Zuma’s mallet has smashed an economy
Business confidence and employment have fallen to their worst levels in years. As observers are now saying, this can be put down to one thing: President Jacob Zuma’s government. Amid state capture, even upstanding members of the Cabinet have been deeply compromised — if not corrupted. The ANC’s glib approach to democracy has seen the economy founder in pursuit of disparate national agendas.
These include visions of a developmental state and black economic empowerment — split between adherents of the National Development Plan and the far more state-interventionist New Growth Path. As these contradictions have morphed into radical economic transformation, populism and personal gain have sunk economic and legislative integrity.
Allied to the notion of a developmental state, SA’s governing party has assumed that it can create markets by fiat. But the only tool it has in the toolbox is a bludgeoning instrument that bears down on the finest screw and smallest nut with the same force it would forge a sword on an anvil.
The result is that companies and markets, large and small, have been squeezed into a box that neither fits them in any way nor allows them to escape.
Black economic empowerment legislation — and its proxy preferential procurement and local content stipulations — has become so suffocating, commandeering and fickle that companies cannot function according to market principles.
Paradoxically, as the government seeks to stimulate competition and free up markets according to World Trade Organisation rules, SA’s manufacturing economy has declined steadily. Dominant industries including primary steel and chicken producers, clamour for greater tariff protections in the same breath that the government talks of taxes to force beneficiation of “strategic” minerals to “reindustrialise” the country.
In the interim, the state has punished errant and arrogant steel and construction companies for outmoded cartel practices. But by simultaneously starving them of projects, in order to make them “transform”, the government has also sucked so much oxygen from the economy that it has now become downgraded.
After years of already difficult macroeconomic conditions, this has led many listed construction groups to divest of steel-related manufacturing subsidiaries at fire sale prices. And while some empowerment deals have now been done at bargain-basement values, the new owners remain stuck in stagnant markets.
It now appears that the process of transformation has also engendered thieving within parastatals. Whether over coal or uranium supplies and possible future nuclear deals, the imperatives of wholly inclusive economic change have been tainted by this kind of “transformation”.
That this has manifested as “Big Man” politics is not at all exclusive to SA or the rest of Africa. But it is anathema to democracy. Zuma’s government, in allowing the pursuit of multiple and nefarious agendas, is now close to emulating the political, moral and socioeconomic failings of Zimbabwe and, more recently, Zambia.
That this is economically calamitous has now become obvious. Unions have gutted themselves at the same time as they have helped to destroy industries.
Meanwhile, Public Protector Busisiwe Mkhwebane’s statements on amending the mandate of the Reserve Bank to protect the country’s currency are so wholly misplaced that soon SA will not have the economic dynamism needed to attract investment.
Years of mangled empowerment policies in the mining industry have sundered the sector at the same time labour has imploded. The inability of the government to stimulate the related domestic steel and construction industries is instructive. The state has put a cap on ArcelorMittal SA’s monopoly steel pricing and effectively prevented it from restructuring at the same time it has struck a long-awaited empowerment deal that does not stink of malfeasance. But the company is still slowly sinking as the government continues to starve it of big infrastructure projects, while belatedly designating domestic steel for such purposes. The imposition of normative World Trade Organisation tariffs on cheap Chinese steel imports that are also beneficial to the downstream metals industry, means the sector remains captive to monopoly interests.
Where the government wants greater competition in the economy — and the rapid creation of jobs — the opposite has occurred. ArcelorMittal SA is now more dominant than ever as other major steel companies are being liquidated.
To this end, the government’s refusal to spend on big infrastructure projects has severely diminished steel, mining and construction markets that are deeply intertwined.
As the state at last implements a special economic zones programme and acknowledges global value chains, General Motors has exited the country.
Despite being part of the heavily subsidised automotive industry, such a failure in manufacturing is testament to the fact that the government cannot create and control markets, but only legislate and support them.
UNIONS HAVE GUTTED THEMSELVES AT THE SAME TIME AS THEY HAVE HELPED TO DESTROY INDUSTRIES