Fears SA driv­ing into dead-end street

• Na­tion’s rad­i­cal po­lit­i­cal turn and mas­sive cor­rup­tion alarm econ­o­mist from Venezuela

Business Day - - FRONT PAGE - Carol Pa­ton

Coun­tries make his­toric mis­takes and SA, which is faced with a new rad­i­cal po­lit­i­cal dis­course punted from the top of the po­lit­i­cal hi­er­ar­chy, ap­pears to be on the brink of do­ing so.

Ri­cardo Haus­mann — Har­vard devel­op­ment econ­o­mist, for­mer Venezue­lan min­is­ter of plan­ning and long-time friend and ad­viser to SA’s Trea­sury — vis­ited SA last week and says he fears the coun­try is head­ing to­wards mak­ing a mis­take.

He served on the In­ter­na­tional Panel on Growth, which pro­vided a rich set of rec­om­men­da­tions to the Trea­sury in 2008. Look­ing back at their re­port, com­piled by 20 of the world’s top eco­nomic thinkers from Har­vard and the Mas­sachusetts In­sti­tute of Tech­nol­ogy, it is dis­tress­ing to see how de­ter­minedly that ad­vice has been ig­nored in the broad thrust of gov­ern­ment pol­icy.

Among its rec­om­men­da­tions were: grow­ing ex­ports to be made the top pri­or­ity in or­der to tackle the cur­rent ac­count deficit; run­ning a tighter fis­cal ship dur­ing boom years to al­low ex­pan­sion when things got rough; open­ing the door to skilled im­mi­gra­tion; re­bal­anc­ing black eco­nomic em­pow­er­ment by broad­en­ing it and mov­ing away from eq­uity deals; re­form of the sec­tor ed­u­ca­tion and train­ing author­i­ties and re­forms to lo­cal gov­ern­ment. Only the youth wage sub­sidy, which was im­ple­mented in a sig­nif­i­cantly more limited way than rec­om­mended, made it into SA’s pol­icy mix.

While his­tory has proved the panel right in many re­spects, of greater con­cern than the “lousy eco­nomic think­ing” that has caused the coun­try to squan­der its growth op­por­tu­ni­ties, Haus­mann says he is alarmed at the turn that pol­i­tics has taken.

“I’m taken aback si­mul­ta­ne­ously by two things: the first is the overt­ness and mag­ni­tude of cor­rup­tion; the se­cond is the courage and en­ergy by the healthy part of so­ci­ety and its in­sti­tu­tions and checks and bal­ances to pre­vent this from hap­pen­ing,” he says.

“In many coun­tries, cor­rup­tion is not present on such an am­bi­tious scale, but also the im­mune sys­tem and the coun­ter­vail­ing forces are weaker.”

The cost to SA of this turn has been enor­mous and in­cludes the loss of for­eign di­rect in­vest­ment; in­creased out-mi­gra­tion of en­tre­pre­neur­ial peo­ple; less in­no­va­tion; less firm cre­ation and less job cre­ation. “It has prob­a­bly caused greater un­em­ploy­ment,” Haus­mann says.

It was through his­tor­i­cal ac­ci­dents — the ar­rival of var­i­ous groups of peo­ple at dif­fer­ent times, each con­test­ing and claim­ing the coun­try as theirs fol­lowed by the dis­cov­ery of di­a­monds and min­er­als — that re­sulted in the di­ver­sity that cre­ated the eco­nomic base in­her­ited in 1994.

In con­trast to the swing by some in the ANC and wider so­ci­ety to an ag­gres­sive eco­nomic African na­tion­al­ism, Haus­mann of­fers a sober­ing re­al­ity check.

“The prob­lem is re­ally that, at this stage, there is no real so­lu­tion in which ev­ery­one can have their own coun­try,” he says.

“The chal­lenge is how do you share the coun­try? How do you ex­ploit the value that has been cre­ated from your di­ver­sity?

“The chal­lenge is to cre­ate a new shared sense of ‘us’. Now that is the world view com­monly as­so­ci­ated with Nel­son Man­dela.”

