tag:theconversation.com,2011:/us/topics/economic-transformation-22100/articlesEconomic transformation – The Conversation2022-11-17T14:11:11Ztag:theconversation.com,2011:article/1942962022-11-17T14:11:11Z2022-11-17T14:11:11ZSouth Africa needs strategic leadership to weather its storms. Its presidents have not been up to the task<figure><img src="https://images.theconversation.com/files/495594/original/file-20221116-22-xqzgnr.jpg?ixlib=rb-1.1.0&rect=8%2C37%2C1778%2C1197&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's democratic era presidents, Nelson Mandela, Thabo Mbeki, Kgalema Motlanthe, Jacob Zuma and Cyril Ramaphosa.</span> <span class="attribution"><span class="source">Penguin Random House South Africa</span></span></figcaption></figure><p>South Africa is in a state of crisis. Its current reality is necessarily shaped by historical events, not least the outcomes of the political settlement process that led to the end of apartheid <a href="https://www.britannica.com/question/How-did-apartheid-end">in 1994</a>.</p>
<p>Unlike other countries in southern Africa, where political independence came after gruesome liberation wars, the leaders of the African National Congress (<a href="https://www.anc1912.org.za/">ANC</a>), which led the liberation struggle and has been the governing party since 1994 – alongside other political and social movements – managed to negotiate a transition to democracy. There were many “wins”, including assent to the election of a majority-led government and the enactment of policies that would ensure broad-based <a href="http://www.thedtic.gov.za/financial-and-non-financial-support/b-bbee/broad-based-black-economic-empowerment/">economic transformation</a>.</p>
<p>This transition may be seen as a point in history where the nation navigated one of its greatest crises. But its current leadership is confronted with multiple challenges. These range from <a href="https://databankfiles.worldbank.org/data/download/poverty/33EF03BB-9722-4AE2-ABC7-AA2972D68AFE/Global_POVEQ_ZAF.pdf">extreme poverty</a> and high <a href="https://www.statssa.gov.za/publications/P0211/Media%20release%20QLFS%20Q2%202022.pdf">unemployment</a> to the severe undermining of democratic institutions by <a href="https://www.statecapture.org.za/">corruption and state capture</a>. </p>
<p>These “wicked problems” are so difficult and complex that there is no single, silver-bullet answer. There is only a range of clumsy solutions, all of which are imperfect. The policy-making puzzle, therefore, is as much about recognising the nature of the problem as seeking to mitigate risks. </p>
<p>Our new <a href="https://www.penguinrandomhouse.co.za/book/presidents-mandela-ramaphosa-leadership-age-crisis/9781776095940">book</a>, The Presidents: From Mandela to Ramaphosa, Leadership in an Age of Crisis, assessed the leadership of South Africa’s five post-apartheid presidents – <a href="https://www.eisa.org/wep/souoverview8.htm">Nelson Mandela</a>, <a href="https://www.thepresidency.gov.za/profiles/former-president-thabo-mvuyelwa-mbeki">Thabo Mbeki</a>, <a href="https://www.thepresidency.gov.za/node/111">Kgalema Motlanthe</a>, <a href="https://www.thepresidency.gov.za/profiles/president-jacob-zuma-0">Jacob Zuma</a> and <a href="https://www.thepresidency.gov.za/profiles/president-cyril-ramaphosa%3A-profile">Cyril Ramaphosa</a>. We wanted to see what lessons can be learned, especially in relation to their strategic abilities. Strategy is one of the critical leadership attributes necessary to cope with the strong headwinds that leaders often encounter.</p>
<p>We concluded that there has been a shortage of truly strategic leadership in South Africa in this period, with a few exceptions. Thus, the country has been unable to grapple with the underlying structural problems that are the fundamental cause of its socio-economic precarity. </p>
<h2>Strategic thinking</h2>
<p>What do we mean by “strategy”? Here we defer to former UK member of parliament and now (UK) Times columnist <a href="https://www.thetimes.co.uk/profile/matthew-parris?page=1">Matthew Parris</a>. He says,</p>
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<p>although the meaning has become diluted through promiscuous and often inappropriate use … strategy remains the best word we have for expressing attempts to think about actions in advance, in the light of our goals and capacities.</p>
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<p>Many leaders, governments and organisations confuse planning with strategy. So this is an apt consideration to keep in mind: have South Africa’s post-1994 presidents addressed the fundamental question of what is wrong with the society and its economy, in a strategic way? </p>
<p>Here’s how the country’s five post-apartheid presidents have fared on strategy.</p>
<h2>Five different styles</h2>
<p>Mandela, the first president of a democratic South Africa, made big strategic choices – not necessarily the right ones, but certainly ones that were befitting of the times. </p>
<p>A primary strategy choice faced Mandela at the very advent of the democratic era. He opted for national reconciliation as his political motif. It was strategic in the sense that the alternative was to drive a strong transformational agenda without seeking to get the powerful and privileged white minority on board. </p>
<p>Crudely put, he could have opted for redemption and even revenge, rather than reconciliation. </p>
<p>This was accompanied by a deep personal commitment to the rule of law and constitutionalism. He used his presidential power to drive that message and execute that strategy, leaving the detail of management of policy and government to his number two, Thabo Mbeki.</p>
<p>The transition from his government’s Reconstruction and Development Programme (<a href="https://www.gov.za/faq/finance-business/where-do-i-get-copy-reconstruction-and-development-programme-rdp">RDP</a>) to the Growth, Employment and Redistribution (<a href="https://www.gov.za/documents/growth-employment-and-redistribution-macroeconomic-strategy-south-africa-gear">GEAR</a>) macroeconomic strategy is another debatable case in point. </p>
<p>The RDP was the ANC government-in-waiting’s flagship programme for socio-economic transformation. It was an essentially Keynesian public investment-focused plan for improving public services such as housing, healthcare and electricity to the black majority. The shift to GEAR was deeply contested. Left-of-centre commentators and players within the broader ANC-led alliance saw it as a neo-liberal approach to fiscal and monetary policy that would constrain the government’s ability to drive redistribution of wealth and opportunity. </p>
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<p>When his turn came as president (1999-2008), Mbeki strove to step up to the strategic standards that Mandela had set. His <a href="https://theconversation.com/mbekis-dream-of-africas-renaissance-belied-south-africas-schizophrenia-58311">vision for Africa</a>, in which Africans would take control of their destiny, was strategic. So was his determination to confront the <a href="http://www.dirco.gov.za/docs/speeches/1998/mbek0529.htm">“two nations”</a> problem – one prosperous and white, the other poor and black. </p>
<p>The shift to GEAR was executed with strategic purpose and an iron fist. There were negative consequences, especially in the long term. But few, if any, big strategic choices can be win-win; there will invariably be a downside. The question is whether the leader understands and then confronts the dilemma, and in doing so can articulate the upside and recognise its intrinsic value, one that justifies the downside. </p>
<p>Mbeki was a flawed visionary. His legacy is scarred by his inexplicable <a href="https://theconversation.com/how-mbekis-character-and-his-aids-denialism-are-intimately-linked-54766">lack of judgment on HIV/AIDS</a>, and his stubborn refusal to accept that his government should provide antiretroviral treatment. </p>
<p>Motlanthe, who succeeded him, in his modest way, also recognised the strategic imperative of his short, caretaker time as president – (<a href="https://www.thepresidency.gov.za/profiles/former-president-kgalema-motlanthe">25 September 2008 to 9 May 2009</a>): to consolidate authority in democratic government and to stabilise an unstable body politic in the context of the palace coup that had taken place within the ANC. </p>
<p>Even Zuma, his successor, in his own mendacious and deviously self-serving way, had strategic intent: to <a href="https://www.statecapture.org.za/">capture the state</a> for venal personal gain. He executed it with a ruthless sense of purpose.</p>
<p>Current president Cyril Ramaphosa appears to be the least strategic of them all. His failure to grasp the strategic nettles inhibits his presidency. On issues such as the transition away from coal, the government stake in state-owned enterprises or the need for a basic income grant, Ramaphosa has dithered, seeking to wait until sufficient consensus has formed or putting in place cumbersome consultation processes, before reaching a clear decision. </p>
<p>He gets things done; he gets there in the end, but his design and use of process is that of a master tactician, not a strategist. He has not risen to the leadership heights required by the gravity of the historical moment. This requires leadership that would unshackle government from the congealing embrace of the ruling ANC and its fractious factions. A leader who would rise above the daily throng to inspire ordinary citizens with a compelling narrative of hope and change, underpinned by iron determination to take brave decisions and to execute them with a sense of purpose and urgent expedition. </p>
<h2>Circling the problem</h2>
<p>The crises that confronted these five presidents have been very different, with varying levels of intensity and composition. Each has faced big challenges, that could inevitably not be resolved only by their executive office. Undoubtedly, part of strategic and visionary leadership is the ability to identify existing and potential allies who are willing to invest what is required to drive a transformative agenda. </p>
<p>All have responded to “what went wrong”. But, because of limitations to their strategic leadership, none has fully met the challenge of confronting “what is wrong” head-on. Their ability to address the question of “what is wrong” has been constrained by the very real demands to put out fires, and keeping the boat afloat without an eye on the navigation system. And where they have focused on navigating the rough seas to get to the destination of a more equal, inclusive South Africa, the vessels of governance with a mandate to steward these transitions have not always delivered.</p>
<p>Mandela, Mbeki and now Ramaphosa have circled the problem (while Zuma weakened the state’s capability). But perhaps because it is such a wicked problem, and the structural difficulties run so deep, they have failed to define a strategic course that would confront the underlying structural conditions, consigning South Africa to an uncertain and worrisome future. </p>
<p><em>This is an edited extract from the authors’ <a href="https://www.penguinrandomhouse.co.za/book/presidents-mandela-ramaphosa-leadership-age-crisis/9781776095940">new book</a> The Presidents: From Mandela to Ramaphosa, Leadership in an Age of Crisis</em>.</p><img src="https://counter.theconversation.com/content/194296/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is employed by the University of Cape Town, is a Fellow of the University of Cambridge Institute for Sustainability Leadership, is a partner of political risk consultancy The Paternoster Group, and serves as a member of the Advisory Council for the Advancement of the South African Constitution (CASAC).
