This week The Economist argued that we should cry about the beloved country and caused an outpouring of opinions about South Africa and our economic future in the media and blogosphere. Their story was that South Africa had much going for it, but is now on the slide, economically and politically. The gathering gloom is described in terms of:
- The downgrade of the sovereign debt rating.
- Violent wildcat strikes.
- Service delivery protests.
- The dismal state of education.
All against the backdrop of unemployment, poverty and inequality. Much of the blame is laid at the feet of the ANC and president Zuma and the solution is seen as greater political competition. There has been a range of responses.
Government said that South Africa is getting many things right (considering global challenges and the legacy of Apartheid). The successes cited include South Africa’s recent inclusion in the World Government Bond Index, the competitiveness of the financial markets, progress that has been made in service delivery and investment in infrastructure. The government argued that “At a political level, we have consolidated democracy and have strong institutions formed in line with the country’s progressive Constitution“. Furthermore, President Zuma acted by bringing together government, business, labour and the community sectors for high-level dialogue on the economy. “A similar initiative during the 2009 recession worked tremendously to cushion the economy and protect jobs“.
In addition, Business Day ran an article arguing that South Africa is far from hopeless: business people are getting on with it and major deals are happening every day. Articles in the Guardian and the Daily Maverick decried the cliché of South Africa’s imminent decline. Johan Fourie posted a list of reasons to smile with the beloved country.
My feeling is that there are many different ways of reading “the evidence”. There are indicators of progress and signs of decline. The challenge is to look for clues to the long-run path of growth and development.
First, I think that the plans are there. Many people were critical of last week’s meeting between the president, business and labour and the plans that were put forward: accelerated infrastructure roll-out, or public sector works programmes – saying that they are the same old plans that we have been hearing about since the RDP. But I want to argue that the plans that we have in the NDP are really the only options out there. Some people want to see more about localisation, or SMEs, or rural development, but there is no single silver bullet. We need to get the basics right and the questions are about how the plans are implemented.
When we think about implementation, it is often in despair, thinking about tenderpreneurs and financial mismanagement. But implementation is about more than processes, it is also about ideology. Will South Africa’s plans be implemented via the market or by the developmental state? To my mind we’ll be on the right track with a pragmatic mixed-economy approach. This will only work if there is a working relationship between government, business, labour and civil society. This requires reforms in taking decisions, mobilising talent and building trust. What if leadership matters?
As a typical economist I am weary of the idea that leadership can make a difference. I don’t think that anyone wants more speeches or big men. But leadership can be linked to ideas about institutions. We will need inclusive institutions / leaders to implement the NDP. It will require trust amongst the social partners. This would mean less vilifying of “extractive” capitalists by government, and less vilifying of corrupt politicians officials by capitalists. There are clear problems on both sides, but the need to work together is greater. Building confidence in a mixed economy approach means that talking about nationalisation and land reform should be akin to hate speech. How can partners build the economy together when one is opposed to the existence of the other? Trust should be a key part of wage negotiations and of new policy plans, such as a youth wage subsidy. Inclusive institutions / leaders will also require gestures. President Zuma called on CEOs and executives to freeze their salaries and bonuses as a gesture in the bid to address inequality, but this rings hollow if he has already received his increase and there are many questions about the spending at Nkandla.
To address the challenges facing South Africa will require more than “just” good plans and honest civil servants. We are beyond that point. It will require everyone working together and making some sacrifices. The spirit of the Mandela presidency and the World Cup 2010 showed that it is possible. So. when asking about the long-run path of growth and development we should ask whether the current president and the nature of the alliance between the ANC, Cosatu and SACP allow for inclusive institutions.