The State of the Nation Address (SONA) gives the president an opportunity to expound on a range of issues, while post-SONA analyses have tended to examine each of them; how well have them been handled in the past, and how credible are the commitments (to the extent, of course, that they denote commitments rather than hazy statements of vision) may be.
This year, President Ramaphosa was effectively in election mode, expounding on the achievements of the ANC since 1994. This was a universe of labour legislation, social grants, ‘free’ services and race-coded empowerment policy. While gingerly acknowledging that not all has been perfect, this was ascribed to anything-but-ourselves (his comments on State Capture were ribaldly amusing in their massaging of what went down over the past decade and who occupied high office in the country). And on South Africa’s challenges, he promised imminent betterment.
It is sometimes overlooked that SONA provides an opportunity to frame an overarching narrative about the country and the year ahead. There wasn’t a great deal of coherence in last week’s address. Rather, there was a tired display of diverse offerings, trying to appeal to any electoral taste that cared to look.
This is indicative of the problem facing the country, one which neither the current President nor his predecessors have been able to come to grips. South Africa confronts one big issue, around which all others are oriented; this is the question of economic growth, or rather, its absence.
Sustained growth
Simply stated, the inability to drive sustained growth has been the seminal and most consequential failure of post-1994 South Africa.
This is hardly a novel realisation. The ANC identified the imperative of growth in the documents it drew up prior to assuming power. In the forewords to the Reconstruction and Development Programme, Nelson Mandela wrote: ‘Democracy will have little content, and indeed, will be short lived if we cannot address our socioeconomic problems within an expanding and growing economy.’
Properly understood, this was quite correct. Expectations that the democratic transition would herald rapid upliftment were widespread, and so were promises to this effect. (In 1994, the ANC used an election poster with a simple message: ‘Let’s get SA Working – Jobs, Jobs, Jobs.’) But this would never be possible without a significant and sustained expansion of the economy.
This meant economic growth: investment, entrepreneurship, buying and selling. Over the years the quantum of growth envisaged by the government has been set at 5% (the RDP), at 6% (the Growth Economic and Redistribution strategy), and at 5.4% (the National Development Plan).
South Africa has only managed more than 5% in three years over the past three decades. In the past few years, growth has been positively anaemic, unless one counts the 4.7% rebound from the pandemic as a success.
The International Monetary Fund recently projected growth of 1% in the present year – a revision of the 1.8% it had forecast in October last year. The South African Reserve Bank has a somewhat more upbeat forecast, although not by much: 1.2%. This means less wealth available in the country, fewer opportunities and a shallower revenue pool.
Litany
In short, as long as the country is unable significantly to improve its growth performance, resolving its litany of socio-economic crises will be impossible. And unless South Africa can get growth moving, even the palliative measures will become increasingly beyond its means.
The system of social grants (not to mention the Social Relief of Distress grant, which is to be ‘extended’ and is inching towards becoming a permanent entitlement) faces a real danger of becoming unviable, unless financed through inflation, which would at best offer a temporary respite before catastrophic decline set in.
So, what’s to be done?
Late last year, Harvard University’s Growth Lab published a report entitled Growth through Inclusion in South Africa. Produced under the direction of Ricardo Hausmann, it identifies two key constraints to growth. One is deficient state capacity – which has ‘collapsed across many government functions that are essential for a functioning economy’ – and the other is the exclusion of large parts of the population from participation in the economy owing to spatial factors.
Deliberate policy choices
Reading the report, one is struck by just how much of South Africa’s current malaise is rooted in deliberate policy choices. Even where these were well-intentioned, they have often produced entirely counterproductive outcomes.
The report, for example, is scathing – within the confines of the restrained economist-speak – about preferential procurement. The policy could not be imposed on complex organisation without extensive negative consequences, and the country as a whole has paid a steep price for this approach. It can be seen in the failings of South Africa’s power supply and its municipal governance, which has imposed hard caps on the possibilities for growth.
South Africa’s spatial arrangements, meanwhile, have their origins in the past, and the confinement of people away from work opportunities – both within urban centres and across the country as a whole. This has served to marginalise millions of people from labour market participation. This was always going to be a tough challenge to address, but without a state capable of executing large and complex processes of spatial transformation – real transformation, in the sense of positive, innovative change, rather than the loaded and hackneyed phrase that pervades official rhetoric – it’s hard to see any prospects of this being sensibly addressed.
Small connected group
‘Empowerment of a few has de facto come at the expense of the many.’ In effect, the suite of policy choices made have been to grant lucrative opportunities to a small, connected group for which society as a whole has had to pay, both directly and in terms of foregone economic opportunities. This is the terrain of a 1% growth rate.
‘Change is required to achieve South Africa’s growth and inclusion goals,’ the report notes, ‘but where should change be focused? It is one thing to accept that outcomes are not in line with the overall goals of society, but it is another thing to identify and address the constraints that are preventing the goals from being achieved. Even in good times, governments cannot address all constraints facing an economy all at once; but when challenges are mounting, prioritizing binding constraints is even more important.’
President Ramaphosa’s SONA – the final of his (current?) term as president – represented a haphazard combination of memories and inducements. As a message about South Africa’s future trajectory it offers little to celebrate. South Africa needs a growth narrative; what was on offer at SONA is failing the country.
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