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The South African economic tragedy

A case of an unfavourable time, bad politics and poor leadership has made catching up to the global economy improbable.
The real problem – dubiously motivated politicians and the proliferation of policies aimed at making the economy perform the way they want it to. Image: Shutterstock

The failings of South Africa’s state-owned entities, as I wrote about last week in Public-private partnership will not save SAA, are intertwined with the wider economic crisis.

This follow-up column deals with the economy as a tragedy, fittingly so because of the destruction and great suffering most South Africans have endured and will continue to experience for a foreseeable time.

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I have organised the economy into development, finance, governance, labour and production frameworks and do not suggest that a specific one is dominant or more important above others. In time I will tackle each on their own, but for now the attention is on the general dynamics, their linkages and their convergence with other frameworks of the economy.

Policies

I have previously warned that unless the right policies are adopted to counter the growth slowdown and as a response to the changes in the global economy, South Africa can forget about catching up.

Read:

The basic point I make is that the parasitic politics of ruling elites has infected the economy.

These political elites have manipulated the hopes of ordinary people and glorified self-serving behaviour as socio-economic initiatives meant to transform the economy.

The current tragedy has more to do with continuing internal factors, because the South African economy was sick well before this. The Covid-19 pandemic has however thrown a spotlight on the failings of our poor leadership.

These include:

  • Failure to sustain growth, create jobs and achieve societal development when the economy was growing;
  • Failure to capitalise on the commodity boom period;
  • Rising government spending and wasted resources;
  • Declining sectors;
  • Declining productivity; and
  • Inability to introduce structural reform (moving from a mining-based economy) as a response to changes in the global economy.

Beneath the surface, several problems were festering:

  • Job losses due to declining sectors and slow growth;
  • Rising poverty and inequality;
  • High levels of unemployed youth, idle and alienated without work;
  • The proliferation of policies that sought to determine that the economy perform as politics dictated; and
  • Policies aimed at mitigating unforeseen side effects of events, such as the financial crisis on the economy, did not take off.

All these internal causation factors overlapped and converged with external factors, which – were it not for the self-inflicted damage – could be attributed to bad luck and unfavourable timing.

In reality it isn’t about bad luck, because while South Africa was losing ground and missing opportunities, other emerging economies were taking advantage of conducive global capitalism using policies and strategies that enabled the restructuring of their economies.

Government action did not dictate how those economies should work. Instead those interventions were in the choices of policies that, although liberal, enabled economic development – which made achieving socio-economic initiatives possible.

The opportunity cost for South Africa is that policies that have sought to revive the economy may have worked in some instances (such as the Industrial Action Policy Plan in the auto manufacturing sector), but their sum total has been overall failure.

The reason for the tragedy is obvious

Seen this way, the relationship between internal and external factors has created a tragedy – because the interventions aimed at mitigating unforeseen events, such as the pandemic, cannot resuscitate an economy that has compromised frameworks.

How do we solve this economic stagnation and the South African tragedy?

Every downturn has to eventually end. The focus thus should now be on using policy in a way that lessens the downturn by shortening its impact on the private sector.

Firstly, for example, now that the country is in Level 1 lockdown, barriers that prevent sectors such as tourism and hospitality from operating fully should be removed.

Secondly, load shedding and power supply problems are simply not acceptable considering that 2020 is a year when operations and productivity stopped – neither business nor government can afford a halt in economic activity due to Eskom’s faults.

Read:
SA’s recovery plan must address constraints, or it’ll fail: Sarb governor
SA’s future rests on a perpetually broken utility

Enough of the asinine rhetoric

At this point, the realisation should be dawning to leaders in government and Parliament that the economy will not improve by subjecting the public to well-meaning but downright asinine rhetoric claiming good intentions of a New Dawn.

Have we not learned that the road to hell is often paved with such intentions?

Not all is lost though.

