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I was looking for a shorthand way of summarising what I thought were the main political risks that are in the minds of investors in South African financial markets.
Note that the emphasis here (in what appears below) is what I think is an appropriate prism for investors in financial markets, and specifically those with an horizon of a maximum of 5-7 years.
If I was looking at broader security issues, particularly with regard to the stability of the state and ruling party, I would have had a significantly different emphasis – and have aspects that are both more negative and more positive than that which appears below. Hopefully, at some time in the future, I will post here a more general threat or risk analysis that would be of more specific relevance to South Africans who hope to live and work here.
Finally, before I get on with it, I do not explore the potential for an upside suprise here … but there does appear to me to be a slight accumulation of good news, albeit against a dark background.
SA Politics and financial markets – 3 risks
- Unpredictable and/or negative government economic policy interventions: Medium seriousness. Medium likelihood. Short- and medium-term duration (next few months to five years);
- Escalating social unrest – perhaps leading to “Arab Spring” type event: Very serious. Very unlikely. Medium- to-long duration (five to seven years);
- Ratings downgrades and tension between ambitious government plans and narrowing fiscal space: Serious risk. Medium likelihood. Short- and medium-term duration (one to three years).
Unpredictable and/or negative government economic policy interventions
Medium seriousness. Medium likelihood. Short- and medium-term duration (next few months to five years)
What it’s about: Most obvious are new interventions in the mineral and exploration sectors (including new taxes, price setting, beneficiation requirements, export restrictions, uncertainty about licence conditions and significantly increased ministerial discretion via the Mineral and Petroleum Resources Amendment Bill), but there are comparable interventions across the economy, as indicated in the ANC’s Mangaung Resolution and in a range of proposed regulatory and legislative changes, including those relating to telecommunications, liquid fuels, the labour market, employment equity and Black Economic Empowerment (to name just a few).
My view: Since 1994, it has generally been the case that markets consistently overestimate the risk that the ANC and its government will take significantly populist policy measures. The best example of this was in July 2002, when exaggerated targets for black equity participation in the mining sector where leaked and R52b left the JSE resources sector in 72 hours – a buying opportunity of note. However, the traction Julius Malema was able to achieve with disaffected youth post-2009 and the implicit defection from the ANC and its allies in the platinum strikes last year have catapulted the ANC into something of a policy scrabble. While nationalisation is off the agenda, it has been replaced by a policy push that hopes to deploy private companies, through regulation and other forms of pressure, to achieve government (and party) targets of employment, revenue generation, service delivery to local communities and infrastructure build. Increases in the tax take look likely – it’s purely a question of ‘how much the market can bear’.
Government intervention, per se, is less the issue here but rather the confused, generalised and uncertain nature and intent of the interventions. If the interventions do not have the desired results (growth, employment and equality), the risk is that government does not reassess the wisdom of the intervention, but instead uses a heavier hand.
Financial markets: Policy uncertainty puts downward pressure on investment, employment and output in all sectors. In South Africa, these negative impacts will be felt most keenly by companies most exposed to government licencing and regulatory power, or most exposed to government’s political prioritisation. Resources, telecommunications and agriculture all fall into one, or both, of these categories.
Escalating social unrest – perhaps leading to “Arab Spring” type event
Very serious. Very unlikely. Medium-to-long duration (five to seven years).
What it’s about: Significant and consistent (apparently linear) growth in service delivery protests, combined with growing levels of industrial unrest (in 2012, anyway) seem to imply that such unrest could continue to escalate until it reaches a point of ‘phase state change’ (as in thermodynamics, referring to changing states of matter – to/from solid, liquid and gas). Thus, the risk is of a sudden systemic shift from unstable to revolutionary/insurrectionary.
My view: Increasing protest and industrial unrest are normal – and fairly consistent – features of South African political life and have been since at least the mid-1970s. Even before 1994 there was no real expectation that unrest would lead naturally to insurrection. A rapid phase state change, like an Arab-spring type event, requires (perhaps indirectly) contesting political formations and ideologies as well as the widespread failure – or absence – of social institutions (parliaments, courts) that direct, mediate and give expression to grievances and/or conflicting group interests. South Africa is rich in such institutions and there is no evidence that large groups of dissenting voices have permanently failed to find expression in society’s normal processes and institutions – even when some of those processes include robust forms of public dispute. However, South Africa does have some comparable features to countries that have had ‘Tunisia-moments’ – including high and growing youth unemployment, high levels of visible inequality and serious government corruption – so we would keep an eye on the escalating ‘service delivery protest’ trends, as evidenced in graphs from Municipal IQ below.
Municipal IQ
Industrial relations unrest is slightly different from – and more negative than – the question of social unrest as a whole. Trade unions are strong and growing in South Africa, and contestation between them is vigorous, even violent – as we saw in the platinum sector in 2012. Trade unions are businesses with an enticing annuity income flow – and this will drive their contestation. The collective bargaining system in South Africa is functioning sub-optimally for a number of reasons – including inappropriately high levels at which automatic recognition kicks in – and the disarray in the system also drives unrest. This conjunction of subjective and objective conditions means I am less sanguine about industrial relations stability (than about stability per se) and expect this to remain a negative investment feature for the next several years. I am specifically negative on public sector industrial relations stability for 2013.
Thus, I do not think unrest and social discord will lead to any radical policy or political discontinuities, but will remain a constant drain on confidence. I also think this phenomenon will tempt government into keeping spending (on the public sector wage bill and on social grants) at above-inflation levels – helping to feed uncertainty and unpredictability in state finances, inflation, the currency and the bond markets.
Additionally, I think labour unrest will remain a seriously destabilising factor of production – including via disruption of services in public sector strikes.
Financial markets:
Resources, agriculture and construction are most exposed through their reliance on large, aggregated and often low-skilled/low-pay labour forces. The financial services and retail are less exposed to (but not immune to) the negative effects of industrial action.
Ratings downgrades and tension between ambitious government plans and narrowing fiscal space
Serious risk. Medium-likelihood. Short- and medium-term duration (one to three years).
What it’s about: The ruling party is facing something of its own ‘fiscal cliff’. The ANC feels itself in danger of losing some support because of failure to deliver employment growth or adequate reductions in poverty and inequality. Foreign investors agree this is a risk, but will not necessarily agree to fund the gap. This tension is among the reasons that all three major rating agencies (Moody’s, Fitch and S&P) downgraded SA’s sovereign rating in 2012 (Fitch in January this year) and both Moody’s and S&P put SA on watch list for future downgrades. The ANC secures political support, at least in part, through spending on the public sector wage bill and on social grants – which together now make up more than half of annual non-interest government spending. Additionally, the ANC has occasionally shown itself hostage to the views of its alliance partners or popular opinion in its spending and revenue plans (Gauteng toll-roads, youth wage subsidy). The ratings agencies don’t like the tension and I expect the bond markets won’t either.