</span></em></p><p class="fine-print"><em><span>Mabel Dzinouya Sithole is employed by the University of Cape Town, contributes regularly to policy advocacy with the Southern African Liaison Office, and other civil society organisations in the region. She advises organisations such as the Ford Foundation on the design of leadership development programmes in Africa and across the globe. </span></em></p>Mandela, the first president of a democratic South Africa, made big strategic choices – not necessarily the right ones, but certainly ones that were befitting of the times.Richard Calland, Associate Professor in Public Law, University of Cape TownMabel Dzinouya Sithole, Programme Officer - Building Bridges, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1285382019-12-10T13:09:02Z2019-12-10T13:09:02ZRandomised trials in economics: what the critics have to say<figure><img src="https://images.theconversation.com/files/306063/original/file-20191210-95173-730nlj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nobel Prize Laureates in Economic Sciences Michael Kremer, Esther Duflo and Abhijit Banerjee.</span> <span class="attribution"><span class="source">Epa/Jonas Ekstromer</span></span></figcaption></figure><p>The 2019 Nobel Prize <a href="https://www.nobelprize.org/prizes/economic-sciences/2019/press-release/">has been awarded</a> to three scholars for pioneering recent attempts to answer microeconomic issues in development using randomised experiments. </p>
<p>Over the last three decades randomised trials have become an increasingly popular way of testing interventions designed to address developmental challenges. </p>
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Read more:
<a href="https://theconversation.com/how-randomised-trials-became-big-in-development-economics-128398">How randomised trials became big in development economics</a>
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<p>But they are controversial. A range of scholars <a href="https://www.sciencedirect.com/science/article/pii/S0277953617307359">have criticised</a> the use of the approach in development research. Criticism has touched on <a href="https://www.cgdev.org/sites/default/files/should-randomistas-continue-rule.pdf">a number of dimensions</a>. These include questions of <a href="https://academic.oup.com/aepp/article/32/4/515/8078">ethics</a>, <a href="http://www.opensaldru.uct.ac.za/handle/11090/691">methodological limitations</a> and the danger that policy efforts get <a href="http://bostonreview.net/world-books-ideas/pranab-bardhan-little-big">reoriented to small interventions</a>. There is also no evidence that the approach leads to better development outcomes.</p>
<p>Academic work we have been involved in has pointed to problems of <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X19304541">informed consent</a> and the dangers of a <a href="https://www.tandfonline.com/doi/full/10.1080/02589001.2019.1579893">conflict of interest</a> in experiments with high political and economic stakes. And shown that there are <a href="https://academic.oup.com/wber/article/29/suppl_1/S217/1689262">fundamental methodological contradictions</a> at the heart of the emphasis on randomised trials for policy.</p>
<h2>Methodological problems</h2>
<p>The <a href="https://www.annualreviews.org/doi/abs/10.1146/annurev.economics.050708.143235">argument for using randomised experiments</a> is that they provide reliable estimates of the causal effects of potential policy interventions. And that they are therefore also the <a href="https://www.aeaweb.org/articles?id=10.1257/jel.48.2.399">best source of evidence for policy</a>. </p>
<p>But scholars in economics have objected to both of these claims. These criticisms date back to <a href="https://www.aeaweb.org/articles?id=10.1257/jep.9.2.85">the mid-1990s</a>.</p>
<p>First, to the experiments. An <a href="https://www.aeaweb.org/articles?id=10.1257/jep.9.2.85">important criticism</a> is that setting up an intervention can itself affect the outcome. For example, individual behaviour can affect who participates in an experiment. It can also affect the way participants and non-participants react to the intervention.</p>
<p>Take an experiment where randomly selected school children are given extra tuition. One consequence could be that parents of non-selected students will compensate by paying for tutoring. Or they could spend more time helping with homework. For their part, parents of selected students might reduce such efforts. </p>
<p>In situations like this the idea of establishing a simple causal effect <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0262.2005.00594.x">has been shown</a> to be highly questionable. </p>
<p>In addition, most experiments only allow researchers to calculate average effects across groups. But for policy purposes, it is often necessary to have a sense of how interventions affect different people. </p>
<p>Linked to this is the fact that the actual effect of an intervention could change substantially (for better or worse) when it’s implemented <a href="https://www.researchgate.net/publication/313471689_Micro_Experiments_and_Macro_Effects">at scale</a>. </p>
<p>Experiments are usually implemented by research teams or their non-governmental organisation partner. But scaled-up policies are implemented by governments. This introduces a further set of dynamics that <a href="https://www.theigc.org/wp-content/uploads/2014/10/Bold-Et-Al-2012-Policy-Brief1.pdf">can affect</a> implementation. </p>
<p>Perhaps the <a href="https://academic.oup.com/wber/article/29/suppl_1/S217/1689262">biggest problem</a> is that there are many other factors that can affect the outcomes of interventions: researchers often do not know what these are and do not measure them. So deciding in advance whether an intervention that seemed to have positive outcomes in one place <a href="https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(11)60563-1/fulltext">will do the same elsewhere</a> becomes a matter of guesswork. </p>
<p>This undermines <a href="http://bostonreview.net/archives/BR31.4/banerjee.php">claims</a> by proponents of these methods that randomised experiments lead to more ‘rigorous’ policy decisions than other approaches.</p>
<h2>Ethical problems</h2>
<p>Among the ethical problems, one concern is that social experiments in developing countries face serious problems of informed consent. Many experiments randomly allocate interventions to entire clusters, such as schools or hospitals, which makes it <a href="https://jme.bmj.com/content/44/2/114">very difficult</a> for participants to opt out. </p>
<p>And most experiments also involve people who are very poor. They are more likely to be unable to make meaningful choices about participating, particularly if it’s in exchange for desperately needed income or services.</p>
<p>The lack of informed consent also increases the risk of unintentional harm. If participants are aware that they are in an experiment, then they can alert experimenters to unintended negative consequences. This is important when experiments allocate critical resources, such as income or healthcare, to impoverished people. Withholding or providing resources to particular groups can harm vulnerable groups or lead to contestations that are <a href="https://www.jstor.org/stable/20799152?seq=1#metadata_info_tab_contents">socially destabilising</a>. </p>
<p>These and other ethical concerns have prompted one respected economist to call for a <a href="https://www.theindiaforum.in/article/indecent-proposals-economics">moratorium</a> on social experiments until effective ethical safeguards are put in place.</p>
<h2>A distraction</h2>
<p>The pioneers of development economics understood development to mean fundamental transformation at the societal level. This required going beyond marginal improvements to the status quo. In this conception, development was largely the outcome of sustainable increases in income levels in society. Through the detailed study of the history of the now developed countries, the <a href="https://www.jstor.org/stable/1823540?seq=1#metadata_info_tab_contents">pioneers concluded that such transformation was the result of industrialisation</a>. </p>
<p>A body of research over the last 20 to 30 years also points to the primacy of industrialisation in the <a href="https://www.press.uchicago.edu/ucp/books/book/distributed/E/bo20848837.html">East Asian</a> and <a href="https://www.amazon.com/Making-Economic-Superpower-Unlocking-Industrialization/dp/9814733725">Chinese</a> development ‘miracles’.</p>
<p>The experimental turn in development economics has unfortunately <a href="https://wiser.wits.ac.za/system/files/seminar/Chelwa2017.pdf">distracted research and policy work from such age-old priorities of development</a>. And in any case, some of the favoured micro-interventions of the new development economists (pricing of mosquito nets, provision of school flip charts, and so forth) would be outcomes – rather than causes – of transformative development. </p>
<p>Angus Deaton, the <a href="https://www.nobelprize.org/prizes/economic-sciences/2015/deaton/facts/">2015 economics Nobel Laureate</a>, has <a href="https://press.princeton.edu/books/hardcover/9780691153544/the-great-escape">argued</a> that in the case of Britain spectacular improvements in well-being in the late 18th and early 19th centuries followed on the heels of increases in the general level of incomes in the economy. Increased societal incomes allowed British society to marshal the resources needed to invest in, for example, large scale public sanitation infrastructure. </p>
<p>The proponents of randomised experiments in development are, therefore, arguably guilty of putting the cart before the horse.</p>
<p>A final critical concern is that there is no historical evidence to support the claim, repeated in <a href="https://www.nobelprize.org/prizes/economic-sciences/2019/advanced-information/">this year’s economics Nobel award</a>, that the experimental approach to development policy actually yields faster growth or development. </p>
