Populism pushes a quick fix to wealth
Radical economic transformation needs sustainable planning, dialogue and solid investment incentives
RATINGS agencies Standard & Poor’s and Fitch’s downgrade guillotines have fallen swiftly and brutally, wiping billions from South Africa’s fragile economy, relegating our creditworthiness to “junk” status.
Despite the derisive comments from some ignorant politicians, the fact is that we’ve been cast into the economic wilderness.
Access to credit, international loan finance and investor confidence have all but evaporated, prompting a hasty visit by the new Finance Minister, Malusi Gigaba, to Washington DC to reassure investors that there’s still value in the South African economy.
Should he fail in his mission, then, unfortunately, for years to come, the downgrade will severely affect the lives of many, especially the poor.
The events of the past months – including the firing of the highly respected finance minister, Pravin Gordhan, and his deputy, Mcebisi Jonas, the ill-considered cabinet reshuffle, allegations of state capture and rampant corruption, rising political intolerance and a negation of our constitutional values – have revealed a nation that’s self-destructing.
The political and economic illiteracy manifest in our body politik have shown astounding disregard for South Africa’s wellbeing and instead increased the already deep fissures in our society underscored by polarisation along widening ideological, economic and racial lines.
Why do some of our leaders create problems of such magnitude that it threatens to undermine everything we’ve gained since 1994?
With all the intellectual tools and historical evidence at their disposal of what happened in other countries in Africa (and the world), it seems they’ve learnt nothing or are unable or unwilling to recognise the inevitably disastrous consequences of their actions.
It brings to mind the words of author Peter Kingsley, who in Reality wrote: “We have plenty of theories, endless discussions of problems about problems.
“They have served their purpose. They have kept us busy, allowed our minds to grow, carried us a little way further on the route towards greater individuality and self-consciousness. The problem is that we know nothing.”
The recurring theme playing out in the current imbroglio, one that has become the rallying call especially to the poor and marginalised, is that of “radical economic transformation”.
This is a positive development that brings sharp focus to an economy that has one of the highest Gini coefficients in the world, leading to vast wealth disparity.
There’s no doubt that the economy needs to be overhauled, but there’s no coherent explanation from its protagonists about what exactly this means.
Judging from rhetorical statements, what it does seem to refer to includes land expropriation without compensation, the nationalisation of key institutions and other threats of wealth redistribution.
Radical economic transformation’s populist lure seems to be that of instant access to the wealth. However, what should be a cautionary note is that, besides alienating the investors the new finance minister is trying to attract, assets without any skills to preserve or grow its value soon become liabilities.
There are many examples of once-prosperous farms which after land claim expropriation, due to a lack of know-how, today lie fallow.
Hence radical economic transformation can only be viable if underpinned by principles of sustainability which should include investor-friendly policies and political stability. It is for this reason that a deeper, more critical reflection is needed.
A starting point to radical economic transformation should be to disengage it from connotations of being anticapitalist or pro-socialist.
Rather, it must be seen as a necessary attempt to address South Africa’s significant economic challenges, along the evolutionary trajectory of the RDP, Asgia, Gear and, recently, the NDP.
For radical economic transformation to be broadly accepted, it must be a legitimate attempt to conceptualise an economic model which promotes inclusive economic participation that can benefit South Africa.
Furthermore, it has to be pursued systemically in collaboration with other economic enablers: industry, higher educational institutions, financial institutions and labour federations.
As is widely recognised and integral to any debate on our emerging economy, proficient skills combined with high productivity, innovation and value creation, are key engines for socio-economic growth.
The fundamental flaw in the current populist understanding of radical economic transformation is that it adheres to a redistributive model, that of taking from the rich and giving to the poor.
Understandably, this is a reaction to the legacy where South Africa’s economic spoils since 1994 haven’t been fairly distributed.
However, this path is contentious, not sustainable and will lead us on the road to ruin.
For radical economic transformation to be more than just rhetoric and to become a viable economic plan, it must facilitate exponential economic growth to fund capacity for broader economic inclusion.
South Africa, as Africa’s second-largest economy, has excellent growth prospects through its highly developed industrial capabilities and leading educational and financial institutions.
However, this is not enough to create the confidence to fast-track our recovery from the downgrades.
What is needed is demonstrable political will and constructive dialogue between political parties, labour federations, higher education institutions and the corporate sector.
Only then can we respond coherently to our socio-economic challenges.
• Kimmie is UKZN’S manager of the hub for the African City of the Future and an associate of the Leadership Dialogue. He writes in his personal capacity.