My view: South Africa maintains respectable debt-to-GDP ratios, although these grew to 39% of GDP by end-2012, substantially higher than the 34% for emerging and developing economies as a whole. When Fitch downgraded SA earlier this year, it specifically mentioned concerns about SA’s rising debt-to-GDP ratio, given that the ratio is higher (and rising at a faster pace) than the country’s peers.
South Africa is uniquely (eg in relation to its BRICS peers) exposed to foreign investor sentiment through the deficit on the current account combined with liquid and deep fixed interest markets. SA’s widening deficit on the current account is a specific factor that concerns the rating agencies and is one of the metrics the agencies will use to assess SA’s sovereign risk in the near future. Further downgrades are the risk – potentially driven by foreign investor sentiment about political risks. Non-investment grade (junk bond status) is not an inconceivable future rating.
Financial markets: A significant sell-off in the rand, coupled with persistent currency volatility and reduced foreign capital inflows. Traditionally this scenario would mean investors look for rand hedges and attempt to get exposure to export-orientated sectors, including manufacturing – and to stay out of the bond market. Offshore borrowing costs will be raised for domestic companies – as well as for the country as a whole. This risk has an internal feedback loop (downgrades make debt more difficult to pay, leading to further downgrades) and naturally feeds other political risks, including in relation to taxation, clumsy government intervention, social stability and property rights.
Nedbank chairman Reuel Khoza provides the lead headline in today’s Business Day as “warning of a rogue state future for SA”.
So imagine if you could, for a moment, that you are playing a sports game.
As in a dream, you suddenly realise you don’t know the rules; you don’t know how to score, who’s on your side or what the parameters of the field are.
This could be a comical situation – and I am sure I remember boys from my school days whose mystification on the rugby, cricket or hockey fields would bring a gentle smile to our (his team mates’) faces.
But this is also the stuff of nightmares: an inscrutable world where what happens happens for reasons entirely mysterious, where people are motivated by incomprehensible impulses and the dread of the unknown builds and builds.
I am sure I am not alone in having worked in a dysfunctional institution?
I mean something worse than a j0b in which you are poorly paid and have a psychopath for a boss (entry level experience requirements for human adulthood as far as I can make out).
A dysfunctional institution is one in which the sum total of what the organisation achieves appears to be at-odds with its explicit mission.
I am suggesting something worse than an organisation that doesn’t achieve what it is designed to achieve. I am suggesting that in some instances a deeply dysfunctional organisation can, when everything is aggregated, achieve the very opposite to its stated purpose is.
Which brings me to the institutions of the South African state.
I am occasionally lucky enough to get hold of some excellent economic commentary written by Sanlam Group Economist Jac Laubscher and published on that company’s website. In his most recent contribution (which appears here) he takes some concepts from Why Nations Fail: the Origins of Power, Prosperity and Poverty by Daron Acemoglu and James A Robinson (book I haven’t yet read, but will do so on the back of Jac’s comments) and hints at how they might be applicable to South Africa.
According to Laubscher, Acemoglu and Robinson suggest that the dominance of “inclusive institutions” over “extractive institutions” is the difference between success or failure of nations.
Inclusive institutions harness and unleash human creativity and incentivise citizens and workers to give of their best.
As Jac Laubscher summarises:
Inclusive institutions are characterised by guaranteed property rights (vital for investment and productivity growth), an impartial legal system that upholds contracts, the effective provision of public services to create a level playing field, space to create new businesses, and the freedom to choose one’s career.
“Extractive institutions” in the words of Jac Laubscher:
… are aimed at extracting income and wealth from one section of society to the benefit of another section of society, usually the elite. In fact, extractive political institutions are the means by which the elite enrich themselves and consolidate their political dominance.
It is a fairly simple matter to demonstrate that to some degree key state and semi-state institutions and processes in South Africa have become mechanisms for extracting wealth by the politically connected elite.
But a key qualifier here is “to some degree”. I don’t think the state has yet, unambiguously, become an extractive tool of the political elite. But it is obvious that at least part of the political elite is struggling mightily to shape our institutions to and for that purpose.
Yesterday I listened to Trevor Manuel deliver the National Development Plan to a joint sitting of parliament. At the same time the the Constitutional Court was hearing an application by the Treasury and Sanral to set aside the April interim interdict granted by North Gauteng High Court halting e-tolling and mandating a full review of the system.
My views on both Trevor Manuel and e-tolling are ambiguous – they both have their good and bad points – but I appreciate the subtlety and complexity of what the National Planning Commission has tried to achieve … and I celebrate the fact that we have a Constitutional Court we can trust with decisions like the one it was busy with yesterday*.
But the institutions of our society are not yet the corridors of the predators’ labyrinth – but we’d be foolish to ignore the signs.
* The Concourt matter is important for a number of reasons, but the aspect that interests me professionally, is part of what is happening is driven by the fact that the Treasury feels the need to defend its credibility as a borrower. I suspect that the rating agencies are happy that the Treasury is fighting this matter but are anxious that they might lose. The lender wants to be certain that the entity to whom it lends is properly able to make the agreement to pay the money back. The Treasury is ultimately arguing that the North Gauteng High Court ruling means no lender to the South African government can be sure that the courts might not declare, in effect, that government was legally incompetent to make the decision in the first place – significantly increasing default risk.
It is no easy matter to explain how a paragraph from Michael Ondaatje’s poem “The Cinnamon Peeler” speaks to me about the ANC’s economic policy process.
The poem is a sensual delight – quite unlike the ANC’s policy discussion.
Anyway … here is the relevant paragraph:
what good is it to be the lime burner's daughter left with no trace as if not spoken to in the act of love as if wounded without the pleasure of a scar.
(Catch the whole poem here – you will be glad you did)
Who could have believed anything other than that the ANC’s recent policy conference was a momentous event, a sharp delineation between one stage and another?
The promise was in the ‘economic freedom in our lifetime’ campaign, the calls for nationalisation of land and mines, the National Development Plan and the ANC’s policy discussion documents themselves.
The sense that some big change was imminent built towards the conference and then the news flow from the event spoke of deep geological shifts; shudders that shook the body politic.
And then … nothing.
Or rather the shifts were so subtle that it all felt like a new version of Kremlin watching (that popular art – masquerading as science – peddled by professional Western political analysts and historians circa 1955-1988 of predicting the future of global politics from who stood where on Soviet platforms).
Carol Paton, writer at large at Business Day, covered the recent ANC policy conference in a piece that should be required reading for anyone who wants to understand the subtleties – and intrinsic weaknesses – of the process.
She argues that little has actually changed in ANC economic policy since the first conference after the unbanning in 1992 – and what has changed is slight and nuanced.
