Transformation should be a prominent by-product of SA’s economic growth. Instead, policy makers have prioritised transformation as if it could serve as a growth substitute. As such policies continue to devastate economic prospects, it’s time to prepare for transformation 2.0.
It has been difficult for white business people to criticise transformation policies without being seen by many as greedy unrepentant racists. Now, as government’s options for funding its deficits constrict, the mood has become more urgent and less intolerant of divergent opinions. Constructive re-engagement is required.
SA’s economic challenges are routinely identified as poverty, unemployment and inequality. This chant is simultaneously credible and dangerous. Dozens of countries have pummeled poverty and unemployment in recent decades using related blueprints which emphasise global integration and household prudence. Conversely, blueprints for reducing inequality remain elusive. In fact, rising inequality often accompanies plunging unemployment and poverty.
SA’s policies and practices do not resemble those of the many countries that have slashed poverty in recent decades. Rather, focusing on redressing income inequality and historical inequities reflects a rare point of agreement across the party and among ANC alliance partners. While this bias is understandable, it has been over indulged to the point that dire consequences are looming.
SA’s most strategic vulnerability has long been the intersection of economics and politics. This was the intersection most closely guarded during the 1990s transition. Eskom’s abundant woes evidence how economic vulnerabilities trace to widespread political malfeasance. That is, excessively prioritising transformation is particularly insidious as it systematically undermines capabilities, performance and accountability while accommodating corruption and patronage. By precluding the alignment of political and economic interests, overindulging transformation also explains the inability of leading voices inside and outside of government to produce a compelling growth plan.
The binding constraint prohibiting SA from achieving full employment and broad prosperity is access to sufficient purchasing power. A fast track path would involve an export surge being maintained for about two decades. Relying on growing domestic consumption would be a slow grind requiring generations of household austerity accompanied by steady skill building. The prudent path, followed by many nations, combines focusing on surging value-added exports with encouraging household financial prudence.