The ANC’s national dialogue initiative is a propaganda exercise which other political parties and civil society leaders should counter with workable solutions. Let’s explore why this is unlikely.
Our ruling party has long been very effective at shaping our national dialogue through normative-styled ‘what should be’ framing. They also routinely produce controversial legislation and scandals which dominate headlines and distract attention from prospective solution paths. As a consequence, none of our diverse centres of influence can craft solutions as our political discourse is dismissive of the mathematics of economic development success.
One of SA’s top bankers recently asserted that our actual unemployment rate is less than a third of what StatsSA reports due to an underappreciation of the robustness of township economies. This was followed by a senior journalist opining: “It isn’t a job that gives you dignity. Your right to remove a rotten public representative who promised you a job and then forgot about you after his election does that.”
I neither agree with nor dismiss the views of the banker or the journalist. These are precisely the issues we would be intently exploring if the ANC wasn’t so effective at fuelling racial populism around values and injustices to mute the hard evidence needed to navigate toward workable solutions.
The ANC was unbanned as the Berlin Wall was falling and the Cold War ending. What followed was an era of ideals being energetically indulged. That era has recently ended and, rather than adjust to a much more transactional global order, the ANC has turned further inward. The party exhibits routine uninterest in the key success drivers, enhancing productivity and competitiveness, which successful countries prioritise.
The ANC has reaped extraordinary mileage from chanting “inequality” and similar synonyms for the legacies of historical injustices. Never mind that income inequality has become as extreme among blacks as it is between blacks and whites. This would count as progress had it not been achieved at the expense of pushing hopes for broad prosperity deep into the future.
A new national dialogue
As the ANC’s overplayed messaging seeks to justify the redistribution policies which enrich the well connected, while further entrenching widespread unemployment and poverty, the political effectiveness of such messaging has waned. This has spurred the party to launch a new national dialogue.
If not for such politically mischievous framing of our national discourse around ideals and injustices, nearly all of us would agree that achieving broad prosperity should be our primary economic goal. This would entail reducing poverty from above 50% to less than 20%.
A realistic national conversation about achieving such an outcome would be very different from our current narrow focus on investment flows and GDP growth. It should be universally acknowledged that we need big lifts in workforce productivity and household resilience. The ANC’s public messaging is determined to avoid such acknowledgements as the party’s electoral strategy, and thus its BEE and localisation policies, emphasise patronage.
While menial township jobs are clearly superior to joblessness, they are lousy substitutes for high-productivity jobs. Had the competence of the ANC’s economic stewardship during the Mbeki-Manuel era been maintained, annual growth would have been at least 2% higher and the economy would now be at least 40% larger. Instead, the overall productivity of our young adults is astonishingly low as so many are unemployed, informally employed or civil servants. This makes the mathematics of achieving broad prosperity extremely daunting.
Township jobs very rarely lead to meaningful intergenerational wealth transfers. Given today’s intense global integration and the resulting benefits, advocates for ‘township economics’ don’t easily refute ‘hewers of wood’ comparisons. An inward-focused township will perpetually struggle economically.
Few blacks prospered
Market access matters. As during Apartheid blacks were widely prohibited from selling to the much more affluent white communities, very few blacks prospered. Lenders have long known how to calculate a company’s sustainable growth rate using inputs such as profit margins, terms of trade, asset turnover, leverage, cost of capital and retention ratios. Such mathematical relationships weren’t invented, they were observed. Similar relationships exist regarding community and national growth rates. They are there but our economic stewards, and national dialogue, ignore them.
Commodity extraction can be funded with relatively expensive capital if the commodity price is expected to remain sufficiently high and the extraction costs are internationally competitive. For bulk commodities, like iron ore, transport costs to load the commodity on ships is also critical.
But the glory years of commodities have passed. Global growth today is mostly about trade and services, with information technology playing an increasingly impactful role. Most commodity exporting countries today are poor and most poor countries are commodity exporters.
Also, as commodity exporting is capital intensive, it directly creates few jobs. Indirect jobs beyond the vicinity of the mines are also few as so many South Africa households are over-reliant on expensive debt while patronage-focused policies further sap our economy’s vitality.
Patronage-reliant regimes seek to make a majority of citizens dependent on them for their jobs or for desperately needed grants. This never ends well, but a country with high commodity wealth can travel far down such a path. This helps to explain why most of today’s poor countries are commodity exporters.
Remain elusive
SA’s financial expertise has spawned highly efficient lenders to low-income households but such lenders won’t easily transition to lending to businesses that serve low-income communities. It might be that StatsSA undercounts informal jobs and that our GDP is higher than estimated, but we can be sure that growth will remain elusive until government policies pivot sharply to pursue productivity and competitiveness gains.
Lending at very high rates to groups of low-income households can be successful as those who repay their loans, in effect, subsidise the lenders for those who don’t. This model is far less effective when lending to poorly capitalised businesses as those with access to lower-cost capital will be much more likely to survive. This created opportunities for astute lenders in the taxi sector to take risks out of the system and pass the savings on through lower lending costs. Cost-reducing efforts are possible in the low-income consumer lending sector but this would require nimble policy shifts.
For this reason, the journalist makes an important point. While I firmly believe that doing a job well provides essential dignity, when democratic forces are twisted to benefit a few while entrenching most in poverty, dignity will remain elusive.
Sophisticated, resource-rich companies have advantages when dealing with low-income communities but they can’t overcome mathematically imposed limitations. Returns from Walmart’s investing in, and then purchasing, Massmart were doomed as the process began just before our economy entered a long-term stall.
The ANC’s strategy has not been to pursue broad prosperity but rather to stay in power “until Jesus returns”. However, the party’s sprawling patronage network feeds on our commodity wealth and higher-income consumers while its disdain for commercial objectives, like prioritising efficiency, have gravely undermined both sectors’ income production.
Subsistence-entrenching activities
Our economy is far too small to gainfully employ most of those wanting jobs and those busying themselves with subsistence-entrenching activities don’t grow the economy. Progress requires much higher levels of productivity and competitiveness to add value to exports.
Instead the ANC has fostered a culture of victimhood, dependency and excess indebtedness. So they are correct when they say we need a new national dialogue. There is much to discuss.
[Image: By Discott – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=26446785]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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