The shift in the international political economy occasioned by the coronavirus means that an opportunity to end South Africa’s tragedy exists. If taken, it should be based on policies and strategies that understand the importance of an alignment between the pursuit of both economic growth and social justice.

It is perhaps necessary to spell out the obvious: achieving this is possible only if the pre-eminence of politics is removed.

Politicians should serve, not reign. Their focus should be on people, not power.

Remove the primacy of politics, and fellow South Africans might and probably will prove that we are more than up to the difficult tasks that face the country.

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The country is just going back to the level of competency and the values of the majority. Similar to Zim. Just that we might be going still a notch lower. Question : what exactly is there to stop this slide ? Certainly not the government. They are the slide into chaos catalyst.

We are not Zim you incompetent. You cannot even compare. SA is a powerhouse with dynamic people.

I used to think so as well. Now I am not sure anymore.

Hi Dadape,
Your powerhouse is almost bankrupt. No doubt there are still some dynamic people left. Some of those spend some of their energy to get out of the powerhouse rather sooner than later. However , there are much more looters, stone throwers and tire burners. Their efforts are getting turbocharged by seriously bad policing , and incompetent and corrupt politicians. I guess it takes all kinds to make up your kind of powerhouse ?

Yes Dadape you are right – we are not Zimbabwe. The average Zimbabwean is better educated, more hard working, more socially responsible, less aggressive and less entitled than the average South African.

Zimbabwe was destroyed by a luntic leader. South Africa’s nosedive is brought on by the populace itself

Sorry, but SA is a powerless house,not a powerhouse, thank you Eskom, and the dynamic people used their ability and were dynamic enough to emigrate

There is zero dynamism in SA. Our economy is a mere rounding error on the balance sheets of global corporations. We are a nation of losers, incompetents, and corruptables. We are a useless, pathetic, people with a obsessed with differences. We do not build, create, imagine and strive. We hate, take and destroy.

Fact check: the power house is being load-shedded, the dynamic people are not allowed in the ruling party.

Dadape, lets rephrase your comment. SA *was* the powerhouse, but only in Africa. In the mean time Egypt and Nigeria has moved ahead of us i.t.o GDP. In terms of the entire world economy, ours make out less than 1% of it. I’d hardly call that a powerhouse.

Dadape – SA is a failed state. Period

SA should be a powerhouse and while we still have some dynamic people – not as many as before plus they are not in the key leadership positions that count – the country is a modern-day tragedy. We may not be Zim right now but we are definitely headed in that direction. I feel a great sadness for this country and and anyone who feels this country is a ‘success’ is delusional or they currently ride the gravy train. The BLM movement should start campaigning in Africa because I have been shocked at how Blacks treat Blacks, it is shameful and in the one continent where Black Lives Should Matter the Most, namely Africa, they matter the least. Fix your own house before you lecture the rest of the world on how to treat Blacks.

With a GDP the size of Maryland (ranked 15th in the USA), and even less than Columbia, South Africa is hardly a powerhouse.

Greed has many faces, our leaders do not see themselves as servants to the normal people. They abuse the common people to fill their greed.

I still believe there is hope if the government can shy away from socialist politics, which undermines any effort at economic growth. We have enough quality human capital to achieve sustained economic growth, given a user friendly business environment as well as renewed focus on human education and development.

If foreign investors can see that government is determined to get the economy growing, their capital investment will follow. Same with private sector companies sitting on huge amounts of cash flow will invest.

The current investment climate is unfortunately very unfavourable to any investor, whether foreign or local.

I agree. It starts with each and every one of us, every day in everything we do. James Clear’s Atomic Habits put into practice.

Shying away from the socialist agenda is key. Unfortunately this is not only of government’s doing. The average voter out there is backing the socialists and will vote in new looters if the current bunch were to develop a conscience overnight.

I also want to be hopeful. However the bigger issue for me are the voters, not the political parties. We have a situation where thousands of households are directly reliant on government grants for survival. In the Eastern Cape over 60% of households receive at last 1 government grant. When so many voters are beholden to government social support to survive, it becomes easy to see how capitalism and pro free market political parties are viewed negatively in this country.