<p>Many countries have grown their economies and developed in various ways without policy decisions being reliant on, or prioritising, randomised experiments. </p>
<p>As we have noted, such experiments only address a limited set of possible development mechanisms that are susceptible to randomised experiments and coincide with researchers’ own pre-existing views. For example, teacher absenteeism is reduced to a crude question of incentives, rather than a set of complex systemic factors, and <a href="https://www.povertyactionlab.org/evaluation/encouraging-teacher-attendance-through-monitoring-cameras-rural-udaipur-india">made the subject of an experiment</a> where attendance is monitored. And these experiments rarely have any basis, either <a href="https://academic.oup.com/wber/article/29/suppl_1/S217/1689262">in theory</a> or <a href="https://www.sciencedirect.com/science/article/abs/pii/S0165176516303068">in practice</a>, for being scaled up or applied in other contexts. </p>
<p>One area of particular concern, which has been the subject of much of the work by the Nobel awardees, is education. Our previous and forthcoming work raises numerous concerns with education experiments. The methodological basis for claiming policy relevance of even popular experiments like randomising school class size <a href="https://open.uct.ac.za/handle/11427/13324">is deeply suspect</a>. Some such experiments have been found to be <a href="https://www.tandfonline.com/doi/full/10.1080/02589001.2019.1579893">illegal and unconstitutional</a> And a <a href="https://www.youtube.com/watch?v=ok0s5uzRN5s">trickle down effect</a> of this approach to local research has been to <a href="http://resep.sun.ac.za/wp-content/uploads/2016/05/PSPPD_BICiE-email.pdf">ignore or deny</a> the role played by <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/saje.12227">insufficient aggregate public resources for education</a>.</p>
<p>Given all these factors, we suggest that instead of advancing development and poverty reduction, the approach advocated by this year’s economics Nobel winners could actually hold back progress in developing countries.</p><img src="https://counter.theconversation.com/content/128538/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller receives funding from a European Union-funded project, "Putting People back in Parliament", led by the Dullah Omar Institute (University of the Western Cape), in collaboration with the Parliamentary Monitoring Group, Public Service Accountability Monitor (Rhodes) and Heinrich Boell Foundation (South Africa). He is affiliated with the Public and Environmental Economics Research Centre (University of Johannesburg), regularly making inputs to Parliament oversight of the national budget, advising civil society groups on public finance matters and consulting for private sector organisations on an ad hoc basis. He resigned from the South African Parliamentary Budget Office in 2016. The views expressed are his own.</span></em></p><p class="fine-print"><em><span>Grieve Chelwa has received funding from the DG Murray Trust for work on the economics of alcohol consumption in South Africa. He has also received funding from the Bill and Melinda Gates Foundation, the American Cancer Society and the International Development Research Center (IDRC) for work on the economics of tobacco control on the African continent. And lastly, he's received funding from the International Growth Center at LSE and the Volkswagen Foundation for his work on the economics of education in Zambia.</span></em></p><p class="fine-print"><em><span>Nimi Hoffmann has received funding from the South African Department of Basic Education to help conduct a nationally representative survey of teachers. She has also received funding from the European Commission to conduct a tracer study of schools for children displaced by conflict and climate collapse in Somalia and Ethiopia. She is a lecturer at the Centre for International Education at the University of Sussex and a research fellow at the Centre for International Education, Cape Peninsula University of Technology.</span></em></p>Randomised trials in development have attracted criticiism over ethical issues and questions about being effective for policy.Seán Mfundza Muller, Senior Lecturer in Economics, Research Associate at the Public and Environmental Economics Research Centre (PEERC) and Visiting Fellow at the Johannesburg Institute of Advanced Study (JIAS), University of JohannesburgGrieve Chelwa, Senior Lecturer -- Economics, University of Cape TownNimi Hoffmann, Lecturer in International Education, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/923652018-03-13T16:39:11Z2018-03-13T16:39:11ZSouth Africa’s economy is badly skewed to the big guys: how it can be changed<figure><img src="https://images.theconversation.com/files/209512/original/file-20180308-30972-1m5arf8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Shutterstock</span> </figcaption></figure><p>The South African economy looks uncomfortably <a href="https://theconversation.com/why-the-dominance-of-big-players-is-bad-for-south-africas-economy-92058">the same</a> to the one inherited when the country transitioned from apartheid to democracy in 1994. Which is why it’s time for a robust economic policy agenda to make it more open, productive and inclusive.</p>
<p>A number of obstacles stand in the way. These include the continued bias towards activities with relatively low productivity, high levels of concentration in key sectors and a lack of diversity in ownership. </p>
<p>Competition policy is a critical part of efforts to change the structure of the economy. But addressing entrenched economic power requires a much wider package of measures.</p>
<p>International experience shows that countries develop by moving towards more diverse, higher value-added and more sophisticated products, a process referred to as structural transformation. There is still no sign that this is happening in South Africa.</p>
<p>In-fact, <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/597f6189a803bbd42418effe/1501520268712/CCRED+IDRP+Policy+Brief_Metals+Machinery++Equipment+Sector+310717.pdf">research</a> conducted by the Industrial Development Think Tank has found that South Africa regressed between 1994 and 2016. The economy has become less diverse and it’s failed to use existing capabilities to produce new products. </p>
<p>Take the country’s export basket. It continues to be dominated by minerals and resource based industries, which represent <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/5a9e4ece652dea3162be0aa6/1520324306895/Policy+Brief+3.pdf">60%</a> of total merchandise exports. This is at the expense of increased competitiveness in industries which create more jobs such as plastic products which range from simple lunch boxes to complex automotive components. </p>
<p>The composition of the export basket also <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/5a9e4ece652dea3162be0aa6/1520324306895/Policy+Brief+3.pdf">compares poorly</a> to other upper middle-income countries. For example, in 2016 high-technology exports accounted for only 6% of South Africa’s manufacturing exports compared to Thailand’s 21% and Malaysia’s 43%.</p>
<p>If South Africa continues on this path, it will struggle to create employment at the scale that is required. The majority of its population will continue to be excluded and the social fabric will continue to unravel.</p>
<h2>Market concentration</h2>
<p>High levels of market concentration coupled with barriers to entry are a big part of the problem. South Africa needs to allow for economic rivalry. Its known that rivals bring new products and business models, and spur incumbents to invest in improving their own offerings.</p>
<p>A recent <a href="https://juta.co.za/media/filestore/2017/12/Draft_Competition_Amendment_Bill_2017.pdf">study</a> of merger reports by the Competition Commission found that there was unilateral dominance – where a single firm has a market share in excess of 45% – in a large number of markets. This included communication technologies, energy, financial services, food and agro-processing, infrastructure and construction, industrial input products mining, pharmaceuticals and transport.</p>
<p>These sectors cover most of the economy. They are central to economic growth and to consumers’ pockets. </p>
<p>And the situation seems to be getting worse. Statistics South Africa <a href="http://www.statssa.gov.za/publications/Report-30-02-03/Report-30-02-032014.pdf">data</a> show concentration levels in manufacturing has intensified: in 80 sub-sectors, the proportion in which the biggest five firms held over 70% of market share increased from 16 in 2008 to 22 in 2014.</p>
<h2>Concentration is bad</h2>
<p>Economic concentration opens the door to market power being exercised in a way that undermines productivity. This can be seen, for instance, in value chains where downstream players have to pay high prices for inputs, with dire consequences for their competitiveness. </p>
<p>The knock on effect is that economic growth slows down and employment creation is affected if downstream industries are labour absorbing.</p>
<p>Such skewed economic power also translates into political power where dominant companies use their resources to lobby for ‘rules of the game’ that favour them. Some examples include:</p>
<ul>
<li><p>Telkom, a partially state owned telecommunication company, has for a long time persuaded policymakers, in the name of extending access, to support its position in the <a href="http://www.engineeringnews.co.za/article/telkom-monopoly-a-threat-to-ict-development-2012-08-15">fixed-line monopoly</a>. </p></li>
