-Sep 20, 2021

Daily Friend

Deputy finance minister David Masondo’s willingness to creatively and openly explore solutions to Eskom’s over-reliance on coal, alongside its over-indebtedness, is refreshing.

However, what his analysis and recommendations tell us about the next generation of ANC leadership is cause for concern.

This young leader’s attempt to transcend bureaucratic caution reveals the debilitating effects of the ANC’s political indoctrination. The ANC’s worldview is just too thinly tethered to reality.

Yuval Noah Harari, among others, highlights how illogical myths can play powerful roles in bringing together large groups of people. The ANC proselytises the belief that redistribution-focused policies are necessary to redress past injustices and that these will lead to broad prosperity. The need for substantial redistribution was broadly acknowledged, but it was exploited as a pretext to create a patronage network with massive legal and illegal components.

Achieving broad prosperity always required prioritising growth. Yet because redistribution thinking is central to the ANC’s belief system, the success blueprints which have been pummelling global poverty were rejected.

What limits Masondo’s capacity to design effective solutions traces to how the ANC’s fervent embrace of redistribution required a long series of imprudent policy trade-offs. Years of justifying redistribution at growth’s expense created a predatory impulse where politicians prey on builders, rather than a symbiotic culture.

To justify prioritising redistribution at growth’s expense, the ANC has indoctrinated its followers to view with suspicion the core drivers of global prosperity, namely, science, commerce and global trade. The ANC’s mythical belief in redistribution has compounded to the point that a ‘builder’s mentality’ is demonised.

Redistribution messaging

Rather than using religious references, builders are labelled capitalists and redistribution messaging is often used to spur racial divisions. As with religions, breakaway groups can gain adherents by exploring increasingly radical beliefs.

Masondo merits credit for his willingness to stick his neck out when his seniors have preferred to defer indefinitely confrontation of Eskom’s unsustainable debt load. Yet his thinking still reflects an ANC mindset: There are people who manage enormous sums of money who want to make the world a better place; the ANC should exploit that. Nonetheless, some version of his approach should be explored.

He wants wealthy nations and investors to write-down the value of a massive amount of Eskom debt along with providing concessionary funding. In return, South Africa will transition toward greener energy production.

Masondo must cope with how alien a ‘creating value’ argument is to the ANC’s culture. That the next generation of ANC leaders are dissuaded from interjecting such a ‘builders’ mentality’ into the organisation is central to why it can’t rejuvenate itself. 

Masondo’s analysis distils to: Repaying Eskom’s debt in full would require the poor to pick up much of the construction overruns for Medupi and Kusile; Eskom is far too reliant on coal-fired power plants; and there is low-cost funding available for green investments.

He buttresses his core argument by claiming that renewable energy projects will create 50 000 jobs per year and that this ‘will also catalyse the largest industrialisation programme since 1994 as we manufacture the required components, which, in turn, triggers spin-off industries.’

Value-added exporting

Masondo further argues that the national treasury supporting Eskom is not new and that ‘(we) just need to be more creative.’ He is correct on both points. Yet his ideas about what constitutes creativity are as archaic as the ANC’s obsessions with tried-and-failed initiatives such as localisation. All of today’s high-growth economies emphasise specialisation and competitiveness to spur value-added exporting.

Suppose, instead, Masondo asked himself, how can SA’s government add value globally? 

Central banks, regulators and software developers see value in using blockchain technologies and crypto currencies for payments. Yet the ‘mining’ of bitcoins is very costly environmentally.

Masondo should ask himself how gold’s role might soon be reconsidered given the environmental costs of mining it? Much coal is mined and burned to extract tons of earth from kilometres below the surface to extract sprinklings of gold dust. This carries on until gold bricks can be formed which are then buried metres below the surface in central bank vaults.

There is much scope for South Africa to propose an arrangement which is green, global and future-focused. It isn’t hard to imagine an arrangement where everyone would be better off.

Ideologically obsessed

What is difficult to imagine is such a proposal coming from the ANC. They are just too ideologically obsessed with trying to justify redistribution. More disturbing still, they seem to have bequeathed this mindset to their organisation’s next wave of leaders.

Pledges to achieve a net-zero emissions global economy are incompatible with supporting bitcoin mining. They are no less inconsistent with mining coal to mine gold in South Africa.

In just the last two years or so, there has been an abrupt decline in the willingness of leading global investors to fund environmentally harsh extraction projects. Would someone like Masondo in a senior position at such an organisation be better positioned to drive a deal with wealthy nations to close mines as part of a massive debt restructuring project and with concessionary funding to compensate negatively affected stakeholders?

For many reasons, the answer is no. Yet, culturally the fit would be much better.

That a next-generation leader in the ANC is exploring innovative solutions should be encouraged. Private sector and civic leaders should engage by offering less culturally constrained solutions.