Government lacks autonomy to emulate Asian Tigers’ path
by Wynand Greffrath,
2014-01-22 05:27:31.0
DESPITE the steadfast ideological resolve of the African National Congress (ANC), the macroeconomic policies it has spawned have been transient, often contested, and contradictory.
The publication of Goldman Sachs’s Two Decades of Freedom report late last year has once again focused attention on the distinctive nature of South Africa’s economic landscape, and its interface with society and government. The report was variously commended and criticised for its analysis and evaluation of South Africa’s broader economic position.
If nothing else, it serves as a reminder of the cardinal role economic growth plays in ensuring South Africa’s general stability and well-being. The report verifies the strides made by the ANC government in the past two decades in reducing poverty, among other structural advances. It is therefore thought-provoking to compare the insights of the Goldman Sachs report with the government’s own blueprint for growth — the developmental state.
Central to the ANC’s (and therefore the government’s) engagement with South Africa’s socioeconomic and political challenges is the concept of the national democratic revolution. The national democratic revolution is an ideology in the purest sense of the word, as it provides its adherents with a political roadmap that identifies the injustices of an unacceptable past and lights the path towards a better future. According to the ANC, this will manifest in the form of a society that is "nonracial, nonsexist, united, democratic, and changes the manner in which wealth is shared, in order to benefit all the people".
The first steps towards achieving this ideal were taken in 1994, with the ANC becoming a party of government, subsequently controlling the "levers of power", represented by the institutions of state. This realised the fulfillment of the maxim of Kwame Nkrumah, Ghana’s first president, "Seek ye first the political kingdom, and all else shall be added unto you."
The attainment of the political kingdom delivered to the ANC the means to decisively alter the lives of South Africans. The mechanism through which it chose to implement its ideological and progressive development agenda was the developmental state — the same model of economic governance responsible for the exceptional levels of economic growth and industrialisation of the Asian Tiger economies. These Asian examples demonstrated how states that were late to industrialise could take the initiative in leading the process of accelerated industrialisation — a function the private sector would organically fulfil in the normal course of economic development, given enough time.
Thus, in Hong Kong, South Korea, Taiwan and Singapore, the state intervened actively in the economy from the 1960s, premised not on socialist redistribution (which underpinned the orientation of contemporary postcolonial peer states, particularly in Africa) but rather on state-led macroeconomic planning, guided by capitalist principles and international competitiveness. These developmental states were generally characterised by two common features: a remarkable political will by the government to act autonomously in the interests of economic growth, and a highly capable state apparatus staffed by the country’s best and brightest minds.
The developmental state’s recipe for success is therefore an attractive prospect for developing countries, particularly those able to leverage abundant natural resources. However, despite the government’s longtime nominal commitment to a developmental state, most recently reiterated in the National Development Plan (NDP), there is little evidence to suggest this goal is attainable in the near future, for a number of reasons.
First, the government has been unable to act with unconstrained autonomy in fostering a developmental economic climate due to the ruling party’s proximity to organised labour. The configuration of the tripartite alliance has resulted in organised labour (as represented by the Congress of South African Trade Unions) essentially emerging as a super-effective lobby group. This has resulted in an imbalance during times of wage negotiation, as labour demands carry the implicit sanction of the government, fostering a confrontational climate with the private sector.
This creates a regulatory climate with a strong bias towards labour, which negates the developmental climate required to accelerate economic growth. The Goldman Sachs report demonstrates that the cost of labour has risen at a higher rate than labour productivity, which has stymied the creation of new employment opportunities. The pronounced trend of increased strike action (20-million work days were lost to strikes in 2010) and the frequently violent nature of such strikes negatively affect net foreign direct investment and investor confidence, depriving the economy of precious capital inflows that could stimulate industrialisation. The report notes the combined contribution of mining and manufacturing to the economy has fallen from 38% in 1986 to 23% in 2012 — a trajectory raising concern, given these sectors’ importance to exports and employment.
Second, the creation of capable and effective state institutions has been neglected. Such institutions are required to plan and implement the prerequisites for an innovative developmental state. By the government’s own admission, the public service is not perceived as a "career of choice", and the ideological programme of transformation and demographic representivity (often achieved through cadre deployment) has decimated knowledge and scarce skills in many areas of government. The magnitude of this dilemma is evident not only in the government’s inability to render basic services (which has provoked sustained civil protest), but also the destruction of value in state-owned enterprises such as Telkom, Transnet and South African Airways. Further, debilitating corruption and maladministration remain persistent challenges to creating a "competent state", as espoused by the NDP.
The replenishment of the necessary skills with which to staff effective state institutions requires substantial investment in quality education and training, as well as research and development. Disregarding these priorities will erode South Africa’s competitiveness in an integrated global economy.
The controversial shift from the Reconstruction and Development Programme to the Growth, Employment and Redistribution strategy during Thabo Mbeki’s tenure, the damp squib that was the Accelerated and Shared Growth Initiative for South Africa, and the present discrepancies between the Industrial Policy Action Plan, the New Growth Path and the NDP, collectively point to an inability to formulate and expedite a cogent macroeconomic charter for a South African developmental state.
Given these perspectives, the South African political landscape reveals the conspicuous absence of the autonomous political will and the institutional capacity to realise the establishment of an authentic developmental state. As a result, the potential of sustainable economic growth remains unrealised. Instead, it would appear a hugely expanded system of social grants will represent the mainstay of the government’s approach to addressing South Africa’s socioeconomic challenges — a strategy that can only foster dependency, not development.
The government should be acutely aware of the fact that the commendable outcomes of the national democratic revolution can be realised only through the creation of wealth, not its redistribution.
• Greffrath is a researcher at North West University and a Fuchs Scholar.