<li><p>There’s been similar strong lobbying in <a href="https://mybroadband.co.za/news/broadcasting/240772-its-all-about-multichoice-protecting-its-dstv-monopoly-former-minister.html">pay TV</a> to secure rules that hinder potential rivals. </p></li>
<li><p>In beer distribution and retail, Anheuser-Busch InBev spent millions of dollars <a href="https://www.opensecrets.org/news/2015/10/anheuser-busch-inbevs-aquisition-of-sabmiller-would-brew-a-strong-lobbying-combination/">lobbying</a> against conditions that would have restricted its operations .</p></li>
</ul>
<p>The other area that has felt the effect of big player dictating the rules of the game has been in the <a href="https://theconversation.com/white-people-in-south-africa-still-hold-the-lions-share-of-all-forms-of-capital-75510">slow progress</a> when it comes to meaningful black economic empowerment. Economic transformation initiatives have tended to reinforce incumbents as gate keepers in exchange for minority shareholdings.</p>
<h2>Broader agenda needed</h2>
<p>A lack of progress towards increased participation is one of the justifications for <a href="http://www.polity.org.za/article/south-africa-releases-competition-amendment-bill-2017-12-05">amendments</a> to the country’s Competition Act. The Competition Amendment Bill is an important step in addressing concentration and increased participation. But it needs to be part of a broader competition policy agenda. </p>
<p>South Africa also needs to introduce a range of complementary policies. Three key areas in particular need to be addressed:</p>
<p><strong>Promote new entrants:</strong> Economic regulations must be changed to favour entrants and ensure incumbents can be effectively challenged. This includes regulations to allow access to essential infrastructure. For example, in telecommunications, spectrum must be allocated to foster greater rivalry. Measures can also include soft regulation such as codes of conduct for supermarket chains to promote access to markets by suppliers and small retailers.</p>
<p><strong>Enforcement:</strong> The country needs more effective enforcement against anticompetitive conduct that excludes smaller rivals. The Competition Amendment Bill goes some way to deal with this. It emphasises the competitive process and in important areas gives weight to the ability of smaller participants and black industrialists to enter markets and grow.</p>
<p><strong>Support rivals:</strong> This can be done by expanding development finance for entrants. Funds could be drawn from competition penalties. Development finance should also consider extending support across the different levels of the value chain. An example is the funding that the Industrial Development Corporation has given to new entrants in the agro-processing value chain from the fund created from the bread <a href="http://www.compcom.co.za/wp-content/uploads/2016/11/CC201602-Mandiriza-T-Sithebe-T-and-Viljoen-M-2016-The-impact-of-the-agro-processing-competitiveness-fund-in-facilitating-entry-into-selected-agro-processing-se.pdf">cartel fines.</a></p>
<p>Talk of economic transformation needs to be backed by a coherent economic strategy that moves the country away from a concentrated, exclusionary, low productivity economy into an open, fair economy for all.</p>
<p><em>Pamela Mondliwa, a researcher at the Centre for Competition, Regulation and Economic Development at UJ, coauthored this article.</em></p><img src="https://counter.theconversation.com/content/92365/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Roberts has received research funding from SA Department of Trade and Industry, Competition Commission SA and National Treasury of SA. </span></em></p>South Africa needs a robust economic policy agenda to make it more open, productive and inclusive.Simon Roberts, Professor of Economics and Director of the Centre for Competition, Regulation and Economic Development, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/750042017-03-23T15:03:30Z2017-03-23T15:03:30ZThe ANC isn’t ready to radically transform the South African economy<figure><img src="https://images.theconversation.com/files/162158/original/image-20170323-3542-dmfi18.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's economy was built on strong mining activity which has declined in recent years.</span> <span class="attribution"><span class="source">REUTERS/Siphiwe Sibeko</span></span></figcaption></figure><p>There’s nothing radical about trying to fix what doesn’t work by making it work better, which is why the <a href="http://www.anc.org.za/sites/default/files/National%20Policy%20Conference%202017%20Economic%20Transformation_1.pdf">economic transformation</a> discussion document released by South Africa’s governing party, the African National Congress (ANC), is not really radical. </p>
<p>The document is also unlikely to renew the economy, ensure that more people are included and create conditions for sustained growth.</p>
<p>It was released recently as part of the ANC’s preparation for its conference at the end of this year. They’re always preceded by a mid-year policy conference, which is meant to agree on resolutions to be put to the conference. </p>
<p>It’s ANC practice to release policy discussion documents in preparation for these meetings – hence the economic document. The party’s leaders point out that it doesn’t express ANC policy since delegates at the conferences could reject it. But it does give an important sense of the thinking of the party’s economic policy strategists.</p>
<p>In keeping with the current ANC rhetoric, the document stresses the need for <a href="https://theconversation.com/the-odd-meaning-of-radical-economic-transformation-in-south-africa-73003">“radical economic transformation”</a>. It says proposals for change should be judged by whether they</p>
<blockquote>
<p>radically and systematically improve the lives of those who are excluded and marginalised.</p>
</blockquote>
<p>The document is filled with good intentions and worthy ideas. But it fails the test.</p>
<h2>More of the same</h2>
<p>The problem is that it ignores calls to seize land or rein in ‘white monopoly capital’ - the themes of today’s “radical” rhetoric. These demands are either ploys by patronage politician’s eager to get hold of resources or slogans pretending to be concrete recipes for change. It’s not radical, nor will it achieve its stated aim, because it doesn’t suggest ways of moving the economy from its current pattern which has produced low growth and continues to exclude millions.</p>
<p>Like both sides in the economic debate, it doesn’t seek a new path which will include millions more. Instead, it keeps alive the forlorn hope that the excluded can be absorbed into an economy built to exclude them.</p>
<p>Perhaps the clearest sign of this is the discussion on employment. The document endorses the <a href="http://www.gov.za/issues/national-development-plan-2030">National Development Plan’s</a> target of shrinking formal unemployment to 6% by 2030. It says this will be achieved by lowering costs, increasing investment and improving energy generation, transport and water supply. </p>
<p>All would no doubt be widely welcomed. But all assume that the current system can be made to work better and so there’s no need to change it.</p>
<h2>Tweaks are not enough</h2>
<p>The specific remedies which the document proposes lack the required innovation too. These include minerals beneficiation, incentives for manufacturing, reducing red tape, more training, more emphasis on research and development. They all assume that the economy needs tweaking, not changing.</p>
<p>Even where it proposes measures which seem more radical – “set asides” for black businesses or speeding up land reform within the confines of the constitution – the document doesn’t challenge the current framework.</p>
<p>And so, despite some rhetoric to the contrary, it doesn’t get to grips with the core reality that the formal economy is still an insider club which excludes millions. It’s <a href="https://theconversation.com/south-africa-must-tackle-dominant-firms-to-achieve-better-wealth-distribution-68759">dominated</a> by too few players engaged in too many cosy networks, many racial patterns persist and potential in the townships and shack settlements is squandered. A core reason is that both the old economic elite and the new political leadership assume that the economy will reach its potential when everyone has what whites had in the 1960s – full employment and a stake in the formal economy.</p>
<p>This ignores two realities. First, the apartheid economy worked for the minority because it excluded most people; it can’t be extended to everyone. A real break with the past would mean negotiating changes which would bring in many new players and dropping the prejudice that wealth can be created only by formal businesses protected by a host of rules. This means accepting that people who make a living outside the formal economy are a potential solution, not a problem, if they receive more support.</p>
<p>Second, the days in which manufacturing and mining could create millions of jobs are gone: the formal jobs the document wants to create are disappearing across the globe. The question is not how to get them back but how to ensure that everyone can make a living without them. </p>
<h2>Ducking the key question</h2>
<p>A sign that the document ignores inclusion is that it has nothing to say about township business besides a throw-away line about reducing costs. So a key question – how to link people in townships and shack settlements into the formal economy – is ducked. This despite the fact that it offers a far more credible way out of poverty than reviving jobs which are gone. </p>
<p>Nor is there anything about how to <a href="http://www.bizcommunity.com/Article/196/608/156277.html">revive mining areas</a> hit by the loss of jobs which will never come back. Or on how to stimulate economic activity for people who 20 years ago would have worked in factory jobs which have gone forever. And so there’s nothing on ensuring that formal business and government strengthen economic activity on the ground rather than snuffing it out.</p>