Paton’s more general point is that the discussion is inherently flawed:
Economic debate in the ANC occurs in a strange, abstract and ahistoric vacuum without reference to what really happens in an economy. For most of those involved in the discussion — who are delegates from branches but also often public representatives — the sole reference point for how change might be effected in society is through the exercise of political power.
Paton argues that almost none of the ANC members and leaders involved in policy discussion “have had the experience of running or managing an operational business or even of operating in the economy in any way other than as a public representative or government official.”
The article is well worth a read – catch it here.
For me the important bit is the disjuncture between the promise/threat of radical change and the actual outcomes.
As we head towards Mangaung it is likely that noise arising from the ANC internal politics will once again begin to imply that we might be heading towards some radical discontinuity in economic policy.
Obviously our markets will be weaker than they otherwise would have been because of this sense of uncertainty.
I am fairly certain that come the morning after Mangaung we will comb our body for a trace of the change we thought must be a consequence of that event that presents itself as so profound … but we will find that we have been wounded without the pleasure of a scar.
Remember kaleidoscopes?
Basically a tube that you held up towards a light and peered through as if it was a telescope?
But unlike kid’s telescopes – which, like kid’s microscopes, were blurry and disappointing and stupid – the kaleidoscope was a device of astonishing power and beauty.
The point for my six-year-old self who received his first kaleidoscope for a birthday, probably, was the power that little tube put in my hands.
The simple expedient of twisting one end caused visions of astonishing, luminous, grandeur to pour out the other.
I can still feel that tingling as if I was balanced on a precipice, reaching out to shape a whole universe; causing tectonic shifts in the intrinsic structure of reality … okay, maybe not that last bit … but you get the point.
Such power … and I had absolutely no idea how it worked.
My “device of power and beauty” was a semi-rigid cardboard tube with loose coloured beads or pebbles in the end and two mirrors running lengthways up the inside, duplicating images of the transparent junk that tumbled as it was twisted.
My first kaleidoscope wilted in my sweaty, meglomeniacal hands a few hours after I had torn it from its pretty wrapping – and I cut myself on a broken piece of mirror as I desperately pounded it to make it continue producing those wonderous images.
Which brings me to my worries about ANC policy making.
I am slightly more worried today that I was when I wrote the piece below (from July 2) just after the conference.
That is partly because I have thought further about some of the issues and partly because the consensus points within the ANC seems to be slippery – and therefore uncertainty is rising.
In short my worry is that the ANC is approaching more vigorous economic intervention with the enthusiasm and growing expectations of my six-year-old self after he first looked through his pretty new cardboard tube.
I think the likelihood of this all ending in tears in increasing exponentially – and the reasons are not very different from those that caused the ruin of my first kaleidoscope and my cut finger.
I will pursue this theme (the threats involved with increasingly desperate state interventions – especially those that worsen the problems they promise to fix) in future posts, but first my initial take on the conference; written just after having read the particularly awful English language Sunday newspapers of July 1:
Much ado – and confusion – about the ANC policy conference
The teams of journalists from the political desks at the Mail & Guardian, the City Press, the Sunday Times and the Sunday Independent could have been covering different conferences given the divergence of their understanding of what went down at Gallagher Estates in the Midrand from Tuesday to Friday last week.
This is my first attempt at a distillation of the main points – partly of the coverage, partly of what was supposedly being covered:
- Debates about policy and the struggle over who will be elected to the top positions in the ANC at the National Conference in December became blurred, to the detriment of both.
- The “Second Transition” concept became associated with Jacob Zuma (even though it was penned by his factional enemy, Tony Yengeni) and its rejection by most commissions at the conference was interpreted as a set-back to Zuma’s re-election campaign.
- The power struggle obscured the fact that there was general consensus that transformation is “stuck” and radical and urgent action to hurry the process along needs to be taken if the ANC is to keep the trust and support of its majority poor and black constituency.
- The report-back to plenary of the key breakaway commission on mining became the most blurred moment, when Enoch Godongwana presented a summary of the views on the state’s proposed involvement in the mining sector – with pro-Zuma provinces KwaZulu-Natal, Mpumalanga and Free State tending to go with the SIMS compromise and the other six provinces tending to support the ANC Youth League in a strengthened nationalisation position.
- When consensus is finally reached, it is likely to include an even stronger role for the state-owned mining company – perhaps giving it the right to take significant stakes in all future mining licenses issued. Absolute taxation levels might be an area of compromise between the state and the mining sector in negotiations about this matter in the final lead-up to Mangaung where policy will be formally decided.
- There was broad consensus that the state could and should force the sale of farmland for redistribution purposes and that an ombudsman be appointed to determine ‘a fair price’ – to prevent the process being frozen by white farmers holding out for better terms. It is not clear whether this would require a constitutional amendment.
- There was general consensus that the Media Appeals Tribunal is no longer necessary, that the number of provinces needs to be reduced, that the proposed Traditional Courts Bill is reactionary and against the constitutionally guaranteed rights of women and children in rural areas, and that the youth wage subsidy (as a tax break to employers) had to be sweetened, or replaced, with a grant directly to young job seekers.
- The push for “organisational renewal” will require a number of changes: a probation period of 6 months for new members, a 10 year membership requirement before such members can be elected to the NEC, a reduction of the size of the NEC from 80 to 60 members and a downgrading of the status of the Leagues (women, veterans and youth) so they more directly serve the interests of the mother body.
So if this was a soccer tournament, what is the score?
The City Press led with “Tide Turns Against Zuma”, but frankly I think this is more about that newspaper’s preferences than anything else. The ideological disputes in the ANC are complicated but broadly follow an Africanist/nationalist group versus a SACP/Cosatu/anti-nationalist group. Neither Jacob Zuma nor Kgalema Motlanthe are clearly in either camp (but Zuma tends towards the former and Motlanthe towards the latter). Only one potential challenger, Tokyo Sexwale, is firmly in one group (the nationalists, which is the ideological home of the ANC Youth League) and he has more chance of passing through the eye of a needle than winning this competition.
Only Motlanthe could seriously challenge Zuma in a succession race and despite all the rumours and leaks it is by no means clear whether he has any intention of running – or, if he did, whether he would have a significantly different policy agenda than that being pursued by Zuma and his backers.
It’s tempting to focus on the ANC as if its history and prospects are a proxy for the history and prospects of the country as a whole.
The party’s centenary celebrations this week will strengthen the sense that this is indeed the case.
The last hundred years of South African history has been about the formal subjugation of the black inhabitants of the country by European colonial powers and settler groups; the fight for national liberation and self-determination; the victory and then seventeen years of the complex process of democratic rule.
Running like a spine through that body of history is the African National Congress - which not without some legitimacy claims to be the organised expression of black people’s struggle to be free of colonial and then apartheid oppression and exclusion.
