ANC’s Radical Economic Transformation is just a convenient diversion

The ANC has consistently promised to develop policies and strategies that will deliver a better life for all in the post-apartheid era. The people have demonstrated their confidence and trust by delivering the party into power until now. However, a break in this trust was demonstrated in the 2016 local elections when the ANC lost three key metros to the DA and its coalition partners. But what is clear is that the erosion of trust has been increasing in the past seven years as the corrosive manifestations of a corrupt and patrimonial state negatively impacted service delivery countrywide.

Following this serious electoral setback the ANC has now decided to embark on a new mission spearheaded by the president himself to again raise the hopes of the poor by promising them that a new theme of “Radical Economic Transformation” will deliver democratic dividends they have missed. What is certainly left unpacked is the real meaning of this catchphrase that is now dominating the headlines. But to put this in perspective it is important to go back to the beginning of the transition period.

The Mandela administration inherited an incredibly nasty legacy from the apartheid government with shocking levels of racialised structural poverty, income and wealth inequality, as well as unemployment and in addition a bankrupt state. The post-apartheid democratic government was morally obliged to respond to these challenges through a comprehensive set of social welfare grants and other benefits, such as rolling out free housing, access to electricity and water etc. These are parts of the good story to tell in respect of poverty alleviation and social justice.

Confronted with the economy that was in crisis at the beginning of the transition period, the ANC-led government has over time introduced a series of growth strategies to deal with these challenges.

First, it was the Reconstruction and Development Plan (RPD) in 1994, designed to provide some degree of macroeconomic stability at the onset of the transition. This was followed by Growth, Employment and Redistribution (Gear) in 1996, criticised as opening the door for the ANC’s current neoliberal economic policy. Now we hear about the nine point plan.

The central theme of a market-led economic policy within the framework of fiscal discipline and macroeconomic stability underpinned Gear and is a central feature of all the other ANC growth policies: the Accelerated Shared Growth Initiative for South Africa (AsgiSA) of 2007; the Industrial Policy Action Plan of 2009, as revised; the New Growth Path of 2010; and the National Development Plan of 2012.

These varying strategies, over a short period of less than ten years, signify policy incoherence and gridlock by an administration that was overwhelmed by the inherited challenges. The debate about inequality and other inherited socio-economic challenges from the apartheid system required the following questions to be raised: Did the liberation alliance movement really have a credible transition strategy going into the negotiations that matched the avowed mission of the “social democratic revolution”? What were the critical elements of this purported “revolution” and what benchmarks were set to evaluate its progress? If our constitutional democracy and the electoral system that underpins it represent the reversal of political power relations, what benchmarks were set in the transition strategy to represent “corrective justice” in economic power relations?

The response of the ANC-led government should have been anchored in policies that provided for mass low-cost employment in retail manufacturing and a major boost in informal employment or self-employment, in combination with broad social security support. This should have been the response of a government driven by a high level of consciousness for social justice as a political philosophy and that is also manifestly pro-poor in its policy outlook, as the ANC has often claimed to be.

The reality we must confront is that about 22-million adults do not have matric and only 34% are employed (Statistics SA 2015). Yet this has not resulted in a fundamental shift and rethink of the assumptions underpinning SA’s economic policy and strategy. Instead what we have is a development policy and strategy that has put a high premium on formal job creation in a paradigm of technology and skills driven growth trajectory yet our labour market conditions require jobs that can benefit our large, under-educated and unskilled labour force.

The other critical element of our economic policy has to do with systematically breaking up the high level of concentration that defines our economy. It is dominated by monopolies and oligopolies that are also vertically integrated resulting in an undesirable and uncompetitive environment that excludes entry to small businesses. To deal with this challenge the Competition Commission was established. However, it has not been fortified with sufficient legislative power and sufficient professional capacity to execute its mandate vigorously. If this was done, we could have achieved in the past ten years, what is intended by the rhetoric of “Radical Economic Transformation”. The interesting question is why has this not been done? Is it because many of the companies that would have been targeted have politically connected individuals on their boards?

People should therefore not be fooled by this renewed energy from the president of the ANC. It is intended to mask an abject failure in strategy execution by the ANC-led government on a critical economic policy challenge.

Economic growth remains to be the fundamental problem we have to deal with. What we need to understand and accept is that it is business that creates jobs. The critical incentive is to create the environment and business confidence levels for domestic investment to grow in order to attract foreign direct investment. The ratings agencies do not form a negative impression about our economic situation only on the basis of their own analysis. They rely on the opinions and perceptions of the local investors and financial institutions. This is the area we have neglected and the finance minister is facing a daunting task.

The most critical task facing government at this moment is how to build a credible and sustainable social contract with business and labour in order to improve investor confidence following a reckless and thoughtless decision by an unwise president to replace trusted leadership at Treasury. This can be achieved in the short term and the ANC knows exactly what needs to be done to achieve this objective.

What is clear though is that, whereas the prior post-apartheid democratic administrations focused on fiscal discipline and macro-economic stability while pushing for growth, the Zuma administration was singularly preoccupied with building a thriving network of a patrimonial state. And they have succeeded spectacularly when measured by the collapsed governance in the SOE’s and malfeasance and corruption that is everywhere. The principal reason is, as I pointed out in my Op-Ed in 2009, that Jacob Zuma came into power as a compromised person. For a complex entity as the state, ethical and moral values are a precondition for success.