Why contraction? Just take a look at the Mining Charter

The fact that SA is now in recession has come as a big shock to even the most expert economy-watchers. But if you were looking for reasons why the economy is contracting you could do worse than glance at the 2018 draft Mining Charter.

I don’t mean necessarily the specific details of the charter, which closed for public comment last week. I mean in a broader philosophical sense of what it says about how the ANC views business.

By all accounts the new charter is better than its predecessor, but only in that it is authoritarian as opposed to grotesque. The Gupta provision, for example, whereby naturalised Indian immigrants would suddenly become qualifying black South Africans, has been scrapped. Hallelujah.

The new Mining Charter to me is a reflection of how the ANC has changed from the Mbeki-era approach to the economy and business to that of the Zuma era, and now under the new Ramaphosa administration. This is a kind of subset of the broader political argument about whether the ANC should be trying to regain the central ground it held in the Mandela/Mbeki era, or whether it should stay where it is and contest most fiercely the space on the left.

Left-wing commentators in SA still regard Mbeki-era economics as a failure, and see its rejection as an understandable and laudatory refutation of centrist politics. In these pages recently, Jonny Steinberg wrote: “A version of moderate, centrist governance was paraded before SA voters in the 1990s and is deemed by many to have failed.” The Mbeki government, in his view, was pro partial privatisation and a “policy of fiscal austerity was strictly enforced”.

This view is common in SA and it totally infuriates me. If commentators think the Mbeki era — SA’s most successful economic period in a generation — was characterised by “austerity”, then they have no idea what austerity really means. Argentina is currently imposing an austerity budget, which includes practically halving the fiscal deficit. Nor is partial privatisation necessarily a “centrist” position; it’s a functional one. The Communist Party of China is a fierce advocate of partial privatisation, for heavens sake.

Steinberg says Mbeki-era economics has been deemed “by many” to have failed. But who are these many? The ANC has never been so successful at the polls as it was under Mbeki. The idea that Mbeki-era economics failed in the minds of working class South Africans is just not borne out by subsequent electoral politics. Since Mbeki was ousted the party has moved substantially leftwards. But in the process it has lost rather than gained support. Nor has its moving to the left hindered the rise of the EFF. In the meanwhile, it has lost ground on its right; not much but some.

Obviously, these developments are complicated. The historical view of the Mbeki era is coloured, rightly, by his tragic mishandling of the Aids crisis. The Zuma era is characterised not only by left-wing economics, but also by corruption and state capture.

But if we are talking about failure, what is indisputable is the disaster left-wing economics has inflicted on SA in the post Mbeki-era, during which, by the way, four million more people had jobs than have them now.

Back to the Mining Charter. The essential difference compared to the Mbeki era black economic empowerment (BEE) charters is that they were essentially quasi-voluntary. They were based on the notion of a cooperative relationship between the aims of business and government, which business often broadly supported. Hence, failure to comply with the charter would cost you BEE points, which could affect your business with government. That was the deal.

The new charter aims to impose much stricter BEE rules by force, and applies not only to miners but also to their suppliers. Non-compliance is now a jailable offence. Instead of co-operation, the document is premised on criminal coercion.

Now what investor is going put down money in a multidecade, hugely capitalintensive project in those circumstances? The incredible thing is that nobody has batted an eyelid.

In her analysis of the charter, Anthea Jeffery of the Institute of Race Relations makes a very perceptive point; instead of imposing a set of rules designed to make life harder for miners, why not base the charter on a system of rewards instead? “True transformation will never be achieved by crippling the mining industry ... Instead, mining companies should earn empowerment points for capital invested, minerals produced, jobs provided, profits earned, dividends declared and contributions made to tax revenues, export earnings, and R&D spending.”

This really goes to the heart of the issue — it’s not about technical issues like lightweight regulation; it’s about fundamental philosophy. The charter shows the ANC now views business not as an intrinsic force for good but as a reptilian monster that needs to be caged — and milked. Ramaphosa has done little, if anything, to change that approach.

The result, unsurprisingly, is recession. Cohen is Business Day senior editor