Rise of the rent seek­ers af­ter golden spell turns to rust

Business Day - - OPINION - Stein­berg teaches African stud­ies at Ox­ford Univer­sity.

If there is a God above who had a hand in shap­ing SA’s fate, I think he gave white peo­ple all the luck. The thought crossed my mind re­cently when I reread CW de Kiewiet’s mas­ter­piece A His­tory of South Africa.

Writ­ing in 1940, De Kiewiet mar­velled at SA’s good for­tune. Mod­ern cap­i­tal­ism had just been through the Great De­pres­sion and SA, a vul­ner­a­ble econ­omy ex­posed to a global hur­ri­cane, ought, by rights, to have been bat­tered to smithereens.

But SA had gold. “Here was an in­dus­try,” De Kiewiet wrote, “which feared nei­ther lo­custs nor cat­tle dis­eases, nei­ther drought nor sum­mer floods. Its prod­uct al­ways com­manded a ready sale in the fi­nan­cial cen­tres of the world…. It sta­bilised rev­enues and pre­served na­tional in­come from vi­o­lent fluc­tu­a­tions…. Like a great fly­wheel [it] gave sta­bil­ity to a coun­try that oth­er­wise would have been sin­gu­larly sen­si­tive to move­ments in the world econ­omy.”

Over the fol­low­ing three decades, the luck of which De Kiewiet wrote only got bet­ter. Af­ter war’s end, the global econ­omy en­tered a quar­ter-cen­tury of un­prece­dented growth, its pri­mary store of value the gold un­der SA’s soil.

Thanks to its strate­gic sig­nif­i­cance in the Cold War and the de­mand for its min­er­als, the gov­ern­ing regime could do as it pleased. HF Ver­wo­erd im­ple­mented grand apartheid while keep­ing full diplo­matic re­la­tions with all the western pow­ers.

The world’s great­est banks queued up to fi­nance SA’s debt. For­eign cap­i­tal poured in. Off the fat of these good times, a fab­u­lous in­fra­struc­ture was built. Be­hind an im­port sub­sti­tu­tion regime, a pow­er­ful man­u­fac­tur­ing sec­tor grew. God ended white SA’s long run of luck on July 31 1985. On this day, Chase Man­hat­tan, fol­lowed in quick suc­ces­sion by a raft of other US banks, an­nounced it would no longer roll over its loans to South African com­pa­nies. The rand nose­dived and the coun­try froze bil­lions of dol­lars of pay­ments to for­eign cred­i­tors. The threat of sov­er­eign in­sol­vency hov­ered.

Forty-five years af­ter De Kiewiet wrote his book, the magic spell at which he had mar­velled had been bro­ken.

By the time black South Africans got to vote, the magic was long gone. The coun­try they in­her­ited had lost its geopo­lit­i­cal sig­nif­i­cance. World trade was rapidly lib­er­al­is­ing and vast new in­dus­trial pow­ers were emerg­ing. SA’s man­u­fac­tur­ing sec­tor, its man­i­fold prob­lems long dis­guised by tar­iffs, was primed for a bat­ter­ing.

Due to global forces over which we had no con­trol, we had be­come a plain-look­ing, dif­fi­cult, or­di­nary place.

Ethiopia’s for­mer prime min­is­ter, the late Me­les Ze­nawi, once re­marked that when a coun­try had no com­par­a­tive ad­van­tage, its elites in­evitably ex­tracted rent in­stead of gen­er­at­ing value. He was de­scrib­ing his own coun­try, but he may as well have been talk­ing of SA.

Look at the two ANC men cur­rently at war. One is wealthy be­cause he was given eq­uity in firms that grew rich dur­ing SA’s hal­cyon days. The other has turned paras­tatals of the fat years into a per­sonal ac­cu­mu­la­tion ma­chine. They are both rent ex­trac­tors par ex­cel­lence, not be­cause they are steeped in lib­er­a­tion move­ment cul­ture or are lazy or en­ti­tled, but be­cause they ac­quired power only af­ter their coun­try ran out of luck.

Of course, postapartheid SA might have been gov­erned much bet­ter. Its predica­ment was by no means in­evitable. But the mantra that our politi­cians are too lazy or too greedy to do more than re­dis­tribute wealth seems stale and un­thought­ful, es­pe­cially when mouthed by those whose wealth de­rives from luck­ier days.

JONNY STEIN­BERG

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