Daniel Silke: SA dodged a recession, but a swallow doesn't make a summer

Within 24 hours, South Africa has gone from witnessing utter lawlessness on the streets of its financial capital to breathing a collective sigh of relief that it’s GDP bounced back by 3.1% in the second quarter.

The juxtaposition of these two events – alongside the political theatre being played out within the broader body politic – shows just how close the country can come to a deeply distressing social meltdown or just how close we could all be to an economic re-boot and better growth prospects for all.

However, we should not let ourselves be distracted by a quarter-on-quarter economic revival – as welcome as it might be. The improvements in the domestic economy statistically represent more of a consolidation with the lights on when compared to the crisis of load-shedding in Q1’s disastrous period.

When compared year-on-year, the domestic economy is still only expanding at just below 1% - far below the figure required to sustain job creation and provide for an expanded citizenry. Ultimately, the low-level civil conflict that played itself out in Jeppestown, Cleveland and other areas within Gauteng is far more indicative of what to expect in South Africa than the one swallow doesn’t make a summer bump in GDP.

Technical measurements of GDP bely the ten million unemployed – about the same number of people as the entire unemployment figures of both the USA and Germany together. Yes, those South Africans looting stores and intimidating (largely) foreign citizens may have been criminals or might’ve acted spontaneously.

Yet, the mobs and looters also represent the abject failure of economic policy for more than a decade to find a middle ground between the various ideological positions so entrenched within the country that they stymie progress towards a clarity of thinking and inhibit any kind of implementation and execution.

To this end, the ANC as the most powerful political force in the country since 1994, has to take blame. Its own inability to analyse the confluence of economic challenges and distil new solutions has left it bereft of policy cohesion.

Debilitated by power-plays, rising populism and patronage politics, the party has largely failed to really dissect policy alternatives. Instead, its myopic vision has resulted in it recoiling away from internal change and managing this shift internally at successive policy conferences.

Locked in position

The governing party has remained locked into its current position of supporting a developmental state with the reins of power firmly vested in central control. In part, the various Alliance elements barely tolerate private enterprise as a ‘necessary evil’, while attempting to maximise internal crony capitalistic benefits from areas seen as ripe-for-the-picking.

In policy discussions over the past decade, this view has largely prevailed. Anything that smacks of a greater role for the private sector is smacked down or belittled and anyone even remotely supporting this notion is labelled a sell-out and purveyor of the neo-liberal order. It has resulted in a stunted debate, stymied at every corner and unable to break free into the realm of compromise and public-private compromise.

So, for President Ramaphosa, still largely reeling from his inability to stamp out his factionalised political enemies, economic policy remains an unresolved headache. Seemingly impotent to lead, he has devolved the running to Finance Minister Tito Mboweni and his new economic reform strategy document.

To his credit, Minister Mboweni has taken political risk. So much so, that he faces the vilification from ANC sectors both factionalised politically and also more established – like the Trade Unions.

Faced with a decade of non-policy making, Mboweni has limited choices for a relatively quick fix. In the normal state-of-play, a political party would formulate economic policy resolutions over successive party congresses, debate these fully and then pass them to become part of policy. Indeed, the ANC has done this on more populist issues like land expropriation and NHI. Even on prescribed assets, the party has debated this and is open to its implementation.

But Mboweni also finds that on the pragmatist side of the equation, the ANC is silent. It cannot take any internal stand on disposing (or rationalising) of state assets without the buy in from its Alliance partners. A weak president cannot afford to alienate a core support base – the unions – by proposing that tens of thousands over-staffed (and over-paid) Eskom staffers be laid off.

All that Minister Mboweni can do is therefore lob a grenade of a document into the public discourse and attempt to change the narrative away from the ideological straitjacket he currently is confined to. It’s pretty explosive policymaking when you come to think of it – but it risks undermining his own party’s internal policy procedures in the process. If you can get it right, you can circumnavigate a decade of lost policy-formulation time. But, if you get it wrong, you can undermine necessary change for even longer.

The problem for the ANC is that almost every economic policy choice is hotly contested space. And it terms of the three key policy areas of spending cuts (read austerity, stimulatory policy and regulatory reforms, each is a political minefield of note. Even the NDP barely received broad buy in when it was adopted in 2013 and largely was unimplementable as the Zuma years took its toll. Mboweni’s current plan is an attempt to re-boot the NDP with additional steps to modify the SOE model into a more efficient (and less State-centric) vehicle.

As the mobs ran rampant through the streets of Johannesburg, the broader ANC Alliance seemed caught off-guard by Mboweni’s initiative. The Unions and SACP lambasted it while the ANC itself meekly called for greater input and discussion. The President seemed largely silent. Clearly, networking such a crucial document at such a critical moment in our country’s history requires much greater networking if it is to remotely succeed in political buy-in.

For those opposed to the document – and those supportive, the threat of an increasing low-level civil breakdown should be the real impetus to find a compromise. There simply should not be a binary choice between those broad-brushstroke terms of socialism versus capitalism.

Failure

Those on the Left will need to swallow their pride and acknowledge that the leadership of the state has largely failed in South Africa over the past decade. Indeed, the state cannot be the job creator of the future lest it simply be a quasi-employment agency offering little more than sheltered employment with its commensurate inefficiencies and propensity for corruption – proved so clearly. This means an acceptance that empowering business to be a key job creator requires both regulatory and tax reforms to begin the long-haul of incentivising investment.

And, those on the centre-right will need to accept that developmental priorities of education, health, infrastructure/public investment and decent wages are critical in an unequal society like ours. Equally, a simplistic call to summarily reduce (without a credible alternative plan) the many thousands ‘over-employed’ in the state sector can lead to additional social distress and be a further threat to any consumption-driven economy.

Both sides can agree on industrialisation, the enhancement of value-added services and boosting manufacturing for a continent easing its own trade barriers. And both sides should agree that boosting domestic consumption is critical to spurring manufacturing output and its pipeline benefits. Both sides should be able to agree that a credible state and conscious capitalism are an equal role side-by side. It’s the escape clause for our current malaise.

Failure to accomplish this will result in more days of looting, plundering and suffering as access to resources diminishes further. Business is surely ready to play its part – but the ANC now has to act to become and Alliance of action rather than one of paralysis.

Daniel Silke is a political analyst, author and keynote speaker. Views expressed are his own.