COMMENT

Framing the DA’s BEE debate around solutions

Shawn Hagedorn says export led growth is required to lift population out of poverty

Values are to politics as branding is to retailing. This helps explain the DA’s leadership debating BEE legislation this weekend. To achieve internal consensus, the party should focus on how promoting its values aligns with developing a plan to pummel poverty - on commercially and politically viable terms.

Voters the world over respond to complex challenges not by studiously researching the issues but rather by supporting those who share their values. The ANC’s values-based bond with so many voters traces to its role in delivering universal political freedom. With polls pointing to another ANC national majority despite revelations of rampant corruption, the DA is not going to reshape the nation’s political landscape with its values.

With over 30 million South Africans being poor, the DA’s influence rests on its ability, as the official opposition party, to present a workable plan to achieve universal economic freedom. If it had to ditch its values to produce such a plan, that would, of course, be a serious issue. Rather, the DA’s values are consistent with SA achieving broad prosperity, yet the trademark of political progress is negotiated compromising.

That BEE legislation is race based is a lesser criticism than how it was always going to benefit few at the expense of many. Per capita income growth has been stagnating for years with no end in sight. That the poor shoulder the greatest hardship is a recipe for rising populism.

None of SA’s centres of influence has offered anything resembling an adequate plan. This is largely explained by their not challenging the ANC’s anti-accountability ploy of heralding a multitude of objectives.

Fixing the economy is mostly about creating the political will to initiate a series of policy pivots. Whereas the ANC is too overwhelmed by factional stresses to muster the required objectivity and creativity, the DA can meaningfully enhance the policy environment by setting out a realistic solution path.

The first step is to recognise the necessity of a credible long-term plan. The ANC avoids going down this path as showing what will work spotlights how ill-conceived its policies have been. Expect the ANC to continue to equivocate around policies and planning before the election. But if this is not more effectively challenged, the election will have come and gone without creating pressure for policy pivots. Thus the DA must fill the void, now.

Among the key differences from two or three years ago is that redistribution focused policies have nearly exhausted their funding sources. Thus, land is now targeted through expropriation without compensation and prescribed assets are being considered to access pension fund assets.

The second step is to prioritise a single overarching goal which aligns business and political interests. The only choice is poverty reduction.

Focusing on jobs is politically very appealing but such government efforts reduce the long-term trajectory of job creation. Only the private sector can create jobs. To maximise job creation the state and SOEs need to shed jobs.

Focusing on growth also doesn’t work as politics requires the focus be on “inclusive growth”. This undermines commercial principles in favour of political wants.

SA has far too many households which are poor, over indebted, or both. There are no plausible scenarios where the modest number of economically stable households will radically increase their spending to offset shortfalls elsewhere. SA will have to emulate the dozens of countries which have devastated poverty through surging value-added exports. The ANC has resisted this path as foreign customers can’t be forced to pay premium prices to fund BEE and other redistribution focused programmes.

The third step is to appreciate that the only option for achieving broad prosperity is through surging value-added exports and that this will require exporters be granted special dispensations from many BEE and other anti-competitive regulations.

If the DA promoted such a workable path, policy debates would become much more realistic. With a bit of luck, and as other options dried up, BEE regulations would be sharply relaxed for exporters. With such a precedent in place, the case for backing away from race-based legislation would become more politically acceptable.

This should be accomplished by policy makers accepting that it is not up to them to identify export channels. Twenty-first century economics dictate that this key task be left to entrepreneurs.

The DA should also be pointing out how much more valuable it is to mobilise capital to hire locally to sell to foreigners. Eventually the penny will drop.

It’s great that the DA has vibrant debates around values and issues, but the ultimate focus must be on solving SA’s challenges. By itself, pointing out how misconceived BEE policies are is of little consequence, whereas robust plans and strong values make for a potent combination.

Shawn Hagedorn is an independent strategy adviser

@shawnhagedorn

shawn-hagedorn.com