<p>There isn’t much on the education and training needed to help people adjust to new realities. Or programmes to boost grassroots livelihoods – such as grants and local infrastructure. </p>
<p>Only two proposals address these issues: the document calls for more effective rules to boost competition, and for changes to the settlement patterns in cities, which relegate the poor to the fringes where they are shut out of the mainstream economy. </p>
<p>But neither proposal is fleshed out. It’s therefore fair to question how much of a priority they really are. </p>
<p>The ANC discussion document on economic transformation isn’t radical enough not because it refuses to substitute slogans for thinking. Rather because it doesn’t break with an economic debate which – on the left, right and centre – is about how to keep current patterns alive, not how to change them.</p><img src="https://counter.theconversation.com/content/75004/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The economic transformation discussion document released by South Africa’s governing party, the ANC, fails to be radical.Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/738632017-03-02T14:59:05Z2017-03-02T14:59:05ZSouth Africa can’t save itself just by talking the talk. It must walk the walk<figure><img src="https://images.theconversation.com/files/159098/original/image-20170302-14706-aohek0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Leader of South Africa's opposition parties and civil society took part in an anti-corruption march against the government.</span> <span class="attribution"><span class="source">EPA/KIM LUDBROOK</span></span></figcaption></figure><p>South Africa is fast approaching a crossroads at which it will have to choose between structural reform and a lurch to populist nationalism. So, too, is its governing African National Congress (ANC), which later this year must <a href="http://citizen.co.za/news/news-national/1379943/the-battle-for-the-anc-presidency-heats-up-its-ramaphosa-vs-dlamini-zuma/">elect</a> a successor to its president, Jacob Zuma.</p>
<p>With a range of conflicting ideas on how to address the country’s socio-economic challenges, some people are floating the idea of convening an <a href="http://www.news24.com/Columnists/ClemSunter/time-for-an-economic-codesa-20151217">economic Codesa</a>. This borrows from the Convention for a Democratic South Africa - the all-party <a href="http://www.sahistory.org.za/article/codesa-negotiations">forum</a> which negotiated the country’s transition to democracy in the early 1990’s.</p>
<p>In his <a href="http://www.treasury.gov.za/documents/national%20budget/2017/default.aspx">2017 budget speech</a> South Africa’s Finance Minister, Pravin Gordhan, pulled up short of calling for an ‘economic Codesa’. He invited discussion on whether the constitution’s bill of rights should be extended to include “economic rights”. Such rights may include a right to work, a legally guaranteed national minimum wage or even a right to a basic income.</p>
<p>Taken together with Gordhan’s chilling message about the state of the economy, his invitation for discussion deserves some attention. Unemployment remains stubbornly high around the 35% mark, <a href="https://theconversation.com/south-africa-can-expect-zero-growth-its-problems-are-largely-homemade-62943">economic growth remains</a> sluggish around 1% and the budget deficit is ballooning.</p>
<p>Clearly South Africa’s social compact is at breaking point, evidenced in part by the <a href="http://citizen.co.za/news/news-national/1434631/xenophobic-attacks-hit-pretoria/">xenophobic violence</a> and protests against foreigners that swept through Pretoria and Johannesburg recently. </p>
<p>There’s certainly the need for a conflict breaking dialogue even for sharply differing groups within the governing party, the ANC. A view of what was expressed in the president’s 2017 state of the nation address versus the 2017 budget speech lays bare some of the deep seated <a href="https://theconversation.com/south-africas-budget-some-good-moves-but-not-enough-to-fix-mounting-problems-73529">disagreements</a>.</p>
<h2>Raging populism</h2>
<p>Zuma’s address was peppered with reference to the party’s new slogan: “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>”. Zuma pulled his populist punches but added little flesh to the bones of the slogan, leaving Gordhan to offer a more measured and precise vision of “inclusive growth” two weeks later. </p>
<p>And herein lies the rub, and the predicament. Within the governing party there are those who want a nationalist form of transformation. They are pushing for the continued handing of economic power and wealth to a <a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">small group </a>of black politically connected individuals. They care little if at all for the socio-economic precariousness of the majority of their compatriots.</p>
<p>On the other hand, there are those who are still focused on addressing <a href="https://theconversation.com/south-africa-is-at-an-inflection-point-will-it-resist-or-succumb-to-state-capture-66523">substantive inequality</a>. They include Gordhan, the minister for economic development, Ebrahim Patel, and the minister of trade & industry, Rob Davies.</p>
<p>Coming about two weeks after the state of the nation address, Gordhan’s budget speech wrestled with the dilemmas that face South Africa. He’s been vilified for this amid the ongoing warfare within the governing party. </p>
<p>President of the ANC Youth League, Collen Maine – a Zuma loyalist – labelled Gordhan, a stalwart of the ANC’s liberation movement, an “<a href="https://mybroadband.co.za/vb/showthread.php/874488-Maine-reckless-for-calling-Gordhan-an-impimpi-ANC">impimpi</a>”. This is a highly inflammatory term from the 1980s and the height of the struggle against apartheid used to name and shame community informers paid for by the regime. </p>
<h2>Dangerous path</h2>
<p>Why such a vicious attack against Gordhan? He’s been willing to <a href="https://theconversation.com/high-stakes-drama-as-south-african-president-and-finance-minister-square-off-47698">stare down</a> the nationalists within the ANC, who have benefited from the weaknesses of Zuma’s leadership. They wish to extend the era of crony capitalism and “<a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">state capture</a>” by venal private interests such as the notorious Gupta family that began when Zuma took power in 2009. </p>
<p>Gordhan has noted South Africa’s dangerous political trajectory. He quoted from the ANC’s famous <a href="http://www.sahistory.org.za/archive/strategy-and-tactics-statement-adopted-anc-morogoro-conference-april-may-1969-abridged">1969 policy conference in Morogoro, Tanzania</a> where it was resolved that:</p>
<blockquote>
<p>Our nationalism must not be confused with chauvinism or narrow nationalism of a previous epoch. It must not be confused with the classical drive by an elitist group among the oppressed people to gain ascendancy so that they can replace the oppressor in the exploitation of the masses. </p>
</blockquote>
<p>It was a masterful citation by Gordhan: as he’s done for the past year in his stand against high level corruption that’s contaminated the government with its dangerous lurch to elite nationalism. </p>
<h2>Slow transformation</h2>
<p>While seeing the need for some dialogue I’m of the view that calls for an
“economic Codesa” may be fundamentally misguided. The idea that South Africa can summon the wherewithal, and good faith of all the requisite social, economic and political stakeholders, may be wishful thinking during a bitterly contested succession year in the ANC.</p>
<p>The original Codesa which began in 1991 may have been an inclusive, carefully facilitated and mediated negotiation process. Today there’s a sense that in delivering a political settlement, it didn’t do enough to secure economic justice and transformation. </p>
<p>Too much of the “old economy” – as characterised by the powerful political slogan “<a href="https://theconversation.com/zuma-had-a-chance-to-galvanise-south-africans-he-blew-it-72914">white monopoly capital</a>” – remains intact. This gives credibility to the militant, <a href="http://www.ujuh.co.za/flopping-bbbee-might-propel-radical-alternatives/">anti-establishment political brands</a> like the Economic Freedom Fighters. The rise of the EFF, in turn, has triggered the ANC’s call for ‘radical economic transformation’ to regain lost ground.</p>
<p><a href="https://theconversation.com/why-julius-malemas-eff-doesnt-offer-south-africans-a-way-out-of-poverty-59267">Julius Malema</a>, the former ANC Youth League president who started the EFF, presumably, would welcome the opportunity to advance the case for redistribution of land ownership alongside other structural reforms of the South African economy. But who else would join the dialogue and from what angle? </p>
<h2>Constitutional rights</h2>
<p>Gordhan’s talk of economic rights may be seen as one useful avenue. But then South Africa’s constitution already provides a far reaching number of justiciable socio-economic rights. These include the rights to access basic services like housing and education. And so, the question would be: what more can be added to economic rights? </p>
<p>A debate about amending the constitution would arguably be meaningless without a parallel process of debate about economic policy and about the relative roles and responsibilities of labour, government and the private sectors. At a very minimum, such a process would need to surface the true concerns and interests of all the parties. It would need to identify the core non-negotiables of each, while ascertaining those areas where compromise and a shift in position would be possible and valuable.</p>