Then in the same way that the back bone’s connected to the … neck bone it follows naturally that post-1994, given the ANC’s overwhelming dominance at the polls, the party can legitimately be seen as the ongoing expression of black South African’s attempts to govern themselves and use the state to redress the inequalities and distortions caused by that apartheid and colonial past.
So this week the ANC celebrates its 100th anniversary, kicking off with a centenary golf day (for only the luckiest of revellers) and including gala dinners, interdenominational church services and culminating in a public rally in Bloemfontein (Mangaung) on Sunday January 8.
The sense that the ANC is a proxy for the country itself is strengthened by the fact that this year will culminate in and ANC national conference electing a leadership that will, almost automatically, become the leadership of government after the general elections in 2014 – again, given the ANC’s electoral dominance.
Additionally an ANC policy conference in July will pronounce upon a range of matters concerning the role of the state in the economy and it promises to make policy on (amongst other matters) the nationalisation of mines and the expropriation of white owned farm land – with or without compensation.
But hang on a moment …
One of the key tasks of political parties in their struggle to become or remain the party of government is to present their agenda as identical to the national agenda, their leadership as automatically the national leadership and their interests identical to the national interest.
The ANC can legitimately point to how central it is to South Africa’s political and cultural life, but as we wilter this week under the the searing overstatement of that message it is useful to bring a few proviso’s to the front of mind.
We are a country with a small, open economy nestled in the most depressed region of a world overwhelmingly interconnected and subject to monumental forces that grind their way irresistibly through the Ozymandian vanities of governments significantly more powerful than ours.
The more we learn about the world and the history of human societies the more apparent it is that we have been hopelessly overoptimistic about our ability to understand let alone predict how the complex systems of our economies, national entities, ecological systems and cities function, evolve, collapse and change.
I am sure that this week newspapers will be full of huffy assertions that the ANC does not represent “the nation” and therefore treating its centenary as if it was a sacred ritual akin to Fourth of July in the United States (which celebrates independence from Great Britain in 1776) is a travesty.
Quite right too. The ANC has diverted significant national resources to traditional US style pork belly politics but has also made itself guilty of more overt Angolan style looting. All that combines to makes its claim to represent the “national interest” an insulting insinuation about “the nation”.
Also new political forces are emerging and growing – most obviously Cosatu and the Democratic Alliance – that will further erode such ANC claims in future – as will the shifting ethnic bases of parties and groups that contest in the political arena of South Africa.
However, these were not the points I wanted to make – and I am sure they are going to be done to death in the next few days.
My point is that sovereignty itself – and certainly who the ANC elects as leaders and what the party decides vis-a-vis nationalisation of mines and expropriation of land without compensation – will have much less force and effect in determining South Africa’s political and economic future that we might imagine.
Economic policy, laws governing ownership and general “good behaviour” around fiscal and monetary policy are rigidly constrained both by the discipline of global capital markets and by a myriad bilateral and multilateral agreements between countries and blocks of countries.
As I said to clients earlier this week (concerning the ANC centenary):
“Obviously we must continue to watch the ANC as carefully as always in 2012 – but this small open country and economy will continue to be tossed on the currents of the global economy and the various geopolitical, technological, cultural and environmental forces that shape the world. We might miss a trick or two if we lull ourselves into believing the myth that the ANC is a kind of metaphor for the country as a whole.
Two brief thoughts – on a rainy Cape Town Sunday:
Firstly – a by-product of Malema’s (possible) retreat
I have a feeling that debates ranging from mine nationalisation, land distribution and continued white economic dominance in the South African economy have just been saved from the gangsters in the ANC Youth League who have been using these as a cover for looting.
It has been difficult not to lump every statement about ongoing race based inequality with the smokescreen slogans used by the ANC Youth League leadership – and many equally corrupt politicians.
The latest Commission of Employment Equity Annual Report says whites still occupy 73.1 percent of top management positions – and blacks 12.7, Indians 6.8 and coloureds 4.6? Yeah, well they would say that wouldn’t they – after all, that is (one of) Jimmy Manyi’s old outfits and he is the grandmaster of running racial interference for pillaging resources destined for development!
Willing-seller, willing buyer policy of land distribution responsible for only 5 percent of redistribution targets met? Yeah, well, guess who are trying to get themselves a portfolio of farms a la Zanu-PF?
Nationalise the mines? Yeah, so you can rescue your BEE backers and get a piece of the action yourself?
But that was last week.
Those issues are back on the agenda, but this time the discussion might be led by people genuinely looking to harness the country’s resources for development and transformation – not looters, corrupt tenderpreneurs and “demagogic populists” disguising their true intentions.
If anyone thought we could go on with the levels of unemployment, inequality, poverty and racially skewed distribution of ownership and control of this economy I suspect they will find they have been very much mistaken.
One of the consequences of the retreat of the Malema agenda is that we will all have to deal with the issues we have, up until now, been able to dismiss or deflect because they were ‘owned” and propagated by thugs.
Itumeleng Mahabane says it like it is
In a similar vein – and my favourite read of the week – was Itumeleng Mahabane’s column in Friday’s Business Day.
He deals with a variety of aspects of the country’s debates about development and transformation.
In tones that have been tightly stripped – of anger, I suspect – Mahabane appeals for the debate to lose the “prejudicial invectives” and that participants should “desist from creating cardboard villains”.
He makes 4 main points (actually he makes a whole lot more, and it is not impossible that I misinterpret him here – and he is certainly more subtle and nuanced than my summary below – so read the original column – the link again.)
Firstly he suggests (although in the form of a question, not the statement as I have it here) that we have to acknowledge the damage our Apartheid past has done our country, leaving “the inequity of our income distribution and the historic systematic destruction of black capability”.
Secondly he hints that the state cannot assume more economic responsibility before we have fixed accountability – and thereby arrested corruption.
Thirdly he appeals for a sophistication of our views on the labour market – I think by suggesting that a degree of duality is crucial.
But, he warns:
I do not subscribe to the simplistic and questionable idea that the inability to hire and fire people is the core cause of structural unemployment. The balanced high growth would create demand for labour, regardless of labour rigidity.
Fourthly he asked us analysts why:
we casually, without considering the social implications, vilify workers and the working class, making them useful villains for complex economic challenges? We almost never give view to the body of evidence that shows that market rigidity and anticompetitive behaviour is a significant factor in deterring investment and output and that, in fact, it contributes to SA’s excessive business and skilled-labour rents.
Those are important views – and an important corrective to aspects of our debate about development.
You might have picked up from warm and welcoming statements by the Democratic Alliance and a flood of beaming news stories that our Minister of Finance Pravin Gordhan said something slightly more exciting about economic policy than the bland pap from the policy kitchen of the increasingly awkward compromise which is the Ruling Alliance.
But before anyone gets too excited we should look at exactly what he said.
