Analogy I: Fishing = purchasing power
Lake SA has long been overfished
ANC’s remedy seeks funding for more shallow water boats
Conversely, ocean fishing boats must compete internationally
Other countries are better at taxing and regulating
Their policies lead to
more and better boats
access to more fish
access to more fish customers
Instead of investing in deep ocean fishing
SA invested in finer mesh nets
Analogy translation
SA’s unemployment is in equilibrium with its stagnant domestic purchasing power
Thus absorption of each year’s school leavers is woefully inadequate
Transformation away from reliance on commodity exports and domestic consumption was never optional
Households and government increasing reliance on expensive debt borrows from the future recklessly
The ANC wants to give healthy unemployed young adults fish
Time is not a friend
Twenty year olds are much more adaptable than never employed thirty-somethings
Bulging youth unemployment is as dangerous as reliance on an increasingly overfished lake
No plausible scenarios to avoid perilous economic decades without surging value-added exporting
Learning to fish – or work in call centres – is fully doable for most school leavers – notwithstanding low education standards
Analogy II: Global supply chains = up escalators
Since the early ‘90s, the global middle class has bulged as poverty has plummeted
Adding value to global supply chains allows high poverty countries to:
Sustain high growth while
Maintaining high savings rates leading to
Rapid middle class expansion
SA’s isolationist perspective places faith in bogus concepts such as
“Beneficiation”
“Localisation”
Integration into global supply chains provide high volume “diffusion” of the latest skills and knowledge
SA’s approach to global integration reflects
The most government distorted sector, autoproduction, or
Companies like Discovery, Investec and Nandos overseas which replicate operations creating very few SA jobs
Structural adjustment: Redistribution policies block growth
Our economy is not structured to
create jobs or
or to create wealth
or to sustainably expand domestic purchasing power
It was apparent by 2014 that domestic purchasing power was structurally stalled.
The implications of sustaining an obscene level of youth unemployment are as apparent yet more dire.
Requirement: A powerful growth plan
2024 election pressures must surge job creation
Otherwise far too much deep scarring by 2029
most particularly a decade plus of obscene youth unemployment
Solution: Regulatory dispensations for value-added exporters
Low-hanging fruit re serving affluent foreign consumers
International tourism
The Western Cape’s success at training and finding employment for call centre personnel
Many other avenues can be developed
Identifying them is not the job of DTI or consultants
Must unlock entrepreneurial verve
SA’s regulatory environment undermines its potential as a value-adding exporter
This benefits other countries at SA’s (unaffordable) expense
Carving out special dispensations from anti-competitive regulatory/tax burdens is a non-negotiable requirement to achieve adequate employment growth
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Related topics
SA’s national discourse
Social justice and identity politics are weaponised to
justify redistribution policies which
fund the ANC’s patronage network
Big business doesn’t understand 21st century economic development drivers
It is not difficult to align economic development, commercial economic and social justice objectives
Dozens of countries have done this in recent decades through integrating into global supply chains
The opposite option is for authoritarian-inclined rulers to
exploit historical grievances and identity politics to
justify their controlling the economy to benefit the politically favoured at the expense of the majority
Virtous v vicious cycles
In financial terms, SA doesn’t cover its cost of capital
- This helps explain the ANC’s fixation on attracting more capital to repay outstanding debts
- ANC policies are contrary to growth, job creation and wealth creation
- They are designed to support patronage
Transitioning from being an isolated, commodity export reliant economy was always required
Transitioning from vicious to virtuous is virtually impossible without having a far larger portion of young adults adding value within global supply chains
Market access
Black were denied selling all but basic services to white before the 1990s transition
Economists term this impediment as inadequate “market access”
The ANC now blocks growth with policies that similarly impede market access
Financial repression
Even if commodity exports remain elevated for, say, a decade, job creation will remain modest
To rapidly “restock” SA’s purchasing power would require substantial restructuring of much household, and probably government, debts
Debating versus Solving
The correlation between winning policy debates and winning elections in SA has not been high
Expecting a disparate coalition to quickly cohere around a stark policy pivot is unrealistic
SA’s national discourse must be urgently enthused by embracing 21st century economic development drivers