<p>And are the labour unions willing to sacrifice some of the legal protections that they acquired in the mid-1990s in return for commitments from business that would create, for example, more youth employment and apprenticeships? </p>
<p>In turn, would business be willing to sacrifice profits in return for concessions from labour and government that would enable them to attract larger long-term investments in the productive industrial sector? </p>
<p>And what’s the solution to the painful shortage of skills and the disaster of public education and what do each of the three main players need to do differently to make substantial progress, and quickly? </p>
<h2>Political will</h2>
<p>A properly organised process of constructive engagement and dialogue such as Codesa requires a considerable investment in political capital and goodwill. It’s far from clear if a sufficient number of the key political players are willing to find it. </p>
<p>But it’s surely worth trying. South Africa has probably very little to lose at this stage. Without such a consensus finding process that confronts the fundamental contradictions and the unanswered questions of socio-economic transformation, the clamour for populist nationalism is likely to grow rapidly to the point where it’s overwhelming, in every sense of the word.</p><img src="https://counter.theconversation.com/content/73863/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is affiliated with the Council for the Advancement of the South African Constitution, the Open Democracy Advice Centre and The Paternoster Group.</span></em></p>South Africa’s social compact is at breaking point and the country may need a dialogue similar to its 1994 political transition talks to get out of the crisis.Richard Calland, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/730032017-02-15T13:45:02Z2017-02-15T13:45:02ZThe odd meaning of ‘radical economic transformation’ in South Africa<figure><img src="https://images.theconversation.com/files/156805/original/image-20170214-25999-mxsvbj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Siphiwe Sibeko/Reuters</span></span></figcaption></figure><p>The only thing radical about South Africa’s ruling party’s understanding of “radical economic transformation”, a commentator once suggested, is its use of the word ‘radical’. The comment was made a few years ago, when the African National Congress (ANC) was in the habit of using the slogan to describe very modest change. Now it’s back. </p>
<p>In his 2017 state of the nation address South Africa’s President Jacob Zuma brought back the phrase “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>” causing nationwide <a href="https://www.dailymaverick.co.za/opinionista/2017-02-14-radical-economic-transformation-bollocks.-its-a-rent-extraction-opportunity/#.WKP_Dm997IU">debate</a>. Other senior ANC <a href="http://www.politicsweb.co.za/documents/what-we-mean-by-radical-economic-transformation--r">politicians</a> have done the same.</p>
<p>Have the ANC’s intentions changed?</p>
<p>To answer that, we need to understand why “radical economic transformation” is back on the ANC’s agenda. As with much of what happens in the ANC today, factional politics is a crucial part of the story.</p>
<h2>One slogan, two agendas</h2>
<p>The ANC has believed for decades that <a href="http://www.anc.org.za/content/50th-national-conference-resolutions-economic-transformation">change is needed</a> to speed up black people’s access to the economy. It has emphasised this over the past few years as it became clearer that economic exclusion remains a stubborn reality despite two decades of political change.</p>
<p>Translating this into reality is difficult. The country’s racial divisions ensure that government and business do not share the common goals which, for example, produced change and growth in <a href="https://www.google.co.za/webhp?sourceid=chrome-instant&rlz=1C1CHWA_enZA699ZA699&ion=1&espv=2&ie=UTF-8#q=asian+tigers+develoment+theory+miracle">Asia</a>. </p>
<p>At the time of negotiating and <a href="https://theconversation.com/how-ancs-path-to-corruption-was-set-in-south-africas-1994-transition-64774">assuming power</a>, the ANC recognised that it could not impose change since this would scare away capital. And it did not develop an effective strategy for negotiating with power holders in the private economy. The result was a gap between rhetoric and detail. </p>
<p>More than five years ago the ANC began talking about a “<a href="https://www.dailymaverick.co.za/article/2013-02-07-behold-the-second-phase-of-the-transition-ancs-big-plans-for-the-economy-and-the-state/">second phase</a> of the transition” to address social and economic change. Since then its documents and statements have tended to combine radical phrases with plans which simply tweaked what already exists.</p>
<p>And over the past few months, “radical” economic change has become a growing ANC preoccupation. This is not because its policymakers decided this. Rather it’s because its patronage politicians seized on the slow pace of change to justify their continued quest – in partnership with their private allies – to control public resources. </p>
<p>Triggered by the need of the <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">Gupta family</a>, which has been accused of “capturing” the state to protect their interests, they ratcheted up a campaign to paint patronage as a contribution to freedom.</p>
<h2>A familiar tale</h2>
<p>The story they tell has become familiar. “State capture” is actually the reverse: an attempt to take back a state already under the control of private interests. <a href="http://www.politicsweb.co.za/politics/zumas-interventions-will-deal-with-white-monopoly-">“White monopoly capital”</a>, this lobby insisted, controls the state and is determined to prevent a challenge by using claims of “state capture” to defame the forces of economic freedom.</p>
<p>As many commentators have pointed out, this is not about building an economy which includes more people but about justifying why some connected people should get their hands on the public purse. </p>
<p>But ANC politicians who reject this ploy cannot simply dismiss it. The patronage group is trying to exploit the idea of economic change because just about everyone in the ANC – and many people outside it – agree that it is not credible to claim that the economy is now nonracial and inclusive. Their opponents must, therefore, acknowledge that change is needed. But they must try to ensure that it is about including people, not enriching a few.</p>
<p>The stress on “radical economic transformation” – and more militant statements on the economy by ANC politicians such as secretary-general <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">Gwede Mantashe</a> and parliamentary finance committee chair <a href="http://www.businesslive.co.za/bd/opinion/columnists/2017-01-26-editors-lunchbox-transform-or-else-yunus-carrim-tells-banks/">Yunus Carrim</a> – are part of this attempt to develop a programme for change which is not about giving a free pass to the connected.</p>
<p>This does not necessarily mean that there is always a neat divide between the two change agendas – some policy documents might mix proposals from the both sides. But the attempt to justify patronage has triggered enhanced ANC interest in change.</p>
<h2>More serious than before</h2>
<p>Given this background, the latest version of “radical economic transformation” should be taken more seriously than previous editions. </p>
<p>The patronage group’s opponents need to show that it is possible to achieve economic change which fixes the problem rather than using it as an excuse. So they can’t simply talk about change – they must make it happen. </p>
<p>But are there any signs of attempts to ensure radical change?</p>
<p>The details spelled out in <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">recent ANC statements</a> provide an answer. They include plans to boost business opportunities in townships and rural areas, and by using “the Constitution, legislation and regulations, licensing, transformation charters, the national budget and procurement, state-owned companies and development finance institutions, as well as government programmes” which, of course, is fairly vague.</p>
<p>The <a href="http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000">State of the Nation Address</a>, which can presumably be taken as a statement of the government’s intent, ignored the township business proposals and concentrated on tougher competition legislation and a state-owned mining company (a possible gain for the patronage group).</p>
<p>It also emphasised land distribution and using a variety of measures to boost black business: public procurement, legislation to boost black property practitioners, and the black industrialists programme.</p>
<p>How radical these ideas are depends on the beholder. To some lobbies any attempt to interfere with the market is a threat to its survival. But, for those with a greater grasp of reality, the theme seems to be change which goes beyond tinkering with current ways of doing things, but does not seek to tear up the fundamentals which have underpinned policy since 1994. It also seems likely that the proposals are designed for negotiation and are not final decisions.</p>
<p>The patronage lobby’s ideas would, of course, change those fundamentals dramatically. It would tear up many of the controls which protect public money, from rules which award tenders to the cheapest bidder, through to controls on money laundering to the Treasury’s spending safeguards. </p>
<p>Their opponents propose a programme which leaves all of that in place but seeks to nudge the economy in a more inclusive direction.</p>
