including taking high-value, high-labour-intensive horticulture to under-developed rural areas, could boost job creation – but not by the one million or so mentioned in the NDP. He also thinks tourism could be another big job creator.
Free Market Foundation Executive Director Leon Louw blames government intervention in the economy for the mess and warns: “Lower corruption rates and better-run SOEs don’t, around the world, predict prosperity or growth.” He also believes that the introduction of the new “Twin Peaks” financial regulations will stifle growth in the financial sector.
Rather, he calls for every black South African who occupies land to be given a title deed. This would affect “between five and 10 million households, worth something like a few hundred thousand rands’ worth of wealth each, and would inject about R1 trillion into the economy at no cost.” Louw adds: ‘[This] would end the legacy of apartheid and be… spectacularly effective.”
Keynes to the rescue
to eliminate all counter-productive ideology in the system – something we’ve yet to do.”
Most importantly, says Davies, SOEs need to be reformed, including privatisation: “You want radical economic transformation? I’ll give you radical – privatise the whole lot!”
He agrees with the contention that any kind of future growth needs to be “inclusive” – in other words, it must bring into the equation the millions of unemployed (mainly black) South Africans who have to endure unacceptable levels of poverty.
Davies’ solution to this conundrum is complex: “We have such a high Gini co-efficient in South Africa, such high inequality in society, that it sometimes results in bad policy. The state often feels the need to do more and more to try to intervene in the economy in order to better manage and, ultimately, reduce inequality. But that’s why I say inequality sometimes results in bad policy. The state shouldn’t be doing more and more; it often needs to do less and less – but it’s very difficult for states to do less and less, particularly when the social and political imperative is so high.”
Ocran worries about the high levels of concentration in the economy, meaning that each sector is dominated by a small number of very large, powerful players. He wants the Competition Commission “to find a way to create some space so that you can have new entrants… having many players in the business place can be beneficial, and… can also contribute to growth and job creation.”
Sihlobo believes that some of the recommendations of the National Development Plan (NDP),
Wits University political economy professor Patrick Bond points to a direct correlation between South Africa’s credit rating and the commodity price index. “It’s a one-on-one correlation. We get ups and downs in GDP because of our reliance on commodity exports.” He is also of the view that the very exports themselves are depleting South Africa’s natural capital – “as if we’re selling off the family silver”. He refers to a recent World Bank report which says that “88% of Africa is a net loser when you account for natural capital depletion”.
His solution for South Africa draws directly on 1930s work by economist John Maynard Keynes. According to Bond, Keynes “had a strategy to save capitalism from its own worst instincts” and cites his celebrated essay, National Self-Sufficiency (Yale Review, 1933): “I sympathise with those who would minimise, rather than with those who would maximise, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible and, above all, let finance be primarily national.”
Globalisation of people and ideas, but de- globalisation of goods and money, in other words. This already appears to be happening, one of the “strange creatures” referred to above.
Bond believes South Africa should re-impose exchange controls, lower interest rates, control illicit capital flows and audit so-called “odious debt” – ie debt taken on by a dictator to oppress the population, or – in South Africa’s case – debt taken on in highly corrupt and Gupta-related circumstances, like the US$3.75 billion loan from the World Bank for the Medupi power station, or
the US$5 billion from the China Development Bank to buy several hundred dodgy locomotives.
Bond also recommends an industrial policy aimed at import substitution, sectoral re-balancing and an increase in state social spending, which would be paid for by higher corporate taxes, cross- subsidisation and more domestic borrowing. Note that Bond is quick to stress the word “domestic” before “borrowing”; he is appalled at the levels of foreign debt. Infrastructure spending should be re-orientated away from mega projects and directed towards unmet basic needs such as sanitation, public transport, clinics, schools, recreational facilities and the Internet.
Bond’s final points: South Africa needs to adopt the “Million Climate Jobs” strategy to generate employment, along with a generous minimum wage.
Investors, land and the future
Most of the experts were unanimous: the ANC’s new commitment to land expropriation without compensation is a potentially large stumbling block for future investment.
“If it gets to happen, it will hinder growth… if there’s no growth, there’s no investment. But if it’s addressed properly and we continue with land reform in a sustainable way that’s well understood by everyone, then… we’ll be able to do well,” says Sihlobo.
“Countries recover from crisis by spending wisely, managing debt and having policies which are pro-business and market- liberal.”
16 An Absa Investment publication
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