It’s a bit of a cliché to say that the coming year will be decisive for South Africa.
An environment of system crisis and increasingly competitive politics raises intriguing possibilities for the coming election. For some, the prospects may be worrying. They are worrying for President Cyril Ramaphosa, and if his perspectives are shared, for many millions of others.
Addressing supporters at the ANC’s anniversary celebrations, he extolled the accomplishments of the party. ‘Our policies have been pro-poor,’ he declared, warning darkly that should the ANC lose its majority, initiatives like social grants and the National Student Financial Aid Scheme were ‘likely to disappear’.
This may have been intended as stock-in-trade politicking – they don’t care about you, but we do! – but the President unwittingly raised a matter that the impending election obscures: whoever might occupy the Union Buildings or hold a majority of Parliamentary seats (though not in the parliamentary building, two years after it was fired), will have to contend with the same dilemmas that confront South Africa now, and which have been allowed to entrench themselves over decades.
The kernel of South Africa’s problem has been a failure to make an economic breakthrough to complement and fortify its political transition. Its future depends squarely on whether it can do so, the measurement of this being its real GDP growth rate.
Put simply, growth is an increase in the size and value of the economy. Critics will argue that this is not a complete solution, which is accurate, but it is a necessary one. South Africa’s success in rolling out its welfare initiatives was only possible because of the size and sophistication of South Africa’s economy. Redistributive endeavours were only possible because resources were available to redistribute in the first place, and could be marshalled with prudent fiscal management.
Doesn’t come close
Between 2010 and the present, South Africa’s economy grew by an average of 1.4%. This doesn’t come close to the 5.4% that the National Development Plan envisaged, and it falls even further short of the 7% that we at the Institute of Race Relations have suggested is possible.
All of this reflects an economy that is running out of space to underwrite its social spending. Whether social grants, NSFAS and any number of other initiatives will be viable in future will depend on the government’s ability to raise the money, not on the big-heartedness of the incumbent party.
Revived growth needs a reformed business environment. Growth is not in the foreseeable future going to be generated by the public sector. This is not an ideological matter, merely a recognition that the latter has been mismanaged and is now a major brake on growth.
Private business is the only realistic agent, but South African policy has functioned to complicate and frustrate its operations. In a sense this has been quite intentional. Race-based empowerment, for example, has been central to the government’s ideological outlook, more prominent in its thinking than is warranted, considering the viability of the enterprises on which it has been imposed.
Demanding that firms cede portions of their equity, or hire in accordance with demographic diktats on pain of crippling fines (the minister of employment and labour has promised to be ‘very harsh’ on recalcitrant employers), or parading the imperative of confiscating property may be appealing to bureaucrats and the ideologists who direct them. For actual entrepreneurs, they are serious disincentives.
The public sector needs to be repurposed. The word is deliberately used, since it has become less a tool of administration and the provision of essential and enabling services than for patronage and the extraction of rents from the productive economy. This applies both to the state itself and to its various parastatals. One need only point to the dysfunction in so many municipalities, the failure to provide a reliable flow of power, and the condition of South Africa’s ports and railways to understand the magnitude of the crisis.
Much of this can be ascribed to destructive ideological impulses. The National Planning Committee referred, rightly, to the ‘rejection of meritocracy’. The capture of the state through its deliberate politicisation via cadre deployment, a policy in which President Ramaphosa played no minor role, stands as a grotesque testimony to hubris.
This has no place in a constitutional democracy and is imposing a heavy cost on South Africa’s economy. Cadre deployment must be done away with entirely. So long as these conditions persist, South Africa has no prospect of reaching the levels of growth it needs.
In fact, last year’s Medium Term Budget Policy Statement forecast a paltry 1% growth for this year, 1.6% in 2025 and 1.8% in 2026. This is as the budget deficit creeps up to 6%, and as capital heads for the exits (foreign investors shed close to R1 trillion in South Africa stocks over the past decade), and interest payments consume ever more of what there is to spend. Year on year, this crisis stands to compound itself. Money for grants and student funding may simply no longer be available.
Seen in this light, policy and governance may aspire to be pro-poor, but is effectively pro-poverty. As the crisis mounts, South Africa will need to choose between ideology or growth. It can’t have both.
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