<p>The land proposals, for example, may use expropriation – which will allow courts to set the price of the land – but, according to land reform minister <a href="https://www.businesslive.co.za/bd/national/2017-02-15-valuer-general-to-determine-land-prices-says-nkwinti/">Gugile Nkwinti</a> will mainly rely on the Valuer-General, a recently created government office which sets the prices of land earmarked for reform. New competition laws may trample on some toes but are hardly radical in a market economy.</p>
<p>This year’s version of “radical economic transformation”, therefore, has more substance than the previous editions. But it is hardly a recipe for a dramatic economic shift.</p>
<p>And, while the content of government proposals has shifted, there are no signs yet that the lack of a strategy to achieve them has been addressed. All of these plans will remain on the drawing board unless ways are found of ensuring that investment not only continues but also grows. That will require a coherent plan to win the support – or at least the compliance – of economic power holders. Until that emerges, “radical economic transformation” will remain the stuff of policy documents rather than concrete action.</p><img src="https://counter.theconversation.com/content/73003/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In his recent state of the nation address South Africa’s President Jacob Zuma spoke emphatically of “radical economic transformation” causing nationwide debate. What does it really mean?Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/728842017-02-13T15:02:06Z2017-02-13T15:02:06ZZuma’s speech was full of ‘alternative facts’ rather than a reflection of reality<figure><img src="https://images.theconversation.com/files/156607/original/image-20170213-15780-76orwx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Jacob Zuma delivers his State of the Nation Address (SONA).</span> <span class="attribution"><span class="source">Sumaya Hisham/Reuters</span></span></figcaption></figure><p>South African President Jacob Zuma’s state of the nation <a href="http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000">speech</a> will be followed by Finance Minister Pravin Gordhan’s <a href="http://www.sabc.co.za/news/a/6c2507004ff087b19481d52890c6dd6e/Gordhan-calls-for-tips-ahead-of-2017-Budget-speech">Budget speech</a> next week on February 22. They represent the country’s two main warring political blocs: patronage versus prudence. But after the “radical economic transformation” rhetoric was ratcheted up by the president, both men may soon stumble on a terrain potholed by what a Donald Trump aide approvingly terms <a href="http://edition.cnn.com/2017/01/22/politics/kellyanne-conway-alternative-facts/">“alternative facts”</a>.</p>
<p>Zuma at least did include a belated definition of what he means by radical economic transformation: </p>
<blockquote>
<p>fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female.</p>
</blockquote>
<p>Given Zuma’s distortions of reality, though, might this simply degenerate into another <a href="http://ccs.ukzn.ac.za/files/BondTalkLeftWalkRight2ndedn.pdf">episode</a> of talk left, walk right?</p>
<h2>Labour-capital harmony</h2>
<p>Zuma’s hope is for a “Team South Africa” harmony model to emerge. He said:</p>
<blockquote>
<p>Our labour market environment is also showing signs of stability, due to cooperation by social partners.</p>
</blockquote>
<p>But workers are angry. The World Economic Forum’s 2016-17 Global Competitiveness Survey <a href="http://reports.weforum.org/global-competitiveness-index/">ranked</a> South Africa’s “cooperation in labour-employee relations” worst anywhere in the world for the fourth straight year, with a rating that continues to sink. </p>
<p>The state’s cooperation with big business, meanwhile, is characterised by extreme corruption. Treasury’s procurement officer Kenneth Brown <a href="http://www.fin24.com/Economy/treasury-hunts-fraud-worth-r233bn-in-spending-20161006">revealed</a> last November that R233 billion per year (out of R600 billion in annual procurement) was lost to supplier overcharging. </p>
<p>And last year PricewaterhouseCooper <a href="http://www.pwc.com/gx/en/services/advisory/consulting/forensics/economic-crime-survey.html">ranked</a> South African corporations as the world’s most engaged in “economic crime” (at 69%, well ahead of the French and Kenyans). </p>
<p>Zuma hopes for a different reality:</p>
<blockquote>
<p>Unity in action was also demonstrated again this week with the conclusion of the agreement on the National Minimum Wage and on measures to stabilise labour relations.</p>
</blockquote>
<p>But the country’s largest trade union federation, the Congress of South African Trade Unions <a href="https://www.businesslive.co.za/bd/national/labour/2017-02-08-cosatu-scuppers-wage-agreement/">refused to support</a> the deal until minimum working hours and inflation adjustments are agreed. Labour also emphasises that the state’s attempt to impose a ballot prior to strikes will be opposed intensely.</p>
<p>What might Zuma do to reverse the recent increase in unemployment to more than 27%?</p>
<blockquote>
<p>Government runs effective poverty alleviation programmes such as the Expanded Public Works Programme [which] has since 2014 created more than two million work opportunities.</p>
</blockquote>
<p>Even if there were <a href="https://businesstech.co.za/news/government/156682/the-truth-and-lies-of-zumas-sona-2017/">actually</a> 2.5 million such “opportunities” from 2014-16, they lasted only three months and amounted to only a fifth of the <a href="http://www.gov.za/sites/www.gov.za/files/Executive%20Summary-NDP%202030%20-%20Our%20future%20-%20make%20it%20work.pdf">target set by</a> in the National Development Plan. The work pays just R84/day, half the R20/hour agreed as per the new minimum wage. And R20/hour still leaves a family of four below the poverty line.</p>
<h2>Housing and services</h2>
<p>Some of the president’s comments about housing and services were also fantasies.</p>
<blockquote>
<p>Government… provided more than four million houses since 1994 … To date nearly seven million households have been connected to the grid and now have electricity.</p>
</blockquote>
<p>In fact, Africa Check <a href="https://africacheck.org/reports/facts-alternative-facts-zumas-10th-state-nation-address-checked/">found</a> that three (not four) million houses were produced in this period, although it pointed out that no formal audit has yet been done. Many require rebuilding due to structural defects.</p>
<p>As for electricity, Zuma argued that:</p>
<blockquote>
<p>Eskom’s build and maintenance programmes helped ensure stability and an end to load-shedding.</p>
</blockquote>
<p>He neglected to mention the <a href="http://www.tradingeconomics.com/south-africa/electricity-production">14% crash in electricity demand</a> led by mining and smelting firms. Power cuts ceased after the mid-2015 commodity price crash and the massive dumping of Chinese steel shuttered mines and smelters.</p>
<p>And true, millions of houses were indeed connected to the electricity grid since the early 1990s, but then how many millions were also disconnected due to inability to pay, especially after the 300% price hike since 2008? Last month, 34 municipalities faced <a href="http://mg.co.za/article/2017-01-17-eskom-is-not-the-vatican-so-pay-up-or-get-cut-off">disconnection</a> by state utility Eskom due to arrears exceeding R10 billion.</p>
<p>The same problem occurred in 2014 when Zuma bragged that 95% of South Africans had clean water access, yet the next day, the main Water Department spokesperson <a href="http://mg.co.za/article/2014-02-13-our-water-troubles-still-run-deep">admitted</a> it was only 65% due to disconnections and breakdowns.</p>
<p>When it came to water this year he avoided that inconvenient fact, and instead Zuma claimed:</p>
<blockquote>
<p>Government is working hard to ensure reliable bulk water supply in the various areas of the country to support economic growth whilst increasing access to vulnerable and rural municipalities.</p>
</blockquote>
<p>For more than a year the national Department of Water and Sanitation has been <a href="http://mg.co.za/article/2017-02-12-nomvula-mokonyanes-water-department-is-bankrupt?utm_source=Mail+%26+Guardian&utm_medium=email&utm_campaign=Daily+newsletter&utm_term=http%3A%2F%2Fmg.co.za%2Farticle%2F2017-02-12-nomvula-mokonyanes-water-department-is-bankrupt">heading</a> into bankruptcy. Treasury is considering a formal administrative takeover and Public Protector Busisiwe Mkhwebane and the police Special Investigating Unit are conducting enquiries into corruption. </p>
<h2>World economy</h2>
<p>Zuma was on perhaps shakiest ground with this prediction: </p>
<blockquote>
<p>We will continue to partner with the United States and work together on issues of mutual interest such as the full renewal of the African Growth and Opportunity Act.</p>
</blockquote>
<p>The two-word corrective to this fantasy is <a href="http://www.theeastafrican.co.ke/business/Agoa-treaty-repeal-Trump/2560-3784086-i5xqqqz/index.html">Donald Trump</a>.</p>
<p>Zuma bragged:</p>
<blockquote>
<p>We successfully avoided credit ratings downgrades.</p>
</blockquote>
<p>False, there were several downgrades in 2016. And although last December, Standard & Poor’s did not push the sovereign rating all the way to “junk” status, it came <a href="http://www.polity.org.za/article/south-africa-long-term-local-currency-rating-lowered-to-bbb-foreign-currency-ratings-affirmed-outlook-still-negative-2016-12-05">very close</a> when lowering the country’s long-term local currency rating on South Africa to “BBB”.</p>
