Step one would be to leave our trenches

IN the wake of our reprieve from a sovereign ratings downgrade by S&P Global Ratings and then Fitch, you may have noticed the increase in chatter about the need for “structural reform”. Structural reforms are changes to the way we run our economy, from wage negotiations to the future of stateowned companies and budget debt limits. Structural reforms (actions, not plans) are what the ratings agencies want to see now that we have six months to go until they review their ratings again.

It’s complicated. It is all well and good to get the budget under control. But that doesn’t stop unemployment and deindustrialisation accelerating.

In the run-up to the Moody’s, S&P and Fitch decisions, Finance Minister Pravin Gordhan and senior business figures did sterling work persuading not only the agencies but also President Jacob Zuma that reform could happen.

I doubt Zuma is convinced, though. Too many cloying voices tell him debt and inflation don’t matter. But he needs convention to fail before he fully divorces himself from reality. To Zuma this “reform” is not about changing anything. It is just about avoiding a downgrade. So, if we are downgraded when the agencies next look at South Africa, in December, then for Zuma “reform” will have failed. If we are not, then he will probably not move against Gordhan.

But in South Africa, real reform is very hard to do.

The politics of reform require the right conditions, not the right people. There needs to be no alternative to reform — and we’re not there yet. What is happening now is that the National Treasury is consolidating the budget, improving deficit targets and steering us away from the cliff.

This is mini-reform, irritating mainly to cabinet ministers who feel they need more money, and who constantly gnaw away at the Treasury, as did Small Business Development Minister Lindiwe Zulu recently.

Under her watch the number of small businesses in South Africa has, astonishingly, shrunk. To mask her failure she has attacked the Treasury, a safe target in the Zuma administration, saying it is not operating “in England”, by which she means a scenario in which fiscal rectitude might be valued.

But in the background, business leaders have begun talking about how to make a visible difference to our red flags by the time the ratings agencies come back. Led by banker Colin Coleman, the great and the good are trying to figure out how to cut unemployment, poverty and inequality and encourage faster and “inclusive” growth.

Which is another way of saying they are trying to do the impossible. Business can’t actually change any of those things. It is an actor in our drama, not the director.

The director is the government. That’s what it is there for. But between it and its allies it would struggle to move an inch on reforms.

In South Africa everyone digs their trenches and never moves from them. So, last week on this page a letter from former Cosatu spokesman Patrick Craven was apoplectic about the mild proposals I had made about what some structural reform here might look like.

I said profit was vital to any modern economy (that’s where salaries and taxes come from) and I admired the German experiment with co-determination (Mitbestimmung), after World War 2 when trade unions, by law, were required to sit alongside shareholders and creditors on the boards of every German company.

And what needed reform, along with labour law, I argued, was the structure of corporate power. To create a form of stakeholder capitalism. Craven’s response was that only world socialism could save us.

Well, good luck with that, pal. Our problem is we all sit in our foxholes and shoot at everything that moves. Business does it as much as the unions and the state. It is the way we are. We cannot talk to each other calmly even though you can almost taste the rewards of greater consensus and trust about how we create wealth and distribute it.

Perhaps the ratings pressure is good. There are holy cows we can slay. Business concedes a bit on the minimum wage, the unions concede a bit on secret strike ballots, the government concedes a bit on stateowned enterprise governance. We can do this all on our own and quickly.

We are not China. We are not the US. We are a mongrel economy with huge poverty. Let’s work out a fix for ourselves. Let’s imagine, and then mould and make, an economy, a market, all of our own.