Efforts to reduce poverty after apartheid have relied heavily on transfer payments and quotas

The political opportunism that entrenches the government’s bloated wage bill explains policymakers’ inability to advance broad prosperity.

Analysing why SA’s successive governing parties have exploited dependencies will make inclusive growth policies less elusive.

Confronting the government’s wage bill confirms, again, that politically determining economic outcomes precludes adequate growth. Exploiting dependencies was central to both apartheid-era discrimination and Jacob Zuma’s massive patronage network, which hasn’t gone away. SA was, and is, out of step with global advancement.

Securing power by exploiting dependencies was a global norm for millennia. Then accelerating military capabilities pressured elites to share privileges to advance battlefield and commercial competitiveness. As democratic institutions and cross-border dispute mechanisms evolved, the world became ever more integrated, peaceful and prosperous. Yet this country and region remain outliers. Why?

Isolated, extraction-based economies are inherently vulnerable to imperialism and dependency politics. While treaties and enforceable cross-border contracts made colonial exploitation uneconomic, domestic policies exploiting dependencies still perpetuate this region’s poverty.

SA’s prevalence of entrenched poverty is exceedingly high — even relative to this region’s norms — and extremely rare beyond this region. Postapartheid poverty reduction efforts have relied heavily on transfer payments, quotas and expanding the government’s wage bill. This maximised dependencies while blocking paths to broad prosperity. Unsustainable early progress has been reversed. SA’s poverty has been rising for more than a decade with no end in sight.

SA’s vulnerabilities to dependency-inducing policies include: considerable reliance on resource extraction; an absence of foreign military threats; the lack of a regional economic challenger; and no country is as distant from the world’s top three economies. As global integration reduced the world’s poverty to about 5%, excluding this region, SA’s dependency politics became increasingly unaffordable.

How can it be that 60% of South Africans — more precisely 70% of blacks — live on less than R50 per day? Whereas economies focused on manufacturing and services are economically nimble and defiant against dependency-provoking politics, economies relying on extraction and agricultural exports are the opposite. The disruption-driven global economy rewards responsiveness and punishes laggards.

Not only is SA not going to be invaded by a foreign army, the door is open to our achieving deep global integration, which sustained high growth requires. Instead, with external pressures lacking, the focus has been inward as political power could be clinched by creating dependencies. This strategy was, however, always destined to backfire. Our realisable mineral and agriculture export potential is modest relative to the nation’s compounding poverty and borrowings.

Women’s progress

Until only about a century ago women’s lack of voting rights was nearly universal. Their second-class status stemmed from inferiority at hand-to-hand combat. As technologies downgraded human strength’s military and commercial relevance, societal blockages weakened and women’s roles greatly expanded. In an increasing number of societies, women are now the majority of college graduates. The future is not bright for old-boys clubs, rather women’s rising prominence is a hallmark of this era.

Reducing discrimination-induced inequalities greatly enriches societies. and women’s progress will continue as political and economic forces favour their interests. The real game changer, however, has been women becoming economically independent. Independence happens at modest income levels. Yet when allowed to compound, such “freedom dividends” overwhelm restrictive social barriers. This becoming increasingly common has helped make peace and prosperity the global norm.

Conversely, SA’s crony crowd frames economic issues around race while exploiting inequalities to camouflage dependency-entrenching policies. This elite-entrenching strategy was never economically sustainable as continually expanding income transfers chokes growth. The politics of confronting the government’s wage bill pits President Cyril Ramaphosa’s camp against the unions and workers, who will now side with the ANC’s aggressive patronage faction.

That far too many people’s incomes trace to government policies is explained by political patronage, not viable efforts to redress inequality. High-volume, high-vulnerability dependency is precisely what patronage systems seek to achieve. A healthy economy would allow the private sector to steadily grow employment, thus undermining government dependency. Apartheid’s legacy of massive race-based poverty alongside its social scars provided the ideal political cover to package dependency-inducing employment as redress to historical inequities.

The status quo is unsustainable politically and economically; expensive consumer loans make wage negotiations more combustible still. SA’s networks of dependencies are as unviable as a Ponzi scheme.

Increasing a society’s wellbeing requires increasing worker productivity and employment while building consumer purchasing power. Dependency-inducing policies and practices are hostile to improving productivity and consumer balance sheets. Once consumer and government debts become choke points, remedies require surging exports and probably writing down debt.

To effectively address the government wage bill and growth restrictions, dependency politics must be confronted. This requires framing the challenges in terms of poverty, opportunities and individual freedoms, not inequality.