<p>As for the supposed “decision to establish the BRICS Rating Agency” by the Brazil-Russia-India-China-South Africa leaders in Goa last September, Zuma should have observed that the <a href="http://thebricspost.com/india-brics-ratings-agency-can-bypass-big-three-unfairness/#.WKAqR_JWIok">commitment</a> was merely to “explore the possibility of setting up an independent BRICS Rating Agency based on market-oriented principles”. This could well replicate a half-dozen <a href="https://theconversation.com/brics-wants-to-set-up-an-alternative-rating-agency-why-it-may-not-work-72382">prior failed attempts</a> to set up an alternative rating agency. </p>
<h2>Alternative facts face fiscal austerity</h2>
<p>A different narrative will enter the theatre, stage right, on February 22 when Gordhan delivers the budget speech. Given the adverse balance of forces – the finance minister is fending off attacks from Zuma’s allies, a downgrade by Standard & Poor’s still looms large, and pressure is rising from diverse leftist groups such as #FeesMustFall, trade unions and service delivery protesters – Treasury staff are hardly likely to radically transform anything.</p>
<p>Zuma’s most sobering thought from the state of the nation address should be the last word here, because it’s a sentiment that sounds dangerously ultra-leftist – but at least not alternative-facty, unlike so much else of what he claimed in his speech.</p>
<blockquote>
<p>Oliver Tambo [president of the ANC from 1967 to 1991] said, ‘It is inconceivable for liberation to have meaning without a return of the wealth of the country to the people as a whole. To allow the existing economic forces to retain their interests intact is to feed the roots of racial supremacy and exploitation, and does not represent even the shadow of liberation.’</p>
</blockquote><img src="https://counter.theconversation.com/content/72884/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patrick Bond does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa’s President, Jacob Zuma, promised radical economic transformation in his 2017 state of the nation address. A lot of what he said in support of this promise is alternative facts.Patrick Bond, Professor of Political Economy, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/678702016-10-30T10:48:51Z2016-10-30T10:48:51ZRoot causes of limp economic growth in South Africa are not being tackled<figure><img src="https://images.theconversation.com/files/143660/original/image-20161028-15783-uqdx4r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's Finance Minister Pravin Gordhan is fighting against economic predators.</span> <span class="attribution"><span class="source"> Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>Protecting and growing the formal economy is important. But so too is changing it in ways which enable many more to enjoy its benefits. This was the most important message in Finance Minister Pravin Gordhan’s Medium Term Budget Policy <a href="http://www.treasury.gov.za/documents/mtbps/2016/">statement</a>.</p>
<p>Since there seems to be some confusion on what this statement is meant to do, it is worth pointing out that it is not a “mini-budget”. It is a statement of broad budget policy, whose details are filled in by the annual budget speech. So its impact should not be judged on whether it provided a detailed account of government tax and spending plans but on whether the approach it spells out is what the economy needs.</p>
<p>To illustrate this, the speech made it clear that student protests have pushed higher education to the front of the spending queue (confirming that inevitable political reality, that those who shout loudest usually manage to push to the front of the spending line). But it also seemed to confirm that free tertiary education for all is not on the cards: this is a broad policy goal so, if the government had embraced it, it would have said so.</p>
<p>Looking at the speech as a broad priority-setting exercise, it does meet the demands of the hour –- although it is not yet clear how the National Treasury hopes to turn intention into reality.</p>
<p>The context of the statement was clear to all who heard it. The National Treasury –- and the formal economy which it serves -– is under threat as <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">patronage</a> politicians and their allies in business and government seek to turn public finances into private piggy banks. The minister himself, of course, is personally in the firing line of this <a href="https://theconversation.com/south-africas-finance-minister-is-vindicating-the-law-by-ignoring-police-unit-64535">assault</a>. Growth has faltered and anxiety about recovery prospects are focused on the threat of a ratings downgrade. </p>
<h2>Social contract under threat</h2>
<p>Inevitably, the statement was viewed as a way of showing the government was willing and able to tackle these threats. It contained much which was designed to do just that –- the pointed references to the need to combat corruption, enforce procurement rules and cut down on waste and ineffectiveness in the government. </p>
<p>Declaring that “our social contract is under pressure”, Gordhan pointed to the need to change patterns which “have put unnecessary hurdles in the way of realising our potential and implementing our development plans”. These included unclear or conflicting policies, “institutional instability” which derailed implementation, and investment which is held back “by uncertainties and erosion of trust”.</p>
<p>If that was all the speech said, it may have achieved the most pressing goal -– showing that the National Treasury is taking seriously the need to rebuild confidence in the market place. But it would also have signalled, at least for now, that <a href="https://theconversation.com/high-stakes-drama-as-south-african-president-and-finance-minister-square-off-47698">protecting</a> the economy from predators is the priority and that economic change, if it happens at all, will need to wait. </p>
<p>And so it would not have addressed the root cause of the <a href="https://theconversation.com/south-africa-can-expect-zero-growth-its-problems-are-largely-homemade-62943">growth crisis</a>, the survival, over two decades into the new political order, of policies and practices which exclude many from the market place and ensure that it cannot tap the energies and abilities of everyone.</p>
<h2>Structural change needed</h2>
<p>Gordhan also signalled National Treasury’s view that fairness and sustainable growth require not only that the economy be protected but that it change. He urged business, labour –- and everyone else –- to join a national dialogue aimed at achieving this. </p>
<p>Warning that “all too often in history, the benefits of progress have been appropriated by narrow elites”, Gordhan declared that the economy needed ‘structural transformation’ which “rests on a partnership between government, business, organised labour and all stakeholders who share our commitment to inclusiveness in our development path”.</p>
<p>The speech urged a “national dialogue to seek common solutions and concrete actions to slow growth and poverty”. The aim was to ensure that “no-one should be left behind”. </p>
<p>Gordhan stressed several times that the aim was inclusive growth, not simply protecting what currently exists. This meant “opening up opportunities and broadening participation in an expanding economy”, better services for “marginalised communities”, “decent work prospects for all” and extending the frontiers of education to those who wish to learn.</p>
<p>This aspect of the speech has received little attention –- either because it is seen as a low priority given the current need to <a href="https://theconversation.com/why-south-africa-faces-a-train-smash-if-its-finance-minister-is-removed-66953">protect the economy</a> or because it seems to substitute platitudes for concrete plans. In reality, it is essential to the economy’s prospects.</p>
<h2>Beyond symptoms</h2>
<p>An approach which simply focuses on ensuring that government does not make life difficult for business can work only in the short term. While predatory politicians and power struggles are certainly part of the problem, they are symptoms, not causes. The real malaise is that the economy continues to <a href="https://theconversation.com/south-africa-needs-to-fix-its-dangerously-wide-wealth-gap-66355">exclude</a> millions, creating opportunities for politicians who win support by distributing other people’s money. </p>
<p>And, in a society divided between economic insiders and outsiders, it is common for private and public actors to work together in their own interest at the expense of the public. If these problems are ignored, sustainable growth which benefits most citizens will continue to elude us. And they can be tackled only by change which makes the economy less of an exclusive club.</p>
<p>This is a task which is beyond the power of any of the economic interests acting alone. Ramming changes down the throats of a society which privileges business over everyone else will cause huge instability –- ignoring business’s interests will ensure economic decline. And so the path to growth lies in a bargain between all the major interests on how to include those who the economy now excludes.</p>
<p>It is important that the National Treasury recognises the need to look not only at the immediate needs of the hour but at what is needed to free the economy from a continual crisis by negotiating an end to the barriers which exclude people. </p>
<p>Whether the National Treasury can make this approach work depends not only on whether it can navigate the politics which prevent government from tackling this issue. It depends too on whether it can persuade business and labour to look beyond the short term and to talk about what needs to change to ensure that many more have a stake in a growing economy.</p><img src="https://counter.theconversation.com/content/67870/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa’s Finance Minister Pravin Gordhan spoke of protecting the economy from predators. This is commendable but not enough to build an inclusive economy.Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.