ANC leaders were not interested in shifting from their liberation struggle to competing in the global economy; our economic woes evolved accordingly.
Maintaining nearly 5% GDP growth for the five years ending in 2007 seemed impressive. It is therefore painfully ironic that this traced to a growth path which our policy makers rejected.
Globalisation fuelled China’s massive infrastructure spend which surged demand for our commodity exports. As the Rand then strengthened, interest rates declined. This led to a housing boom and wealth effect among the middle class. Meanwhile, many lower-income households binged imprudently using expensive unsecured debt.
Post-apartheid SA’s middle class rather swiftly expanded and, while soon there were more middle-class blacks than whites, today a majority of black South Africans are still deeply entrenched in poverty. As there are also more high-income blacks than whites, our world-topping income inequality is no longer a racial phenomenon.
Our economic debates continue to focus on increasing GDP growth through attracting investment flows. This path has less potential to create jobs and alleviate poverty than is commonly presumed. Thus the ultimate benefits to middle class and affluent households are modest as our political decision making will remain highly contentious and easily exploitable.
Investment-led or export-led
While Mariana Mazzucato is a decidedly left-leaning economist, she is right when she argues that in Europe, “for two decades, capital has been abundant and cheap, and corporate profits strong; yet investment, productivity, and wages have stalled.” Like ours, European policymakers have failed to meaningfully respond to the rise of Asia.
Various nations – most of them Asian – have figured out how to get rich quickly by combining high savings and high growth. In a country like SA, which is greatly reliant on domestic consumer demand, to achieve such an outcome would require that an exceptionally high level of productivity gains be achieved. In practical terms, this is nearly impossible. But even if it was possible, it would be vastly easier to mimic the Asian model and carve out niches in global supply chains and build on those successes.
Many Asian countries achieve this through export-led growth models which prudently employ capital to increase worker productivity. This obviously requires that companies and countries be able to grow exports, and neither most European nations nor SA is as effective at this as many Asian nations are.
The ANC came to power as globalisation was gaining much steam. Today’s global economic growth continues to benefit tremendously from competitive pressures within international supply chains spurring productivity gains. As was the case twenty years ago, we only gain from this noticeably when it triggers higher demand for our commodity exports.
Increasing commodity exports requires huge investments in extractive and transportation capabilities. As the ANC has blatantly mismanaged the governance of such activities, investments have suffered. Correcting this brings benefits but relatively few jobs. That is, such initiatives are capital-intensive not labour-intensive.
Welcoming a fresh mindset
To meaningfully reduce rampant unemployment amid pervasive poverty our national discourse must adopt a new mindset. There are no plausible scenarios whereby we achieve something resembling normal workforce participation without far greater global integration.
Adopting a fresh mindset requires younger leaders. One need not be a psychologist to appreciate that South Africans who were adults when the 1990s transition began suffered from a unique sort of post-traumatic stress disorder. ANC elites shifted from leading a brutally contested liberation movement to being globally feted as social justice royalty. White South Africans were no longer international pariahs, but could they achieve a political accommodation of their interests?
An impressive constitution was agreed over three decades ago yet our economic dialogue is devoid of workable solutions because our political-economic psychology has been framed by the ANC. Let’s not forget that there was very little scope to broadly criticise the ANC prior to then-president Zuma firing two finance ministers within a few days followed by the leaking of the Gupta emails a decade ago.
Job creation
Probably this country’s most astute job-creation effort ever was the “investment” made to persuade airline executives in foreign lands to add flights to SA. This made vastly more sense than spending billions to restart SAA.
While significantly deindustrialising, SA has benefited from the global surge in international tourism. As digital possibilities reshape the global economy, our leaders show they are too old to learn when they block Starlink from linking our most isolated communities to the global economy.
Seeking validation versus acknowledging core disconnects
The ANC vision for SA was to validate their perceptions about themselves as social justice nobility destined to lead Africa. Their policies reflected the pursuit of such validation; this has entrenched widespread xenophobia, unemployment and poverty.
It has become abundantly clear that the ANC is an organisation incapable of reinventing itself. The core problem is that they have pursued separateness from the still Western-defined global economy. We are not acknowledging that this apartheid 2.0 has shaped the structure of our economy in ways that lock in highly elevated levels of unemployment and poverty.
Quite possibly the best indicator of an economy’s long-term prospects is the portion of its young adults who add value to exports. Yet our national discourse does not acknowledge that we score horrifically in this regard.
When a company is flagrantly mismanaged, shareholders must choose between new leadership or bankruptcy. Countries don’t go bankrupt and disappear as companies do.
The ANC’s mismanagement has extended across its local, provincial, and national mandates while blacks and whites, often for different reasons, were slow to criticise. Public scrutiny has advanced sharply over the last decade and this has slowly affected voting patterns.
The ANC’s ability to shape narratives has suffered but it will remain formidable until there is a sea change in our national discourse toward truly prioritising jobs and accepting that this requires far greater integration into the global economy – and that this is quite different from pursuing investment-led growth.
The progress achieved in recent years remains woefully insufficient. To escape the apartheid 2.0 the ANC has created we will need to look to those who were too young to have had their beliefs distorted by the extremes of our 1990s transition.
[Image: by stockscar]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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