The G20 disappointed our leaders because they seek aid despite their lacking a plan to noticeably reduce our poverty and unemployment.
ANC cadres associate inequality with historical oppression. Yet after three decades of ANC rule, SA has the world’s highest income inequality – and our Gini coefficient is marginally higher among blacks. That is, ANC policies and practices have led to more high-income blacks than whites. Our unemployment and poverty are similarly ultra elevated; yet none of our leaders can articulate a credible plan to significantly reduce either.
Worse still, the ANC has entrenched the world’s most severe youth unemployment crisis. Nonetheless, ANC leaders use their opportunities to speak at global gatherings to lecture those from successful countries about the need to restructure the debts of African nations. Little mention is made of poor governance.
Sovereign debt restructurings happen in the normal course of events but the typical scenario is that a debt crisis triggers debts being restructured alongside fundamental policy reforms sufficient to achieve adequate growth and fiscal stability. Our situation is far from normal.
The ANC came to power while being feted internationally as the world’s most credible arbiters of social justice. This was early in the post-Cold War period when idealism was in rapid ascendancy.
Globalisation also rose dramatically over the past three decades as transport and communication costs plunged while digital services soared. Adding value within global supply chains amid innovative disruptions is now as central to economic progress as industrialisation was over the prior two centuries. The rise of Asia confirms this – as does Africa’s being harshly penalised for its ongoing reliance on commodity exporting.
Commodity exports
The ANC’s localisation and BEE policies preclude SA benefiting from global integration’s massive employment potential. Almost none of our young adults add value to exports. As our per capita income peaked fifteen years ago, the only remaining way to spur growth is through increasing commodity exports.
Our business leaders assisting government in this regard is very helpful for stabilising the economy. But this won’t noticeably reduce our unemployment queue of over ten million jobseekers.
About a quarter-million would-be workers in their late twenties become permanently marginalised each year. Those who several years after having left school have never held a skill-building job will be at the back of the unemployment queue. Ahead of them will be millions of job seekers who are younger or who have experience being meaningfully employed. Even under a best-case scenario, the rate of permanent marginalisation wouldn’t start to contract for many years.
But there are no plans under consideration that could produce a best-case scenario for job seekers. Our leaders are pursuing paths whose best-case outcomes would preserve the status quo for those well-off while creating very few jobs.
Our business leaders pursue a “powerful virtuous cycle” where increased confidence leads to more investment, which in turn accelerates economic activity. But mining operations as well as energy and transport projects are capital intensive not labour intensive. If they are successful, they will postpone, or perhaps avoid, a credit default – which is probably our only path toward much needed policy shifts.
Our finance minister’s latest GDP projections for this year and the next two point to further stagnation in per capita income. Without sweeping policy shifts, ten years from now we will almost certainly have permanently marginalised at least another two million young adults. This highlights why the ANC’s localisation policies become ever more anti-development.
Patronage
The ANC is an organisation united not by an ideology or patriotic zeal but rather by patronage. This is something all democracies have had to transcend. Such transcending is however constrained by our mix of massive resource wealth and long-standing ethnic strife.
When the ANC came into power it could reference historical oppression and massive income inequality along racial lines to justify much redistribution. It was never going to be easy to balance pro-growth economic policies with the political imperative for much redistribution. Despite the first fifteen years being encouraging, broad prosperity is now a very distant prospect.
From beyond SA’s borders the income inequality arguments now cut the other way. Why should aid providers or those authorising concessionary funding want to assist SA if we don’t have a plan that benefits our many millions of jobseekers or low-income households?
One of our most senior bankers has recently made a case for the sovereign debt of African nations to be restructured to reduce their debt service costs. Closer to home, among the core reasons SA lacks virtuous cycles which would create jobs and alleviate poverty is that a majority of our households are poor, over indebted, or both. Meanwhile our per capita income stagnates and our policy makers favour localisation at the expense of global integration.
Consumer debts
If we were to default on our sovereign debt, a restructuring plan would need to address the anti-upliftment effects of our households struggling to service their consumer debts. These are the debts which should be urgently restructured.
Banks can profitably lend to low-income communities despite high bad-debt expenses because those who pay timeously, in effect, subsidise the banks for those who don’t. Those prompt payers should be at the front of the upliftment queue. Instead, their diligent repayment of expensive debt undermines their progress. This benefits bank shareholders in the short- and medium-term but it is unsustainable and imprudent.
Russia’s invasion of Ukraine in 2022 marked the end of the post-Cold War’s indulgent idealism. The ANC’s embrace of Russia, Iran and Hamas spurs much suspicion by those who could respond to ANC pleas for concessionary funding. The audiences receptive to the ANC’s old talking points are dwindling.
As neither our political nor our business leaders are offering a plan that could meaningfully reduce unemployment and poverty within a single generation, their counterparts in successful countries—and history—will judge both groups harshly. Modestly improving the status quo is not a solution.
[Image: william william on Unsplash]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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