First up, in the main body of his speech to the 14th annual conference of the Board of the Institute of Internal Auditors – a body I suspect has hitherto not been allowed to bask at the centre of an important breaking news story – he suggested as part of his list of things that need to be done to “energetically reposition, restructure and reform our economy” :
Lower the cost of young, inexperienced low-skilled workers for firms to stimulate the demand for labour
That is from the paper as published on the the Treasury’s website – catch that here – it is well worth a read.
Then press stories – this from the New Age – seem to imply that he took things a little further in discussion. I give you the full text below, especially as the journalist has left off quotation marks on the key sentence, making me wonder if this is more a case of hearing what you want to hear than it is an accurate reflection of exactly what the minister said:
The New Growth Path envisages the creation of five million jobs by 2020. Gordhan suggested that South Africa might have to relax its labour laws in certain cases to grow jobs. “We may have to change the way we see the labour dispensation in South Africa,” he said.
For example, a balance needed to be found to retain the jobs of the 10,000 people working at clothing factories in Newcastle, KwaZulu-Natal, while still allowing them to earn a reasonable wage and keeping the factories open.
There is no doubt in my mind that the inflexibility of our labour market is partly responsible for the high levels of unemployment in this country.
I have tired of pointing out that as the representative of the ‘already employed’ Cosatu is not to be trusted to talk on behalf of the ‘unemployed’ – with whom its interests often conflict (see here, but a number of other places as well).
The Minister of Finance’s job is to find an economic policy that somehow reflects the national interest – and not the sectional interest of organised labour.
The most important government priority is to find ways to grow the economy in a manner that helps create the greatest number of jobs.
With a government gone soft in the middle, led by a compromised and beholden president, it is a relief to hear someone in power, however tentatively, at least name the nettle if not actually grasp it.
Wouldn’t you want to have a job for life as a public servant, with guaranteed medical and benefits in a parastatal company that government would push up borrowing and taxation to keep afloat no matter what?
Of course you would – any of us would … just like the Greeks did up until very recently.
When Cosatu economist Chris Malekane argued as he did yesterday, stating with imperious certainty that the discussion about mine nationalisation was over – that the ANC NEC was unanimous and that it was not a question of if, it was a question of how – we should not be too surprised.
Malekane was talking the book of a particular faction of Cosatu – and his views are in stark contrast to views that had been expressed by leading member of the National Union of Mines.
While Malekane said Cosatu had encouraged the Youth League to place the debate on the agenda, National Union of Mineworkers president Senzani Zokwana said in November last year that the Youth League was being reckless with the industry and that their call was inspired by rich Black Economic Empowerment recipients looking to get failing deals bailed out by the state. ”I believe that there’s no threat to any investor …. I don’t think that view (nationalising the mines) will fly given the facts at our disposal”, he said.
Frans Baleni NUM Secretary General said just a month ago: “It is not only the private sector that has invested (in mines), but the workers with their pension and provident funds have also invested. We should have maturity and the debate should not have political undertones.”
NUM has to care about the the state of the mining sector – it has members who would undoubtedly lose jobs if the mines were nationalised.
Additionally NUM is lead by the ANC/SACP supporting faction of Cosatu – with Vavi and NUMSA increasingly seeking ways forward around and beyond the ANC.
The ANC incumbents have done everything they can to stop or limit this debate – and they have been supported in this by the South African Communist Party. The president, cabinet ministers and senior party officials have argued that it was never ANC policy to interpret the Freedom Charter clause on the nationalisation of mines and “the commanding heights of the economy” in the crude and mechanistic was the Youth League has done.
I am convinced that it is entirely impossible that the ANC will nationalise the mines along the lines proposed by the Youth League. It would cost in the region of $130bn (see excellent Reuters article here) and it would break a long list of formal and informal obligations South Africa has with trading partners – as well as explicit reassurances the ANC gave at the time of the leaked mining charter in 2003. Finally, owning the mines would oblige government to take on the accumulated risks associated with environmental damage those mines have built up over the years as well as the risk associated with volatile resource demand.
Government’s task is to get the best possible value out of the non-renewable resources with which the country is endowed. I don’t see any scenario in which that could be achieved through the nationalisation of mines in the form described by the Youth League or that supported by a faction of Cosatu yesterday.
Capitalism, at its most basic and unbridled, is a system that says: okay, the king is dead and therefore no longer owns all this stuff; take what you can … if you can hold onto it, it’s yours. Oh yeah, and you can pay the people who don’t manage to hang onto any stuff to work yours … because if they don’t they will starve.
On your marks, get set … go!
The system is extraordinarily productive, driven as it is by those gargantuan twin-thrust engines: human greed and human fear (you can keep what you can take/failure means death).
One of the great political achievements of the last 300 years has been the refining, softening and regulating of this system so that it maximises the good it can produce for as many as possible.
But note this: it can’t produce the same amount of good for everybody – because its fundamental driver is that it allows the hungriest, cleverest, most creative and most intelligent to keep what they can take. That’s why those people build the enterprise. So they can keep what they can get out of it. That’s the creative heart of the system.
(One of the many flaws of capitalism is it also allows those who have become powerful for reasons other than those listed in the last sentence to “keep what they can take”. Thus both Apartheid apparatchiks and New Elite cronies are (still) living high on the hog for reasons that have nothing to do with the unleashing of their creative spirit and more to do with their ability to cheat and steal. But that is another story.)
The point I wanted to make, is that in its most basic and unregulated form capitalism will allow the owner of the factory or mine to extract the last drop of blood from the worker – and the last drop of blood from his children, his old mum and his maiden aunt. Without regulation the only thing that will stop the capitalist working the worker to death is the need to have him come to work tomorrow and for his children to come to work in ten years time. The history of capitalism has demonstrated this unfortunate truth about humans time and time again.
Thus we have labour market regulations: minimum wages, basic working conditions, rights to dignity, rights to organise and strike. These are amongst our greatest achievements – and they are all there on the law books of the new South Africa.
But there is a line over which we must not cross.
When the law, in effect, demands that the capitalist share equally the profits of the enterprise with the workers, the enterprise is over.
If local regulation means the capitalist can’t make sufficient profit here he (or she) will go elsewhere or will spend his or her time doing something else. That’s it; end of factory, end of jobs and end of story.
"Not only are the proposals contained in these draft bills a staggering contradiction of the government’s economic and social objectives with the potential to destroy hundreds of thousands of jobs, but they are also poorly drafted and difficult to interpret." Michael Spicer, CEO of Business Leadership South Africa
Michael Spicer, as CEO of Business Leadership South Africa, is the perfect person to listen to if you want to get an average signal of what South African capitalists are feeling.
His comment in today’s Business Day about the conflict between the flood of proposed changes to labour and employment equity laws and government’s job creation agenda is well worth a read. Catch it here.
It seems to me we are carelessly testing for the “tipping point”, the point beyond which the capitalists mechanise their plants or leave.
