How to recover a captured state

State capture has fatally weakened the state, reduced business and investor confidence, caused policy uncertainty and undermined state legitimacy.

However, these damaging consequences are symptoms of the contradictions and structural weaknesses in our political economy.

Dismantling state capture will not necessarily address these issues, but will create the conditions under which they can be tackled.

Modern industrialised economies require robust engagement between the state and private sector on interests and policy perspectives.

It would be naïve to assume all engagements between business and the government take place through collective, public processes.

There are specific issues that affect small groups or individual businesses, which bring benefits to some and costs to others.

Here, however, a line must be drawn between legitimate and national representation of interests, and the abuse of influence or connectedness.

The deployment and appointment of “enablers” of capture at the executive, administrative and technical levels in the government and the stateowned enterprises has displaced the meritocracy, hollowed out the state and redirected resources away from service delivery.

In the process, the state has lost its legitimacy to lead society behind a common purpose.

Though the genesis of state capture predates 2009, the past decade has set back our efforts to restructure and transform the economy.

For a few decades, South African growth closely tracked world GDP, but since 2010 it has lagged the rest of the world and is worsening.

Business confidence at the end of last year was at its lowest point in 16 years.

Fixed investment in South Africa is a fraction of what it is in other developing markets.

As the South African economy has restructured from a lowskills mining, agriculture and manufacturing economy towards a higher-skilled services economy, the high rate of return to skilled workers has exacerbated inequality.

The salaries of skilled people have increased roughly twice as fast as the salaries of unskilled people, mainly because of the failure of our education system to produce sufficient numbers of skilled people, and is directly linked to the incapacity of our captured state to rally society behind fixing our education system.

Economic stagnation has increased social discontent, which has fuelled antidemocratic populism.

In our context, rising youth unemployment and increased social discontent have fed the growth of populism both within and outside the ANC, together with a developing narrative that our constitutional provisions, a free media and an independent judiciary were constraints to transformation.

While our institutions of democratic accountability acted as a bulwark against state capture, high levels of social discontent remain.

The coincidence of unfavourable global conditions and our high-inequality, lowgrowth trap requires a new consensus:

● Dismantling abusive patronage networks;

● We must also focus on the networks that express in local and regional politics, and governance institutions;

● The security cluster must be overhauled and state-owned enterprises again repositioned as the front-line forces of the developmental state;

● Building a compact for inclusive growth, which requires both investment-led growth and active redistributive measures. Economic growth without transformation will exacerbate inequalities;

● Transformation without net growth in investment and output will result in unemployment and poverty increasing.

Lessons from the highgrowth Asean bloc over the past few decades offer useful insights: high levels of investment in fixed capital in the productive economy; high levels of investment in research and development and technology; a strong focus on exports; a strong focus on human capability; a pragmatic (trade-led) approach to international relations; greater emphasis on meritocracy and technocracy; and close collaboration between the state and private sector;

● Creating a national obsession with education and skills development. Good-quality basic education is both a development goal itself and a crucial ingredient of economic development.

Three change levers for the sector must be activated: strengthening school-performance monitoring and accountability; rapidly improving the capacity of school leadership and teachers, including competency testing of principals and teachers; and aligning the skills pipeline with labour market demands;

● Building a high-performance state, based on four levers of change: restructuring and rationalising the state, including consolidating the number of ministries; reassessing the devolution of functions and capacity across the three spheres of government; gearing metros to contribute more to national investment and revenue targets; and supporting the restructuring of state-owned enterprises.

Brokering a new consensus for inclusive growth requires new levels of leadership vigour across political formations, business, labour and civil society. This is critical to address the trust deficit and negotiate the trade-offs necessary for inclusive growth.

Dynamics within the governing party will be a major deal breaker. The ANC remains highly fractured around competing patronage interests.

Good-quality basic education is a development goal itself and a crucial ingredient of development