The Rainbow Nation of 2019 may be described as the ‘triumph of pretence over reality’.
Traditionally, South Africans invest their expectations by voting for personalities and political parties. Adept businesses and skilled entrepreneurs however, invest on party policies and pronouncements.
The South African political factions who have won parliamentary representation can be categorised as being either helpful or harmful to the private sector and economy. Informed investors seek guidance from sources such as the World Index of Economic Freedom which reports on economic conditions, ease of doing business and security of tenure. In 2019 South Africa was placed 102 out of 186 countries measured, a drop of nearly 50 places in less than a decade. (a)
For guidance on investment and job creation, South African voter choices provided a clear-cut result:
|Commerce & employment
-Growing the economy
|Commerce & employment
-Restricting economic liberty
-Authoritarian economic control
Following the elections, South Africans were brought down to earth with a bump. AngloGold, once the top gold producer in the world employing over 300 000 South Africans, announced they would be dis-investing from the country.
A day later, Statistics SA revealed a quarterly rise in the unemployment rate to 27.6%, and an expanded rate (including those who have given up looking for work) increase to 38% – just short of 10 million people. In 2009, the ruling party promised to create 5 million jobs in 5 years. Just prior to the 2014 elections, a figure of 6 million jobs by 2019 was mooted.
Helpful policies facilitated Singapore’s transformation from a third-world economy to an economic miracle in under 25 years, despite having no natural resources. Mauritius implemented helpful policies to propel it to the freest and wealthiest country (per capita) on the African continent. If helpful economic policies based on economic and personal liberties, are so beneficial, what motivates South Africa to do the opposite? The rarely quoted National Democratic Revolution (NDR) strategy of the ruling party provides some answers:
Ideologically, the ruling tri-partite alliance NDR is also supported by authoritarian, Marxist and Fanonist(c) political parties. The present NDR resolutions calls for party cadre deployment, economic and social racialisation, and selective redistribution of wealth. It also promotes nationalisation of key economic sectors and control over the organs of state, people’s property and livelihoods. The component of the legislature promoting NDR ideals comprises 70% of parliamentary votes. Without remaining constitutional safeguards, Parliament’s harmful NDR bloc are a shortcut to Venezuela and Zimbabwe.
A quarter century of steady NDR policy implementation has significantly affected bread-and-butter issues.
On the eve of democracy (and after a generation of sanctions), a besieged South African economy was the 25th largest in the world and unemployment was under 20%. In 25 years, despite fluctuating growth, the country has slipped to position 33 in world rankings. Unemployment has increased by 38% and the economy has grown only 5% in real terms(b). The size of the public sector ballooned in line with centralising economic control. The asset value of over 700 inefficient and mostly debt-burdened State Owned Enterprises (SOE’s) comprises nearly one-third of GDP.
Chris Hattingh, from the FMF explains: “notable economic growth requires freedom as an essential ingredient. [From a low base], it is only through work, and trade, and investment, that people can improve their situation in life. Government can only provide assistance for so long – eventually its coffers, full of taxpayer money, will run dry. To have any hope of real, long-term economic growth, SA must become a place where starting and running a business is as easy as possible, where people can take agency of their lives and agree to enter contracts on their own terms, and where their property will be secure from arbitrary seizure by the state.”
Despite a depressed economy, policy uncertainty and a decade of wholesale state corruption and looting, South African business people remain resilient. AngloGold (and others) will be sold off to investors who have a different outlook. Industries that are geographically confined and distinct, such as chrome mining and tourism will continue, and mostly adapt. Niche consumption markets remain and social entrepreneurs will still embrace opportunity. The informal economy will survive and even thrive, as will crony-capitalism and the politically connected.
However, as long as the NDR and compromise politics conspire, economic upliftment, job creation and capital investment will remain elusive.
South Africa – an economic powerhouse on hold and shrinking; until enabling policies and principles appeal to voters more than personalities and parties.
(a) – Heritage Foundation: Index of Economic Freedom 2010-2019
(b) – Calculating and adjusting for US/RSA inflation, GDP (per capita) and USD to ZAR exchange rates 1994-2019).
(c) – Frantz Fanon, 20th century revolutionary, author and doctor. Fanon espoused violent anti-colonialist struggle, identity politics and Marxism.
About the author: Ron Weissenberg is a former corporate warrior, latterly resident in South Africa who started his first business at age 7. He is a Certified Director (SA) and mentors people and their enterprises.