Busy, busy … and everything is slower; the brain and hands struggle with what they did with alacrity before the December holiday.
Anyway …
It is becoming clear that South African Investment Risk is going to be all about the New Growth Path (NGP) this year. So picking up from where I left off from the two pieces I wrote last year about the NGP, here and here – I did promise a third and, I suppose, this is it.
Zuma’s 2010
I get irritated by those those interminable news features reviewing or predicting the calender year as if it was a natural unit of history into which discreet trends neatly fit themselves and await their unpacking by news organisations short of December and January copy.
But then that means I failed to point out one of the most interesting features of 2010, namely the peculiar arc described by Jacob Zuma’s fortunes over the course of last year.
Remember how badly the year started for him?
He stumbled from crisis to crisis and the consequences of his sexual behaviour (consequences we are going to feel again this year) began to make even his most fervent backers nervous.
The second phase was the World Cup and the apparent surrendering of his position to Blatter and his merry band of soccer thieves. That phase ended with the gathering woes of the public sector strike and a serious challenge from “the right” at the NGC.
That is the moment he turned it all around, to everyone’s surprise – mine included.
His administration managed to negotiate an end to the public sector strike and secure Cosatu’s aid to stop the political challenge from the right (fronted by Julius Malema, but emanating from higher up the ANC/New Elite food chain – I cover that – exhaustingly if not exhaustively - here.)
As I discuss in the previous link, it is my contention that he secured the victory by making policy concessions to the left and Cosatu (which are essentially contained within the NGP document – clearly not acceding to the left’s full agenda but going some of the way) and this sets much of the tone for a discussion about political risk in 2011.
The New Growth Path (NGP)
The New Growth Path (NGP) document was produced by the Department of Economic Development (23/11/2010), an institution that came into being as a direct reward to Cosatu for having backed Jacob Zuma’s rise to power at Polokwane and which is headed by a minister who hails from the heart of Cosatu’s leadership.
The origins of the NGP might be closely linked to Cosatu, but the fact that it is a real attempt to address unemployment that has been formulated in government (i.e. outside of the priority Cosatu objective of protecting the interests of the already employed) means it is full of suggestions that Cosatu has found itself unable to support.
But Cosatu’s doctrinaire and sectarian self-interest based criticism aside (see those here), this proposal is far closer to the policies of Cosatu than any macro and micro economic framework that has emanated from the ANC and government since 1996 – and this is because the document forms part of the payback to the trade union movement and herein is contained some of the risks associated with the policy.
The Activist Developmental State
The NGP is more than just a statement committing government to various broad economic interventions designed to achieve job rich economic growth. It calls for a fundamentally new approach to the administration of all aspects the economy and is highly interventionist and proposes that the the Department of Economic Development plays the lead role.
One of the most interesting critiques of the policy comes from the Chief Economist of the Sanlam group
It wants to regulate wages and salaries in the labour market, prices in the goods market, the rate of exchange in the currency market, interest rates in the money and capital markets, and dividend policies and therefore by extension equity prices. It even hints at rent control in its desire to reduce rentals for small businesses in shopping centres. (The New Growth Path – Does it really take us forward? – Jac Laubscher, Sanlam Group Economist – 01/12/2010 catch the full text of that interesting critique here).
The premise is that markets left to their own devises will not solve the problems, particularly of unemployment. Unemployment (as well as the full range of social ills in South Africa), in this paradigm (the paradigm of the NGP, not the paradigm of Sanlam or Jac Laubscher!), can only be addressed by vigorous state intervention.
The conventional or orthodox view in economics tends, in principle, to be wary of over regulation of the economy and markets by even the most efficient, vigorous and rigorous state or government agency. The potential for misallocation of resources, bureaucratic drag, distortions and inefficiencies (and therefore reduced growth) must be significantly increased when a new, untested and under-resourced agency nested in a national administration known for high levels of dysfunction is charged with leading interventions at every level into the economy.
Looser monetary, tighter fiscal policy
The stability and predictability of macro-economic policy has been one the great successes of post-1994 policy making in South Africa.
The NGP makes constant reference to achieving a “more competitive” currency – through the mechanism of “a looser monetary policy and a more restrictive fiscal policy backed by microeconomic measures to contain inflationary pressures and enhance competitiveness” (page 16 , The New Growth path – The framework – 23/11/2010).
Thus this policy holds out the hope/promise of stimulating the manufacturing sector (by making exports more competitive) but proposes to help control the danger of inflation inherent in this strategy by reducing state expenditure.
I do not expect government to either change the inflation target for the SARB or its general mandate “to protect the value of the currency in the interest of balanced and sustainable economic growth” (Constitution of the Republic of South Africa 1996/1996/2009-04-17/Chapter 13 – Finance), but the assumption must be – at least – that there will be downward pressure on the currency.
Labour markets and wages – the source of the conflict with Cosatu
What is fascinating about the NGP is that it calls for wage restraint and is, inevitably, starting a serious discussion in government and the ANC about the conflict between “quality jobs” and any jobs at all. Charged with creating employment, the NGP is inevitably going to come into conflict with the labour regime established after 1995 that so profoundly strengthened the interest of workers inside the system against the interests of the unemployed outside the system.
Conclusion
2011 is going to be the year that government finally shifts beyond the set of macro-economic policies enshrined in the Growth, Employment and Redistribution document that defined the Mbeki leadership – and so angered Cosatu, the SACP and the ANC’s own left wing.
Political analysis for this year is going to have a strong economic focus. We will have the national local government elections (the rumour I hear is May 18) and the never ending cycle of tenderpreneurial abuse by party and government figures.
All of that will continue to provide grist to our mill, but the big story for this year is all about government economic policy. Will they go too far for the financial markets and other investors? Can a government, any government, do anything to fundamentally alter the content and direction of economic growth? Can the Ruling Alliance hold itself together if the ANC grasps the nettle of the labour market? These are the big questions for the year.
This is the second of three articles about the New Growth Path (NGP) Framework released last week by the Ministry of Economic Development.
One of the architects (I must assume) of the NGP, Neva Makgetla (an economist long associated with Cosatu and now deputy director general in the Department of Economic Development) recently examined both the Growth, Employment and Redistribution macro-economic policy and the ‘industrial development plan’ alternative usually advanced (in my opinion) by members of the SACP.
Writing in the September 2010 special issue of the African Communist (journal of the South African Communist Party designed as a forum for Marxist-Leninist thought) Makgetla spells out what she thinks are the problems with both polices are.
Her views of what has gone before are interesting because the new policy tries to marry these frameworks by taking only the best of both.
Someone should have warned them that in policy marriages, as in human ones, you take the good with the bad … but more about that in the third post about the NGP which I will probably only get to by Monday.
