A cursory look at the 4^th Quarterly Bulletin 2009 of the South African Reserve Bank shows a disconcerting state of affairs with respect to how the international economic relations are managed and conducted. If this area of the economy could be given more attention and managed more efficiently and effectively there could be some savings made for relief in the domestic tax burden, a case for reduced interest rates and more jobs created. On aggregate with respect to investments it is evident that it pays more to invest in assets in South Africa than offshore. Why?

Notes:
Receipts are investment income for assets owned by South Africans in foreign countries: Payments are for dividends and interest paid to foreign investors who have invested in South Africa.

The issue of the current account deficit and low foreign exchange reserves will always be perennial until the government addresses the structure of the economy in all aspects including proper and transparent financial regulation of the international investment flows and the accompanying production relations. It is not good enough to use the excuse that South Africa does not have the funds for extracting, exploiting and processing the mineral resources that it is endowed with for the benefit of the country.  South Africa already has world class sophisticated institutions of learning, financial institutions, a vibrant stock exchange amongst other important factors for a modern and developed economy. For whom are these institutions existing? Whom do they serve? Do South Africans share in the benefits of these institutions as elsewhere? South Africa has produced ‘indigenous' entrepreneurs of the calibre of Donald Gordon, Mark Shuttleworth, the Oppenhiemers, etc. Where are they now?

Most SA economic analysts always skirt the issue of ownership of the means of production in the economy. They do not want any change in the status quo even though it is inequitable and would sooner or later lead to undesirable consequences and upheavals as has happened with our neighbours in Zimbabwe. Politicians and those with powerful vested and parochial interests often kid themselves saying it will never happen in South Africa. As Thabo Mbeki once said we are a two nation state, one nation well endowed with economic opportunities and a better life and the other nation poor and deprived. The inattention to the fundamental economic issues of our country has resulted in the ascension to economic and political power by an elitist comprador bourgeoisie. This elite is made up of two symbiotic categories, the economic oligarchy and the political oligarchy.  The elite lacks the will and commitment to invest in increasing the productive capacity of the economy that can create jobs and employment. They are bent on consumerism of high value added consumer goods, such as the German luxurious automobiles, expensive overseas travel, etc. In African countries we do not see the leadership passion and patriotism that we see in China, Vietnam, Malaysia, India and Kazakhstan for economic independence and self determination. These countries have higher economic growth rates and are improving the standards of living of their citizens through modernising their economies and rural developments to enhance local internal markets for various goods and services. With us in SA we only shout the "Batho Pele" slogan without any meaningful import or consequential improvement in the life of ordinary citizens.  Leaders perpetuate the victim mentality of blaming lack of delivery on the legacy of the past and the machinations of imperialism of the West whilst they themselves mismanage the scarce economic resources of the country and do nothing about fundamentally correcting those economic imbalances.  It is still "not yet uhuru" for the African. Economic and political leaders have embraced the culture of everyone for oneself and forgotten about service to the nation. It is a "dog eat dog' culture out there.

"The people shall share".  The majority of working South Africans were involved in the struggle for social, economic and political liberation because they believed that we would evolve a new kind of society, a caring and compassionate society.  At the moment many, too many, of our people live in gruelling demeaning, dehumanising poverty. Archbishop Emeritus once stated way back in the nineties that we were "sitting on a powder keg. Poverty and unemployment pose the most immediate threat to our safety and security. We should not be browbeaten by pontificating decrees from on high. We cannot glibly on full stomachs speak about handouts to those who often go to bed hungry. It is cynical in the extreme to speak about handouts when people can become very rich at the stroke of a pen. If those are not massive handouts what are?" This was a wake up call then which has never been heeded by those in power.  The recent service delivery protests are telling symptoms of a fragile economic foundation.

