures. 

An investment-led growth mindset traces to our sanctions-era induced isolation and reliance on commodity exporting. Today, top global companies are seeking to train young South Africans and the World Bank is spotlighting the emerging trend whereby the online gig economy spurs job creation across the developing world. 

It is understandable that voters prioritise jobs. Yet we mustn’t rely on elected officials to create them.

[Image: Gerd Altmann from Pixabay]

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

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For 20 years, Shawn Hagedorn has been regularly writing articles in leading SA publications, focusing primarily on economic development. For over two years, he wrote a biweekly column titled “Myths and Misunderstandings” without ever lacking subject material. Visit shawn-hagedorn.com/, and follow him on Twitter @shawnhagedorn