The ‘anti-poverty framework’ associated with GEAR
“In effect, the transition to democracy built an implicit social compact: business would retain its property rights, and by extension its wealth and standard of living, while government would use its tax revenues increasingly to address backlogs in services for black communities left by apartheid.”
Makgetla sees the 1996 GEAR policy framework as having left in place the basic structure of the Apartheid economy.
Path dependency meant mining and finance continue to dominate and that property relations and inequality remained unchanged.
But the strategy, according to Makgetla, was attractive to successive ANC governments because it was quick to roll out and provided immediate benefits for the poor (particularly through social grants), while (hopefully) stimulating production and generating employment as the poor consume more goods and services.
“(The major benefit of the strategy) from the standpoint of the state was that it did not require explicit intervention in the economy. It relieved the government of responsibility for transforming the economy, with the associated risks of failure and potential conflict with business. Instead, government could focus on the more agreeable task of improving the lives of constituents through the more conventional public functions of providing basic services and housing.”
The risks were largely in lost opportunity – not achieving “new kinds of economic growth and by extension enhanced employment”. Because the strategy was dependent on state revenues, it was ultimately hostage to the booms and busts of the global economy.
Her key assessments of the policy are:
1. the transfers remained too small to provide the hoped improvement in the conditions of life of the poor and therefore the expected increase in demand and economic stimulation;
2. the relatively strong rand meant that new demand for manufactured goods, especially clothing, appliances and household furnishings was largely met by imports, and
3. the poor were ultimately dis-empowered and demobilised by top-down hand-outs that are central to the strategy.
Industrialisation strategy – SACP alternative
This is the policy proposal that ‘stands in’, in Makgetla’s assessment for the traditional left contribution to the policy debate. It is best revealed, in her opinion, by the Industrial Policy Action Plan (1 and 2) of the Department of Trade and Industry.
These strategies are designed to encourage production of manufactured goods, especially for export.
The industrial strategy has the potential, in her opinion, to access larger markets in order to drive mass based production, which in turn will secure more rapid growth and higher employment.
Crucially, the approach is modelled on the relatively rapid development experienced in Asia especially in the 1960s and 1970s.
The version of the strategy she deals with – which is the version in IPAP2 of the DTI – explicitly requires government to change which parts of “capital” it supports i.e. government would need to collaborate more closely with “industrial capital”, while reducing support for mining, farming and finance.
The state should focus its support on conventional manufacturing especially of capital goods, transport, electronics – and to a lesser degree “light industries” like clothing, food processing and minerals beneficiation. The policy tends to assume that services and production to meet domestic demand are inherently less competitive “and hence less desirable.”
Makgetla thinks there is high political risk for government in this strategy. The chances of failure in such an unequal society are high and if government adopts a strategy largely dependent on its effective intervention in the economy, it will get the likely flak along with the less likely kudos.
Risk is increased because the strategy is hostage to global demand for manufactured goods and RSA will be competing with China and almost every other developing country that sees this kind of strategy as central to their development path.
Finally, the industrialisation strategy supports long term economic growth but not employment and equity, which are not automatic consequences of growth. It ignores labour intensive activities like agriculture, services and construction and often leads to proposals to hold down wages to support competitiveness – she was prescient about that, but then she did help write the NGP!
On Monday I will spell out more specifically what the NGP proposes to do and I will make an assessment as to whether the policy will ever be implemented by this government and if it is, what it’s likely consequences would be.
If any of you are still with me by then, I will be surprised and you will probably be slightly sick of grandiose government policy making.
This is the first of three articles that look at the political and policy bloodline of the New Growth Path and the main criticisms that have emerged about the policy in the public domain over the last few days.
This first post is a summary – using quotes and paraphrasing – of Ruling Alliance statements about macro-economic policy since 1990.
To understand the policy we have to understand:
- firstly how the policy fits into the discussion/dog fight in the Alliance over the last 20 years;
- and secondly the fact that the policy comes from Minister of Economic Development, Ebrahim Patel, whose department and position, in my opinion, was a last-minute structural compromise to reward Cosatu (and to a lesser degree the SACP) for having backed Jacob Zuma against Mbeki.
So the big bulls (ANC and the SACP) have been butting heads for 20 years (see below) and now the little bull is trying to horn in on the action.
20 years in the trenches of the ideological squabble
Since the release of Mandela from prison in 1990 (and, in fact, well before that – mostly behind closed doors) different factions of the ANC, the SACP and Cosatu have had a sometimes productive and sometimes vicious policy debate about economic policy. At issue has always been the stance the state should take towards private business and the appropriate amount of persuasion and coercion required to achieve redress and redistribution.
The first sign of things to come was the speech Nelson Mandela made on his release from prison in 1990. After the excerpt from Mandela’s speech I will let the comments flow and tell their own story of the conflict within the Ruling Alliance.
A history of the conflict in quotes and paraphrases
“The nationalisation of mines, banks and monopoly industry is the policy of the ANC and the change or modification of our views in this regard is inconceivable”
Nelson Mandela paraphrasing the Freedom Charter on his release from prison in 1990
“We are convinced that neither a commandist central planning system nor an unfettered free market system can provide adequate solutions.”
The 48th ANC National Conference, July 1991 from a conference resolution
“It was a demand-led and internal infrastructural development proposal, which envisaged less immediate concern with budget deficit reduction and inflation.”
African Communist No 147, third quarter 1997 discussing the Macro Economic Research Group’s (MERG’s) proposals from 1993
“Of particular importance was the proposal to restructure the economy by way of a policy of ‘growth through redistribution in which redistribution acts as a spur to growth and in which the fruits of growth are redistributed to satisfy basic needs’. This proposal was predicated on the central policy idea that the state needed to boost demand, primarily by ensuring that greater amounts of income would be received by the poorer sections of the population, which in turn would stimulate output and hence economic growth.”
Dennis Davis in From the Freedom Charter to the Washington Consensus 2002 discussing the RDP proposal of 1993
“Despite its ideology while in opposition, once in power the ANC government implemented an orthodox macroeconomic policy which stressed deficit reduction and a tight monetary policy, combined with trade liberalisation. The stated purpose of this package (the Growth, Employment, and Redistribution programme, or GEAR) was to increase economic growth, with a 4.2% rate programmed for 1996-2000. At mid-term of the programme, growth remained far below this target. The GEAR’s lack of success cannot be explained by unfavourable external factors; rather, the disappointing performance seemed the result of fiscal contraction and excessively high interest rates”
A standard left criticism of GEAR from: Stuck in Low GEAR? Macroeconomic Policy in South Africa, 1996-98 John Weeks Cambridge Journal of Economics, 1999, vol. 23, issue 6, pages 795-811
“Faced with deepening unemployment, poverty, and inequality, and with disappointing growth and investment, the GEAR policy framework has met with persisting criticism from COSATU and the SACP in particular. From the side of its principal proponents within the government, there have been several adjustments in the face of disappointment. Increasingly, GEAR has been redefined as a conjunctural stabilization program and not what its acronym suggested it once aspired to be (a growth, employment and redistribution strategy). In this rereading, GEAR was necessitated by global turbulence and by a very precarious foreign currency reserve situation in 1996. Its “success” is now measured not in terms of growth, employment, and redistribution outcomes, but anecdotally and by way of comparison—“whatever our problems, South Africa’s economy is not in the same predicament as Argentina, or Turkey, or Zimbabwe,” or “GEAR has helped us to survive the worst of global turbulence” (which may not be completely incorrect).”