People walk along a busy street at Pudong financial district in Shanghai. Picture: REUTERS
DESPITE the steadfast ideological resolve of the African National Congress (ANC), the macroeconomic policies it has spawned have been transient, often contested, and contradictory.
The publication of Goldman Sachs’s Two Decades of Freedom report late last year has once again focused attention on the distinctive nature of South Africa’s economic landscape, and its interface with society and government. The report was variously commended and criticised for its analysis and evaluation of South Africa’s broader economic position.
If nothing else, it serves as a reminder of the cardinal role economic growth plays in ensuring South Africa’s general stability and well-being. The report verifies the strides made by the ANC government in the past two decades in reducing poverty, among other structural advances. It is therefore thought-provoking to compare the insights of the Goldman Sachs report with the government’s own blueprint for growth — the developmental state.
Central to the ANC’s (and therefore the government’s) engagement with South Africa’s socioeconomic and political challenges is the concept of the national democratic revolution. The national democratic revolution is an ideology in the purest sense of the word, as it provides its adherents with a political roadmap that identifies the injustices of an unacceptable past and lights the path towards a better future. According to the ANC, this will manifest in the form of a society that is "nonracial, nonsexist, united, democratic, and changes the manner in which wealth is shared, in order to benefit all the people".
The first steps towards achieving this ideal were taken in 1994, with the ANC becoming a party of government, subsequently controlling the "levers of power", represented by the institutions of state. This realised the fulfillment of the maxim of Kwame Nkrumah, Ghana’s first president, "Seek ye first the political kingdom, and all else shall be added unto you."
The attainment of the political kingdom delivered to the ANC the means to decisively alter the lives of South Africans. The mechanism through which it chose to implement its ideological and progressive development agenda was the developmental state — the same model of economic governance responsible for the exceptional levels of economic growth and industrialisation of the Asian Tiger economies. These Asian examples demonstrated how states that were late to industrialise could take the initiative in leading the process of accelerated industrialisation — a function the private sector would organically fulfil in the normal course of economic development, given enough time.
Thus, in Hong Kong, South Korea, Taiwan and Singapore, the state intervened actively in the economy from the 1960s, premised not on socialist redistribution (which underpinned the orientation of contemporary postcolonial peer states, particularly in Africa) but rather on state-led macroeconomic planning, guided by capitalist principles and international competitiveness. These developmental states were generally characterised by two common features: a remarkable political will by the government to act autonomously in the interests of economic growth, and a highly capable state apparatus staffed by the country’s best and brightest minds.
The developmental state’s recipe for success is therefore an attractive prospect for developing countries, particularly those able to leverage abundant natural resources. However, despite the government’s longtime nominal commitment to a developmental state, most recently reiterated in the National Development Plan (NDP), there is little evidence to suggest this goal is attainable in the near future, for a number of reasons.
First, the government has been unable to act with unconstrained autonomy in fostering a developmental economic climate due to the ruling party’s proximity to organised labour. The configuration of the tripartite alliance has resulted in organised labour (as represented by the Congress of South African Trade Unions) essentially emerging as a super-effective lobby group. This has resulted in an imbalance during times of wage negotiation, as labour demands carry the implicit sanction of the government, fostering a confrontational climate with the private sector.
This creates a regulatory climate with a strong bias towards labour, which negates the developmental climate required to accelerate economic growth. The Goldman Sachs report demonstrates that the cost of labour has risen at a higher rate than labour productivity, which has stymied the creation of new employment opportunities. The pronounced trend of increased strike action (20-million work days were lost to strikes in 2010) and the frequently violent nature of such strikes negatively affect net foreign direct investment and investor confidence, depriving the economy of precious capital inflows that could stimulate industrialisation. The report notes the combined contribution of mining and manufacturing to the economy has fallen from 38% in 1986 to 23% in 2012 — a trajectory raising concern, given these sectors’ importance to exports and employment.
Second, the creation of capable and effective state institutions has been neglected. Such institutions are required to plan and implement the prerequisites for an innovative developmental state. By the government’s own admission, the public service is not perceived as a "career of choice", and the ideological programme of transformation and demographic representivity (often achieved through cadre deployment) has decimated knowledge and scarce skills in many areas of government. The magnitude of this dilemma is evident not only in the government’s inability to render basic services (which has provoked sustained civil protest), but also the destruction of value in state-owned enterprises such as Telkom, Transnet and South African Airways. Further, debilitating corruption and maladministration remain persistent challenges to creating a "competent state", as espoused by the NDP.
The replenishment of the necessary skills with which to staff effective state institutions requires substantial investment in quality education and training, as well as research and development. Disregarding these priorities will erode South Africa’s competitiveness in an integrated global economy.
The controversial shift from the Reconstruction and Development Programme to the Growth, Employment and Redistribution strategy during Thabo Mbeki’s tenure, the damp squib that was the Accelerated and Shared Growth Initiative for South Africa, and the present discrepancies between the Industrial Policy Action Plan, the New Growth Path and the NDP, collectively point to an inability to formulate and expedite a cogent macroeconomic charter for a South African developmental state.
Given these perspectives, the South African political landscape reveals the conspicuous absence of the autonomous political will and the institutional capacity to realise the establishment of an authentic developmental state. As a result, the potential of sustainable economic growth remains unrealised. Instead, it would appear a hugely expanded system of social grants will represent the mainstay of the government’s approach to addressing South Africa’s socioeconomic challenges — a strategy that can only foster dependency, not development.
The government should be acutely aware of the fact that the commendable outcomes of the national democratic revolution can be realised only through the creation of wealth, not its redistribution.
• Greffrath is a researcher at North West University and a Fuchs Scholar.
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