Workable solutions are needed to counter the exploitation of inequality to justify pervasive patronage

How many new jobs could big businesses create if its leaders were to take on our unemployment crisis? The short answer is: not nearly enough. 

With the ANC’s electoral dominance dented, we must freshly and realistically assess our core challenges and options. Sustaining 3%-4% growth is unlikely but plausible. Yet as our economy is structured this would not meaningfully reduce SA’s huge unemployment bulge. Rather, it would disproportionately benefit the affluent while increasing the government’s capacity to fund sub-subsistence grants.

As prominent politicians have exploited identity politics and the legacies of past injustices to create peril-inducing patronage networks, most 20-something South Africans are becoming permanently marginalised. Without a definitive course correction, SA will soon resemble today’s combustible KwaZulu-Natal.

Voters tell surveyors they prioritise jobs and overcoming pervasive poverty. As the two are directly related, a single set of policies can sharply reduce both. Yet nearly two-thirds of the votes went to the ANC, EFF and MK, which exploit SA’s high inequality to justify their latest patronage initiatives — ranging from National Health Insurance to expropriation without compensation and nationalising banks.

Might seemingly irrational voting trace to a lack of workable solutions? The same pro-patronage policies that entrench the world’s most severe youth unemployment crisis have resulted in SA also having the world’s highest income inequality. Our political economy will wobble ever more precariously until we identify powerful solutions to counter inequality being exploited to justify pervasive patronage. 

Most South Africans are poor, over-indebted or both. Few invest wisely. Funeral policies are popular, whereas meaningful intergenerational wealth transfers are the exception.

It is essential that a nation’s productive assets be well managed. The government’s attempts at that have incited calamities at Eskom, SAA and Transnet, among others. If a small percentage of the population is far better than average at managing organisations and resources, their owning or operating a substantial portion of the nation’s productive assets should greatly expand opportunities.

Rapid economic development can provoke decades of rising inequality as genuine opportunities flourish. The country with the world’s highest youth unemployment would prioritise the reckless pursuit of equality only if its leaders sought to entrench their privileges by creating a long-tentacled patronage network.

Of course, racial inequality was a top challenge for post-1994 SA. But there are now more high-income blacks than whites, and no plan under serious consideration that might noticeably reduce our obscene level of youth unemployment. A majority of today’s adult black South Africans who were “born free” have been condemned to lifelong poverty. 

At first glance it would seem that the more people who own and manage our productive assets the more equitable that is. Unfortunately, both our households and the government are far too willing to be excessively reliant on expensive debt. Neither group shows genuine interest in economic development basics.

Capital market metrics are ineffective for understanding why our top economic objective should be the rapid transition of the idle poor into middle-class lifestyles through productive employment and prudent household budgeting. Nor are they designed to inform such a transition. Framing debates using capital market metrics distracts us from appreciating that the ANC’s creation of a pervasive patronage network is the primary obstacle.

Capital markets are designed to price securities. While such systems are invariably imperfect, they help countries with successful economic models achieve higher highs. China began to seriously develop its capital markets only in the 1990s — after its export-led growth model was firmly established. 

That our business and government leaders still promote investment-led growth reflects an emotive, faith-based misdiagnosis. SA’s financial services sophistication has mixed disastrously with a national discourse dismissive of development fundamentals. 

This disconnect is amplified by much lending expertise skilfully maximising consumer indebtedness. Meanwhile, our government’s localisation biases mix with anti-business and anti-competitive policies to undermine access to international consumer markets, which, unlike our domestic market, are huge and increasingly affluent.

We must confront why our debates lack workable solutions. Such solutions exist, but they only reveal themselves to those who embrace economic development fundamentals.