The sad thing is that if I were poor, unskilled and reliant on government grants to survive I would also vote for a political party that promises more handouts. Talking about macroeconomics and creating business environments which promote investment realistically talks to an educated middle class, not the majority living in poverty (even if said policies would end up benefiting the poor in the long run).

I don’t know what the solution is. I had hoped that the growth of the black middle class would facilitate a shift away from rampant socialism but the increased levels of inequality in South Africa (even amongst black South Africans) has seemingly had the opposite effect.

Poorly written article and bad negative headline. Then at the end of the article the sad and confused journalist says that not all is lost though which is a complete contradiction of the headline of the article. Please find better, more positive and competent journalists.

This badly written piece of journalism is unnecessarily negative and a contradiction to what its about.

Don’t be an idiot. You are taking a shot at the journalist because you cannot handle the truth. Wake up and look around you what’s going on with the economy and politics. Our government is incompetent and self-serving, senior officials corrupt! Everything government touches, fails. They live in luxury off your taxes and there is nothing to show for it.

Nyaope, so early in the morning, is not your friend.

This guy has to be a troll.

I think he is boombang reinvented ,who I managed to get rid of : total Wally

Sadly…in my opinion…the majority ( not all) of people in government are immature – politically, socially and economically. The country’s policy of righting wrongs by employing and empowering those without the education or experience to do the job is killing this country – politically, socially and economically.

THANK YOU AND REMEMBER TO VOTE FOR MORE OF THE SAME WITH A.N.C. Unfortunately the people who have gone through school and can’t read this will not get the message. These children are our future.

With increasing arrests of State Capturers and the corrupt, the balance of power in the top six and NEC in the ANC will slowly swing towards the less bad faction in the ANC. Which should enable pres. CR to govern better.

However, the economists and actuaries spoke out loudly during March that the economy will take a big blow. The economic plan should have been pushed by pres. CR and drawn up then already. Seven months later it is still not completed.

The complete destruction of South Africa can be reduced to just three letters

A N C

Poor leadership applies to the previous government administration.

When the previous president stepped down we knew that it was going to take decades to fix the damage.

Well we are now discovering the damage created.

First the NPA had to be fixed/built up and now the work has started.

A nice summation of the South African economy and social structure which is like a newly painted show house, but with beetle infestation in the flooring and structural supports.

It really doesn’t matter what wonderfully sounding New Dawns are promised and what policies and strategies are offered if the people who should be doing the actual work of implementation are either incapable, untrained, lazy or simply corrupt.

The real problem is how to replace these politicians and bureaucrats with professional, competent, ethical and committed people.

This means getting rid of the entire ANC involvement in the running of the country and how that will be smoothly achieved I do not know.

They had their chance and they failed: one has only to follow the Zondo commission with the litany of incompetence, theft and failure to implement service delivery to realise this.

I anticipate your solutions.

Tremendous article Mamokgethi. I disagree strongly on only one point – all is actually lost

Am sure very few will like my suggestion.
1 Deal with No 1 problem – Overpopulation
2. Empty all prisons. Execute anyone serving long term sentences.
Balance to be handed over to road gangs to repair SA roads.
3. Government only responsible for law and order and a few other essential services. All healthcare to be privatised except clinics for basic healthcare. .
4.A small Government to comprise elected citizens and experts from The Uk, USA , Singapore to advise and implement policies that are investor friendly.
5. All grants except pensions to be scrapped.
I could go on and on
6. Any form of corruption to be regarded as treason.

Also a major problem is BEE. Lost all my Foreign clients, they have left the country, courtesy of BEE. No large company is willing to give up 25% or 30% of their shareholding particularly if they have to inject more capital. Those that are left (local)are extracting as much as they can, without putting any more capital in, and where possible establishing overseas company’s. .Expropriation without compensation will just make it worse.

End of comments.

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