Jeremy Cronin rephrasing GEAR as a conjectural stabilisation strategy – 1998
In an address to the Socialist International October 2003 and then in various speeches in 2004, Thabo Mbeki argued that solving unemployment, poverty and low levels of black participation in ownership and control of the economy had become very urgent. Further, he argued that to solve these problems an effective, strong and interventionist developmental state was needed – just proving that there is nothing new in heaven and earth. He put the case for improving the public service and extending the state’s influence and ability to lead the economy. “Influence” meant keeping hold of strategic state assets (and therefore a partial withdrawal from the privatisation specified in GEAR) as well as a detailing of micro-reforms including BEE. He placed a strong emphasis on private public partnerships as well as on galvanising a collective consciousness about the “common good”. From this shift the Accelerated and Shared Growth Initiative for South Africa (AsgiSA) was codified in 2005/2006. While it set targets for growth and employment, Asgisa was primarily an infrastructure investment programme combined with various (mostly supply-side) measures to remove impediments to growth – much of which the economy continues to benefit from today.
My own summary of Thabo Mbeki’s initial motivations for AsgiSA
In the lead up to Polokwane this was the definitive statement from ‘the left’ attacking the direction that the Mbeki government had taken: “The post-1996 class project” was led by a “technocratic vanguardist” state with the mission for “a restoration of the conditions for capitalist profit accumulation on a new and supposedly sustainable basis” (as opposed to “a revolutionary … transformation … to resolve the .. contradictions in favour of .. the working class ..”). The document argued that “The post-1996 class project” rests on three pillars: Firstly, the ANC leadership has mistakenly bought into a myth of a gentler, kinder world, but imperialism is stronger and more hostile to popular democracy than ever; secondly, to fit into this world “the second pillar of the project is a powerful presidential centre” that necessarily installs a top state/ leadership group of state managers and ‘technocratically’-inclined ministers and (often overlapping with them) a new generation of black private sector BEE; and finally, the project calls for the organisational modernisation of the ANC … “to transform the ANC from a mobilising mass movement into a ‘modern’, centre- left, electoral party”. There is a “manifest inability of capitalist stabilisation and growth to resolve the deep-seated social and economic crises of unemployment, poverty and radical inequality in our society. The ravages to the ANC’s organisational capacity and coherence (are caused by) “the attempts to assert a managerialist, technocratic control over a mass movement, and in the crises of corruption, factionalism and personal careerism inherent in trying to build a leading cadre based on (explicit or implicit) capitalist values and on a symbiosis between the leading echelons of the state and emerging black capital.”
My paraphrasing of the SACP Central Committee Discussion Document. Bua Komanisi – Volume 5, Issue No1 May 2006 – difficult to read but a perfect summary of the position that exists to this day in the SACP
Then came the answer to the ‘left critique’ from the central ANC leadership: “…the trapeze act here is to co-opt the ANC, formally, as an organisation pursuing socialism; and then condemn it as having betrayed the socialist project”. First, and most importantly the ANC denies that it ever was or should have been an organisation whose objectives was to achieve socialism. The ANC, the document claims, is the organic result of the struggle of black South Africans for national liberation and redress for what they suffered and lost under Apartheid. Additionally the ANC prioritises the poor and the working class. Once this point is made, the ANC argues, all the rest of the SACP critique falls away. The ANC accuses the authors of the SACP document of “ahistoricism, subjectivism and voluntarism”. This is more than just name calling. In the argument of the authors of this document: ahistoricism refers to the SACP’s alleged failure to understand what led to the present conditions as well as the character of the historical moment in which they find themselves, subjectivism means that the SACP has used its own preconceptions to guide its views and has seen the world as they wish it to be rather than how it really is; voluntarism means the SACP believes that through pure force of will, hard work and determination it can achieve socialism in South Africa, whatever limitations the domestic or global environment and balance of forces, especially the strength of global capital markets, impose on possible outcomes.
Managing National Democratic Transformation – ANC response to SACP discussion document – probably the last time the ANC spoke plainly and confidently about economics and the class struggle – 19 June 2006 the official NWC response to the above quoted SACP Central Committee discussion document
The next post will summarise the actual policy contest (from an economists point of view) of the last 15 years. This will essentially be the actual macro-economic policy of the ANC (run from the Treasury) and the SACP’s consistent “industrialisation” alternative (proposed from the Department of Trade and Industry).
I phrase it like that deliberately to suggest that the Department of Economic Development and the New Growth Path Framework represents a new political assertion even if the policy formulation ultimately turns out to be a hodgepodge of previous proposals – as suggested by my summary of Thabo Mbeki’s AsgiSA policy above.
Cosatu has released its long awaited document in which it provides the facts (as it sees them) and theoretical underpinnings for “A Growth Path Towards Full Employment” – and in doing so attempts to align its views with those emanating from Minister Ebrahim Patel’s Department of Economic Planning (the Two Year Strategic Plan) as well as Minister Rob Davies of DTI’s (IPAP2).
Stephen Grootes at the Daily Maverick has done an exemplary quick analysis (catch that here). I am not quite certain I am as gung-ho capitalist as the guys down at the the DM are … although I am as clear as Grootes is that Cosatu’s main planks of policy would turn us into a wasteland in two flicks of a lamb’s tail – as not even my old Granny was prissy enough to say.
I saved a copy of Cosatu’s full document here and hope to give it a more thorough treatment than the cursory skim I gave it in the middle of last night. Whatever I conclude will be faithfully reported on these pages.
Here is the summary of South Africa’s performance in the Global Competitiveness Report 2010 – 2011. The highlights are mine and the seriousness of the problems is obvious..
While we quite rightly bemoan health, education and labour market failures it is interesting to note we were top ranked – in the whole world! – in two categories: in auditing and reporting standards as well as in the regulations that govern our securities (financial instruments) exchanges.
But on with the bad news: part of the process of the construction of the report involves asking the opinion of “business leaders” (see note below about methodology) about their concerns. The top four concerns they had about South Africa are not a huge surprise:
From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings.
Methodology note from the press release: “The rankings are calculated from both publicly available data and the Executive Opinion Survey, comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the study. This year, over 13,500 business leaders were polled in 139 economies.”
Click here for a link to the full report.
