ANC leaders who routinely reference historical injustices to criticise Western nations are to welcome leaders of the world’s largest economies, the G20, to SA − while international support for diversity, equity and inclusion initiatives is suddenly reversing.
The ANC’s economic stewardship has entrenched the world’s most severe youth unemployment crisis and it cannot be meaningfully mitigated without abandoning what are probably the world’s most counterproductive DEI-styled indulgences. Instead, our political and business leaders continue to advocate for investment-led growth which would mostly benefit elites while providing meagre trickle down benefits.
The ANC wants to spur a new national dialogue despite the party’s leaders exhibiting no interest in policy pivots sufficient to sustain high employment growth. Meanwhile, various countries are acknowledging how DEI initiatives exploit the underprivileged to benefit the politically ruthless.
The rise of pragmatic politics highlights why the ANC’s economic policies are as ill-conceived as its foreign policies have proven to be. Whereas Western countries, particularly the US, fund many millions of jobs in lower-income countries which run trade surpluses with them, there is zero chance that the anti-Western axis of Russia, China and Iran will run large trade deficits with SA.
Principles
Perceptions of our economy are shaped by capital market references and politically framed narratives. Economic development principles are routinely ignored.
The attractiveness of many large capitalisation JSE shares bears little resemblance to our economy’s trajectory. Further consider how traders can confidently predict within a few basis points how the yield curve of US treasury bonds will adjust if the monthly employment data varies from market expectations. Our employment data releases have far less direct influence on our interest rates.
The potential for investment-led growth to reduce our obscene volume of unemployment is meagre as localisation and BEE policies undermine our prospects for growing value-added exports. Growing commodity exports barely improves employment prospects but it can expand government’s capacity to fund grants.
That is, as our political economy accommodates massive patronage, multiplier effects are greatly muted. Such multiplier effects are also dampened by so many SA households being imprudently reliant on expensive debt. If this was better appreciated, it would be easy to understand why neither investment-led growth nor rising commodity exports can spur meaningful employment gains in SA.
Our political and business elites want to prioritise investment flows ahead of poverty and unemployment while the ANC also wants to persuade G20 countries of the need to restructure the debts of many African countries. It’s hard to pitch both simultaneously.
Countries progress through increasing the productivity of their workers while their households and companies save and invest prudently. When countries default on their debt obligations, IMF restructuring packages tend to require “haircuts” from investors to induce employment gains and sustainable growth. That is, the interests of investors are subordinated to the goals of expanding employment and growth. Our political and business elites refute such necessary prioritising resulting in meagre investment flows amid broad stagnation. Trying to persuade the leaders of wealthy countries to write-down their investments in Africa while increasing investments is a tough sell.
Axis
The anti-Western axis of Russia, China and Iran looked vastly more formidable prior to Russia’s invasion of Ukraine. Russia expected a mild response from Western nations similar to how they accepted its annexation of Crimea in 2014. Instead, the West has aggressively cut ties with Moscow through waves of sanctions while helping to arm Ukraine’s surprisingly capable military.
Iran’s use of proxies to destabilise the Middle East provoked Israel, with considerable support from the US, among others, to pummel those proxies and demonstrate that it can attack Iran directly while blocking counter attacks. Iran’s government is extremely unpopular with its people and its neighbours.
China retains the considerable advantage of being the world’s most efficient manufacturer and it seeks to weaponise this advantage through achieving global dominance of key sectors through aggressively subsiding its competitors in those sectors. The goal is to create such global dependencies on China in these key sectors that China would be able to bully its neighbours and many distant nations without provoking a substantial response.
SA has been a valued alignment partner to these axis members, as today’s ANC inherited much of Nelson Mandela’s standing as a champion of moral causes − particularly anti-colonialism. But how likely is it that such credibility will survive today’s growing criticisms of DEI-type initiatives which benefit the politically connected at the expense of the poor? The G20 spotlight will not overlook how most of SA’s young black adults are becoming permanently marginalised economically.
Quite possibly the best indicator of a country’s long-term growth prospects is the portion of its young adults who add value to exports destined for affluent markets. SA scores remarkably poorly in this regard.
Value-added exporting is this era’s foremost upliftment escalator but, as the ANC’s BEE and localisation policies are profoundly anti-competitive, they preclude large numbers of South Africans from benefiting from such opportunities. This reflects our political economics being at odds with globally determined success drivers.
Cheap
Predatory political parties sometimes presume the political support of poor people can be bought on the cheap. Such anti-development manoeuvring is not uncommon among commodity exporting nations and it helps to explain why the ANC adheres to anti-growth policies which create massive dependencies.
That is, the ANC does not seek to create a broadly prosperous society as its electoral strategy relies on patronage to enrich the well-connected while sustaining our modest-sized middle class. The majority of voters who are poor are then expected to vote for the ANC out of fear of losing their meagre grant payments.
This strategy isn’t sustainable politically or economically. While parties such as MK will lure voters with more aggressive patronage promises, the global economy keeps demanding ever greater integration from workers, companies and countries.
Voices within the GNU and of business leaders should help ANC leaders to appreciate how ill-conceived their policies have proven to be. Heightened situational awareness should alert our leaders to how geopolitics and geoeconomics have suddenly become much more pragmatic and transactional. Trying to guilt-trip Western leaders into providing debt relief while seeking investment-led growth in a long-stagnating economy whose DEI-styled and localisation policies preclude healthy growth is misguided.
Value
Countries are now pursuing mutually beneficial deals that are commercially sound. SA won’t soon become an attractive, high-growth investment destination but that doesn’t mean we can’t offer strategic value.
We can’t employ most of our school leavers but that doesn’t mean that a significant portion of them can’t be integrated into the global economy. This should be the theme of our hosting the G20.
Attracting capital to SA to employ people to add value to exports doesn’t work due to BEE and localisation policies. Yet there is now enthusiasm within the GNU for attracting digital nomads. Better still, major global trends support our seeking to create millions of “local digital nomads”.
Most affluent countries have shrinking populations whereas Africa is home to the most surplus workers. Meanwhile, services, not manufacturing, is driving global growth and many service jobs are digital. Affluent customers appreciate the option of interacting with real people and they will frequently pay a premium for a handmade-styled human experience.
Western countries have become weary of accepting waves of immigrants so there will long be a bias toward remotely employing people from low-income countries. AI and other technologies can offset various educational shortcomings. This is comparable to the outsourcing which drove the rise of Asia, and SA is well placed to benefit.
Our leaders must adapt to today’s more pragmatic, more transactional geopolitics by suggesting ways for our school leavers to integrate into global supply chains digitally − while challenging foreign leaders to be supportive. No one had a detailed expectation of the rapid proliferation of smartphone apps. Similarly, we can’t anticipate the many ways companies and consumers can benefit from offering affluent consumers human interaction options.
Governments’ support for the rise of Asia was greatly aided by sharp declines in shipping and communication costs. Technological advances can be extremely disruptive, particularly when they are accompanied by major demographic shifts, and pragmatic leaders.
[Image: Gerd Altmann from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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