The Harvard Report, Growth Through Inclusion in South Africa, released last week is a damning indictment of the entire ANC project. It is one of the best explanations so far of how the ANC has managed to mess up the country.
At their root, the causes for our economic demise are all political. The story is of a ruling party with an ideological fixation on creating a large state to solve society’s problems. It hires its supporters, called cadres, and gives them contracts because it wants to extend patronage. The result is an incompetent state that is not under pressure to fix problems because it knows that it will not be thrown out of power at the next election.
Yes, there is a legacy from apartheid, says the report. One critical area where this is found is in the location of townships far from places of work, which raises labour costs and unemployment. But steps could have been taken years ago to help remedy this.
The thrust of the report and its arguments have often been made, but the explanation comes from a highly authoritative source and the case is tightly argued. The report is also unusual in pointing to the overwhelming political causes of the collapsing economy.
It was written by a team at the Harvard Growth Lab headed by Ricardo Hausmann, a pre-Chavez planning minister in Venezuela, now a professor at the Harvard John F. Kennedy School of Government.
The Harvard Report should be taken as a dire warning by the ANC, but it won’t be. It is just one of a number of negative reports from the International Monetary Fund and the credit ratings agencies among others that point to our worsening predicament. It might be water off a duck’s back for the moment, but perhaps in a decade, with a responsive coalition in government, the report could be an agenda for action.
The diagnosis of the Harvard Report is that four factors account for state collapse. Firstly, too much responsibility was allocated to the state by the ANC. It was expected to change society, but with insufficient competence, there was “premature load-bearing”.
Secondly, argues the report, there is political gridlock. That means reforms and key changes to improve delivery are not undertaken.
Third is the role of ANC ideology that decrees that the state should play a leading role in society. China’s reform was based on the ideas of the architect of the country’s economic reform in the 1970s, Deng Xiaoping, about doing what is practical. “It doesn’t matter whether a cat is black or white, as long as it catches mice, ” Deng said.
“But in South Africa it is about caring more about the colour of the cat than whether it catches mice,” says Hausmann.
“Ideological gridlock within government,” says the report, prevents decisions being made in time, “as has happened repeatedly in both electricity and rail.”
Ideology prevents society from contributing to supply the needs of the country; for example, by limiting private, municipal, and provincial power generation.
The fourth factor behind the collapse of the state is corruption and state capture. Tenderpreneurs have become entrenched in the political system due to, “the mistaken belief that preferential procurement rules could be imposed on complex organisations,” at little cost.
The four factors are all heavily political rather than strictly economic explanations, but the result has been stagnant per capita income.
The power crisis is an example of all four forces at work in undermining the economy. For years, the low cost of electricity from coal-fired generation was the source of the country’s competitive advantage, particularly in export-oriented manufacturing industries. Well-managed power and rail networks were a basic underpinning of the South African economy, until the ANC got to work.
After years, the ANC has failed to fix the problems. Policy gridlock and ideology have triumphed.
Only recently did the government entirely lift the restriction on what municipalities and private companies could produce. Under a government plan, Eskom stations not in need of major overhauls were meant to have been concessioned off for private operators to run last year. Nothing has happened, and meanwhile we have experienced the worst year of power cuts so far.
Transnet was meant to have let private operators run certain rail corridors. Nothing has happened, and exports of certain minerals are way down.
This is firm evidence of political gridlock and ideological fixations by the ruling party.
The prime cause is that South Africa is a one-party-dominant system. The ANC has yet to face an election where there is even a remote chance that it will lose. And even its drop in its share of the vote does not seem to end the inertia.
But why does ending the inertia not happen here?
The reason gridlock is overcome elsewhere, says Hausmann in this Centre for Development and Enterprise video, is that governments are a lot more accountable in many countries. “If you do not fix the stuff you lose the election,” says Hausmann. It is the fear of losing the next election that motivates many democratic governments to act.
“The idea that power is entrenched, that it is less contestable,” tends to mean that there is no urgency around the issues that democracies sometimes generate, says Hausmann.
The report has a long list of changes to spur faster growth, only some of which would impose political costs like reform of the civil service and the concessions of power stations to private contractors. Overcoming the problems that result from the long distances between places of employment and housing, and growing our position as a supplier to the international green economy would be a win for all.
There are two most likely scenarios for a post-election government and neither of them point to a relief from gridlock.
If the ANC wins the next election with an outright but reduced majority, a doubling down on failed policies and gridlock can probably be expected. If the ANC is short of a majority by a few percentage points it will form a coalition with smaller parties. Perhaps there might be more pressure then, but it is still more likely to double down than change.
The breaking of gridlock requires a new party or a coalition without the ANC and EFF to be in power.
[Photo: Ceylon Chamber of Commerce]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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