Since democracy in 1994 government has tried to sweeten the bitter pill with the BEE policy and has not made any impact in the lives of ordinary South African except for those who are connected to the political establishment.  The reality of the matter and the unintended consequence is that BEE beneficiaries are agents or representatives of international capital.  They have no influence or impact whatsoever in our national economy except for opening doors for indebtedness of our country in the global economy through overpriced imports, transfer pricing, imported expatriate expertise and excessive and expensive overseas travel.  How do we begin to create 4m jobs in 2014 when we have no equity leverage in terms of the assets we own or control in the economy.  Not to mention the dwindling fiscus where we are either overpaying construction companies for the infrastructural development programme or sheer shrinkage of resources through theft and paying for services and products that have not been delivered or procuring second hand capital equipment at prices for brand new products.  Some industries, amongst others, the construction and steel are having a field day in uncompetitive behaviour bent on collusive practices that include price fixing and hideous tendering agreements exploiting the anxiety of government under pressure to have 2010 stadiums and the roads infrastructure completed on time for the World Cup.

The obtaining capitalist system when implemented and applied in the underdeveloped and developing countries is most inhumane, when super-profits are earned at the expense of the populace with no good return in terms of skills and expertise transfer to the country, nor any accumulation of wage earnings for procuring a better life by those participating in labour provision for the productive work.  Certainly this economic order is not equitable. In South Africa, in spite of the recent commodities boom and economic growth, inequality has increased and workers' share of national income has been declining. Accompanying high unemployment and inequality is the rising cost of living for many of our people. At the end of a working life a worker is not able to take care of himself, nor his dependants, his last hope is the social security system. All the big mining corporations that currently benefit from South Africa's wealth were built on the foundation of poor people's sweat and blood as cheap labourers, slaves and underpaid workers in the mines. The people of South Africa should share in the country's wealth. The mineral wealth beneath the soil, monopoly industries and banks should be transferred to the ownership of the people as a whole. {Please note I did not say nationalisation. What I mean is that we should have a critical mass of the citizens, such as Patrice Motsepes, Raymond Ackermans, the Venters, etc. with a substantial impact on the economy in terms of job creation and increasing the productive capacity of the economy (as in plant, equipment and other facilitative infrastructure). I do not mean distributing agents for luxurious big tickets imports of technology, consumer autos and fly-by-nights experts and executives ala Coleman Andrews of the SAA notoriety.

The words of former ANC President Oliver Tambo are as true today as when he said them in the 1969 that, "At the moment there are vast monopolies whose existence affects the livelihood of large numbers of our people and whose ownership is in the hands of Europeans only. It is necessary for monopolies which vitally affect the social well-being of our people such as the mines, the sugar and wine industry to be transferred to public ownership so that they can be used to uplift the life of all the people".

One of the less mentioned reasons for the less than desired economic growth in South Africa in comparison to the other developing economies is that most of the wealth and profits generated in the economy is leaked out of the country through earnings and dividends due to foreign investors, payments for expatriate skills, expertise and services, transfer prices for inputs into production locally and the unfavourable terms of trade. Countries like China and India guard these economic aspects jealously in the interest of their nations. South Africa is home to the world's three largest platinum producers, Angloplat, Implat and Lonmin. What impact do these companies have in the economy of the country? Do they create proportionally more jobs in relation to the strategic importance of the commodity? Do they invest in the training and production of skills and expertise? Do they leverage our manufacturing industries to export high value added products and services? Do they help build SA's global competitiveness? Or are they just present here merely to extract and deplete the mineral reserves of the country and creating and exporting jobs and expertise to the developed countries, enhancing the competitiveness of their manufacturing industries because they get the raw materials on the cheap in South Africa?

We often refer to companies in India and Brazil as exemplary in contributing to the economic growth and development of those countries.  The fact of the matter is that CVRD (Vale) in the case of Brazil and the Indian corporations are indigenous companies with investment decisions made in those countries and not in London nor New York.  As for China, it is thanks to their state capitalism that they are not hapless recipients of FDI at extortionist terms of trade.

I hope this year, 2010 will not be spent in debates, workshops and seminars about inflation targeting, industrial and economic policy but will call for a long and hard look at the fundamentals of the political economy of South Africa and engender pragmatic solutions to the problem of poverty and unemployment.

*The views expressed here are those of Tseko Nell and not the Department of Minerals Resources.  Tseko Nell is the chief economist in the Department of Minerals Resources.

[1] Words in italics are for emphasis and inclusion of unemployment by myself.

[2] ANC National Executive Committee Political Report to the 1^st National Consultative Conference, Morogoro, 1969.