President Cyril Ramaphosa recently said: ‘We are going to have to go for growth in a big and exponential way, and be willing and be brave and courageous enough to massify whatever needs to be done, because playing around on the edges with whatever efforts we are making – that time is over now.’
To respond effectively, we need to consider why none of South Africa’s various leaders has ever designed a workable plan to achieve broad prosperity. In short, the politically powerful have always twisted the commercial pillars of economic development to advance narrow interests. Such twisting must become a coronavirus fatality.
The shaping of public discourse by the African National Congress (ANC) blurs objectives and accountability. As testament to its success, people have become used to mentioning ‘inequality’ when describing the country’s economy. Such framing of economic issues in terms of historic injustices instilled an inward and backward-looking perspective. Meanwhile, the world economy, through blending dynamism and global integration, was pummelling poverty.
Such dialogue-shaping precludes growth blockages being objectively identified and then transcended. Initial acceptance of the five-stage lockdown reflected the public’s appetite for effective governance consistent with international best practices and science-based analysis. Truly objective analytical rigour would, however, identify the nation’s core economic crisis as the policies which sacrifice growth in order to expand redistribution and reliance on government.
Public attitudes are suddenly in flux. The ANC’s over-indulging its bias for control, as exhibited by its blunt use of force to dominate the economy and the population, is inspiring a backlash. The party’s instinct to make citizens reliant on the state has destroyed livelihoods while inducing hunger beyond government’s diminishing capacity to respond. The coronavirus is unravelling both the ANC’s ability to shape the national consciousness and government’s ability to fund far-flung obligations.
Chronic poverty
Future history buffs will not easily grasp how exploiting past inequities to entrench patronage was tolerated, even though it condemned a majority of today’s South Africans to chronic poverty. We have now entered a phase where a small spark can ignite a massive conflagration. Something as crazy as clothing retailers’ support for restrictions on selling open-toed shoes could be South Africa’s equivalent to a Tunisian police woman confiscating Mohamed Bouazizi’s fruit cart, which was the spark that led to the bushfire that became the Arab Spring.
February’s state of the nation address and the budget speech made clear that the internally fractious ANC had given up on producing a growth strategy prior to the pandemic which is devastating global commerce. That does not mean, however that, amid mounting human and economic carnage, the ANC would reject a blueprint for sustained high growth that had society-wide support and was politically palatable to the ruling party’s partners.
The obvious place to find common ground is around small business development. This can only succeed, however, if the nation’s disparate leaders suddenly come to appreciate just how out of step the economy is with today’s global success drivers. South Africa has written the book on how piecemeal policy interventions amid a broadly misconceived policy framework invariably destroy capital while spreading poverty.
As deaths and bankruptcies surge in the coming weeks, perhaps amid intense loadshedding, either the moment will be seized or political and economic decay will become entrenched. But crisis alone is not sufficient to provoke solutions. Our society has become inured to domestic setbacks amid global advances. Those opposing the ANC often expect a profound electoral shift in 2024 or 2029 with a growth plan to follow. Remedying the economy can’t wait.
Exhibiting ignorance
Political factors will feature, but restructuring an economy is mostly a technical exercise. Yet South Africa’s public dialogue is littered with proposed solutions from all corners, with some exhibiting ignorance of economic fundamentals. The rise of economies in Asia can be traced back to a half-dozen policy essentials. In each case, South Africa’s policy positions are nearly perfect inversions.
Associating East Asian success with industrialisation distracts from the fundamental point that the region’s miraculous growth was built on value-added exporting. The advantage of exporting goods versus services is less important.
South Africa cannot eradicate poverty at a noticeable pace without increasing value-added exports and simultaneously building household savings. Tourism’s devastation must be countered by far greater integration into the global supply chains. Redistribution must align with increasing the country’s global competitiveness. Lending to emerging households at obscene rates is a threat to our massive redistribution programmes. Such madness must cease.
President Ramaphosa’s signature economic initiative, attracting investments, was widely supported by business leaders, yet was ill-conceived. Our economy was on a trajectory on which its inability to cover the cost of capital was spinning out of control before the pandemic struck. Abundant capital continues to flow to companies and countries selling goods and services to deep-pocketed consumer markets. This is central to the rise of Asia, but difficult to reconcile with prescriptions around black economic empowerment.
Ever less tethered to reality
As South Africa’s domestic purchasing power is sharply contracting, the concept of investment-led growth becomes ever less tethered to reality. Mathematics matter. South Africa didn’t have sufficient domestic purchasing power to meaningfully address the nation’s severe poverty challenges prior to the viral outbreak and it has considerably less now.
The traditional approach of opposition parties and non-political bodies in criticising individual government decisions is simply not effective in South Africa today. Private sector nimbleness must accompany a sweeping pivot toward pro-growth policies. Instead, the ANC’s instincts will be to resist the flood of bankruptcies which are coming.
President Ramaphosa’s quote at the beginning of this article is commendable. To achieve his stated aim, our leaders outside of government must coalesce around a workable high-growth blueprint which is commercially robust and politically workable. This tragic crisis must be seen as an opportunity.