Right now, Haus­mann says he can’t see any strong po­lit­i­cal voices ad­vo­cat­ing this view. Rather there is a “very dif­fer­ent dis­course” that is emerg­ing and that is about “it is our time to eat”. The prob­lem with this dis­course is that it does not bring pros­per­ity and is about re­dis­tribut­ing what ex­ists.

The cre­ation of an in­ter­nal enemy — white mo­nop­oly cap­i­tal — is “based on a fun­da­men­tal lie”, he says, “and is super-coun­ter­pro­duc­tive”.

“It is a sur­pris­ing turn for a coun­try such as SA, which has such deep cap­i­tal mar­kets and bil­lion-dol­lar com­pa­nies, which are owned broadly and widely.

“It is not true that these com­pa­nies are owned by whites — 30% to 40% of them are prob­a­bly owned by for­eign­ers. There might be firms with mo­nop­oly pow­ers and they should be dealt with ac­cord­ingly.

“But it is a scape­goat and a dan­ger­ous one be­cause it puts the ac­cent on the firms that ex­ist when the prob­lem of SA is the firms that do not yet ex­ist that need to em­ploy the 9-mil­lion peo­ple who don’t work.”

SA should look to the fate of other coun­tries to un­der­stand the risks of this racialised and “rad­i­cal” ap­proach.

The first is Zim­babwe, which, sim­i­lar to SA, had a rel­a­tively suc­cess­ful tran­si­tion for the first 15 years and then took a turn to more racialised poli­cies, re­sult­ing in dis­as­ter.

The se­cond is Haus­mann’s own home, Venezuela, where Hugo Chavez pur­sued an agenda of rad­i­cal eco­nomic trans­for­ma­tion from about 2000, na­tion­al­is­ing the econ­omy and putting in place price con­trols, re­sult­ing in a col­lapse 10 years later at great cost to its ci­ti­zens. There has been mas­sive out-mi­gra­tion from Venezuela, GDP shrunk 30% and in­fla­tion was in the re­gion of 700% in 2016. Most chill­ing of all the statis­tics is that the coun­try’s most re­cent house­hold sur­vey shows Venezue­lans have lost an av­er­age of 8.2kg each, a sign that the coun­try is go­ing hun­gry.

“I can un­der­stand the po­lit­i­cal mo­ment in which these de­ci­sions are made, but that doesn’t make them right. These are his­toric mis­takes. Coun­tries can take wrong turns and get into dead-end streets and that is my fear for SA,” he says.

While the coun­try has not suc­ceeded in gen­er­at­ing jobs — SA’s un­em­ploy­ment rate is dou­ble the rate of Latin Amer­ica’s worst achiev­ers — SA should use what it has as a step­ping stone rather than de­stroy­ing it.

In some senses, says Haus­mann, the dan­gers in SA are the same as in the US and Europe, where a resur­gence of identity pol­i­tics is now dan­ger­ously re­shap­ing the na­tional agenda.

“Trump is the clos­est thing you can get to a white na­tion­al­ist. He says he wants to be called an eco­nomic na­tion­al­ist, but he wants to cre­ate a sense of us that in­cludes only ‘real’ Amer­i­cans,” he says.

“His identity pol­i­tics is a de­fence of a cer­tain dom­i­nant eth­nic­ity. That this will be done at some eco­nomic cost is the same dan­ger faced by SA.”

The source for op­ti­mism in the US is the same as in SA.

“You have to put your trust in the checks and bal­ances, of which there are many.

“The same is true for you in SA,” Haus­mann says.

I’M TAKEN ABACK BY … THE HEALTHY PART OF SO­CI­ETY AND ITS IN­STI­TU­TIONS AND CHECKS AND BAL­ANCES

/Robert Botha

Study­ing trends: Ri­cardo Haus­mann, direc­tor of Har­vard’s Cen­tre for In­ter­na­tional Devel­op­ment and a pro­fes­sor of the prac­tice of eco­nomic devel­op­ment.

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