ANC ineptness forced its economic policy U-turn

Don’t get too excited about its SOE investment proposal for the private sector – remember how the ruling party neglected the NDP.
Image: Waldo Swiegers/Bloomberg

A lot has been said about the ANC’s apparent economic policy U-turn outlined in a leaked policy document set to be tabled at its policy conference in July this year.

It proposes that private sector companies acquire (invest?) stakes in state-owned enterprises (SOEs) and build the infrastructure necessary for these entities to function properly.

The document was received with surprise draped in heaps of scepticism. It appears to be a crack in the ANC’s historical belief that South Africa’s economic future is cemented in a developmental state model.

It seems as if there is an acceptance that this model has failed.

Read: ANC suggests state firm ownership model is dying

In a developmental state government takes control of the economy. The ideal is a state that plays a dominant role in the economy through strong intervention and extensive regulations and by building and running efficient state-owned enterprises (SOEs) thanks to which the private sector can ‘thrive’.

For example, an efficient Transnet could have exponentially increased the country’s exports of coal and iron ore industries, but alas…

The model is similar to China’s and Beijing proved that the developmental state can bear fruit. Its success is however squarely based on the running of profitable, well-managed SOEs that actively contribute to economic development.

Unfortunately, as successful as China has proven the model to be, the failure of virtually all of South Africa’s SOEs has had the opposite effect. If nothing else, the ANC has proven over the past decade that it cannot even run a bath.

The numbers speak for themselves.

The numbers do the talking

The 2022 National Budget shows the return on equity of SOEs tanked to -14.6% in the government’s 2021 financial year.

The SOEs’ total debt amounted to R850 billion, and operational cash flows fell from R56 billion in 2020 to R30 billion in 2021. This resulted in infrastructure spending plummeting from R86 billion in 2017 to R44 billion last year.

Government does not have the skills nor the money to turn these entities around.

Therefore, it should not come as a surprise that the ANC is turning to the private sector for help – despite portraying the latter as an enemy for being “greedy and exploitative” for many years.

Several interventions

Another reason that the leaked policy document should not come as a surprise is that over the past year or so, government announced several structural reforms to allow the private sector to assist SOEs in becoming more productive. This includes allowing private companies to generate up to 100MW of electricity without a licence, allowing private-sector rail operators to use Transnet’s rail infrastructure, and using private sector entities to make its ports more productive.

The current electricity crisis may also accelerate the licencing of private power producers.

The partial privatisation of South African Airways (SAA) is another example.

Although South Africa does not need a state-owned airline, introducing a private sector equity partner was the last resort to keep it in the air. (It was actually partial privatisation, but that word seemingly remains a swear word for ANC ears)

President Cyril Ramaphosa also alluded to it in his State of the Nation Address earlier this year when he said that businesses create jobs, not government.

The question, therefore, is whether the ANC will accept this document at its policy conference and if it does, whether it will be implemented before it is too late.

I still remember former president Jacob Zuma brandishing the National Development Plan (NDP) in the air at the 2008 Mangaung conference, proudly proclaiming that this document is the ANC’s plan to create a flourishing economy, create jobs, and reduce poverty and inequality. It was a great plan, and if implemented, South Africa would have looked very different today.

Some delegates openly jeered at the time, and others shook their heads. Look what happened.

I don’t think this is a radical U-turn based on renewed thinking within the ruling party. The ANC has forced its own hand.

Good proposals mean very little as long as they are only on paper and the latest proposal still needs to be accepted as policy at the ANC’s conference at the end of the year.

And after that, it needs to be implemented. The NDP is still gathering dust in file 13 and the same might very well happen with this document.

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The ANC have over 30 years had all the beautiful plans and promises and delivered the highest unemployment and most inefficient SOE’s in the history of this country.
Do not expect any of these wonderful new ideas to work either !!

These clueless central planning clowns make their mistakes on our time and at our cost. They do failed experiment after failed experiment and send us the bill. They pretend to know what is best for citizens, while those citizens themselves have no idea what is best for them. Are these central planners not from the same community, with the same cultural beliefs, education, and mindset as those ignorant and naive people whom they are trying to rule and regulate with their supposedly brilliant plans?

Even the most brilliant economists, historians, sociologists, teachers, doctors, and anthropologists make mistakes when they start their own businesses. According to statistics, 85% of new businesses fail within the first 5 years, simply because they miscalculated the needs of consumers and clients, or mismanaged their cash flow. Why would uneducated, ignorant, confused, and inexperienced politicians do any better? The difference is that private entrepreneurs pay for their own mistakes, while we pay for the errors of politicians.

Socialist politics enable the most clueless members of society to rise to positions of power from where they make their planning errors without any repercussions or accountability. A person who is unable to run a spaza shop successfully, now runs the retail space and economic activity of the entire nation. He rules, regulates, and directs consumer behavior and entrepreneurial activity as if he has a direct line of communication with the Almighty!

The nation pays the price for the mistakes made by central planners. Firstly, citizens pay through missed economic opportunities, the absence of economic growth, constrained government finances to fund the social grant, unemployment, poverty, and hunger. Secondly, these ignorant central planners tax the successful entrepreneurs into extinction, to finance the cost of central planning errors at SOEs and municipalities. Their mistakes and ignorance swallow the economy. They steal the bright future we never had.

Statistically, their chances of success are less than 15%, even if they were brilliant academics, but they advocate these plans with such conviction, as if success is 100% guaranteed!

They are unscrupulous liars, clueless failures, who are unable to manage their own affairs, while they make a living by pretending to have a plan for others.

Even the Chinese central planning proves to be an unmitigated disaster. Harvard Professor Kenneth Rogoff and IMF Economist Yuanchen Yang estimated that the real estate sector accounts for around 30% of China’s GDP. Most, if not all of the property developers in China are bankrupt. The value of their bonds has crashed lower than the floorboards. Property values have crashed by more than 50%. This monster can bankrupt even the most ardent central planners in the world today.

I think there’s a stand-up comedy TV show like Bill Maher or Jimmy Kimmel waiting to be discovered here.

What economic policy U-turn? Prove you are serious about job creation and not further job destruction.

As an example – why are you still throttling the tourism and hospitality industry? We must literally be the last country on earth, that has not dropped everything with regards lurgy protocols and on 25th March you even added 5 year olds to these requirements!?

We seem to forget that not everyone wants to be muzzled for 11 hours on the way here, as such they just choose somewhere else… I am yet to come across a family that is happy to stick a 15cm cotton bud up their 5 year olds nose… surely you can get permission from the British Foreign Office to drop the last of these economically restrictive policies?

End of comments.

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