The 15th of June marks President Xi Jinping’s 70th birthday. President Putin reached this milestone last October. As their days ebb, these autocrats tempt horrific outcomes in pursuit of ill-conceived legacies. We should better appreciate why ANC leaders are so attracted to them.
Declining confidence in President Ramaphosa traces to his inability to noticeably constrain the patronage network which dominates ANC policy making. It is not rational to expect the party to rehabilitate itself. Meanwhile, polls suggest that next year’s elections, like the Zondo Commision, will have far less impact than one would reasonably expect.
An ANC-dominated coalition could rapidly improve our economy’s ability to reward capital by significantly reversing the party’s long-standing anti-business and anti-competitiveness policies. However, the party’s essence, track-record, and recent trends all discredit such hopes.
Often overlooked is that even if, somehow, there was a profound pro-business policy shift, the impact on employment would be meagre. The brittle finances common among so many households contributes significantly to unemployment. This won’t be swiftly repaired.
SA has the world’s most severe youth unemployment crisis. Our various leaders lack anything resembling a remedy. The debate is about increasing sub-subsistence grants.
Suicidal
ANC leaders will have come to accept that their chronically incapable party can’t realistically hope to remain electorally competitive until 2029. Aligning with autocratic governments makes sense as legitimate election in 2029 would be suicidal for the ANC.
The only feasible way to rapidly reduce our massive youth unemployment backlog is to have them add value to goods or services consumed in western markets. Many countries, most notably Japan and China, recognised, and learned to navigate, this unparalleled opportunity path many decades ago.
This path need not, and should not, be tied to rewarding SA-based capital. The ANC’s policies harshly undermine SA’s ability to reward capital. Thus very few local or foreign companies see SA as being a suitable jurisdiction for value-added exporting. As services will continue to outpace manufacturing while remote working becomes more prevalent, employees no longer need to reside where their employers are domiciled.
Of course the ANC should have been more concerned that its policies would create - and entrench - massive youth unemployment sufficient to undermine its electoral viability. It has become clear however that the party is now beholden to benefactors who require it to use its government powers to feed the kitty. The only other consideration that is not secondary is the party’s continued viability - which is on a collision course with preserving legitimate elections.
Binding constraint
SA’s pre-1994, sanctioned, mining-dependent economy was starved for capital. Investment led growth. Then, as SA was reinventing itself, global commerce was also reconceived. Cross border investment flows became much faster and more common. The binding constraint acting on our economy has long been access to purchasing power.
Global poverty has plunged since the early 1990s reflecting well over a billion workers having been integrated into the global supply chains that serve affluent western markets. This model solves the high growth versus high savings dilemma inherent to countries with extensive poverty. It does so by providing access to deep consumer markets. This became the standard economic orthodoxy shared by high growth emerging nations, such as China. It is sometimes referred to as the “East Asian model.”
When it produces a large affluent middle class, this model has tended to advance democracy, such as with South Korea and Taiwan. In the absence of a large middle class, “big man” politics can more easily smother democratic desires through using government resources to buy support. This is far more doable when a country’s population is predominantly rural and its exports are dominated by commodities.
The extreme outlier
Geographic and cultural isolation from successful economies also benefit big man styled political dispensations. These combinations of factors are clustered in the Middle East and Africa. Russia and its satellites are, however, not very different. China is the extreme outlier.
China’s economy is the inverse of ours. We have the world’s most severe - and most incorrigible - youth unemployment crisis due to isolationist and anti-competitive policies such as localisation, BEE and cadre deployment. China has the world’s most competitive manufacturing capacity while its populace prioritises saving. Many of our households are choking on expensive debt.
Value-added exporting is great for economic development in part because it aligns the interests of a ruling party with the general population. Commodity exporting has the opposite effects and this makes China, the world’s top importer of commodities, very attractive as an alignment partner for patronage-dependent ruling parties of commodity exporting nations.
Aligning with autocrats
As the ANC has no reasonable hope of remaining electorally competitive, its next wave of leaders will likely pivot away from legitimate elections to fully embrace big man styled politics. This explains the party’s willingness to sacrifice SA's crucial value-added exports to western markets in favour of aligning with autocrats. Cash donations to the party from Russian oligarchs are a significant, though lesser, consideration.
The ANC’s pivot to decisively align with autocrats looked promising a year and a half ago. Experts expected Russia’s invasion of Ukraine to succeed thus greatly strengthening Putin and Xi as challengers to the western-designed world order. Instead, their countries’ economic growth paths have been deeply muddied.
It is easy to appreciate why autocrats like Xi and Putin think democracies are inefficient; they are. For instance, the likes of Jefferson and Madison designed the US constitution to squash legislative fervour. Nor does the EU’s need for unanimity among 27 disparate nations encourage rapid responsiveness.
Legacy projects
The world order has been starkly recalibrated since early last year. The biggest surprises have come from Ukraine, Brussels and the other European capitals as well as the likes of Seol, Tokyo and Canberra. China’s manufacturing competitiveness and capacity is truly amazing but its economy is far from bullet-proof. Both China and Russia have, again, demonstrated how hazardous it can be to centralise decision making. Unchecked big man rule all too often leads to the pursuit of ill-conceived legacy projects.
Before Russia’s invasion of Ukraine last February, it was very nearly unthinkable that the West and key East Asian nations would coordinate to aggressively de-risk from relying on China. This is happening and China and Russia are actively seeking alignments in the so-called global South. Development will suffer for all involved.
Weaponising the dollar and the SWIFT international payment system along with sanctions can produce breaking news headlines. But whether it is called “decoupling” or “derisking,” western oriented governments, businesses and investors have become much less keen on China and its autocratic bedfellows. It is the investments and purchases not made which will ratchet lower China's and Russia's long-term growth trajectories.
Collateral damage
It now seems that countries spanning North America, Europe and SouthEast Asia will individually and collectively discriminate against exports from high carbon emitting nations. They are targeting China; SA will be, as they say, collateral damage. This has much potential to be a real game changer.
The ANC has brought us a future where a majority of today’s young South African adults are unlikely to ever be meaningfully employed. Prospects for this decade’s school leavers are no better. The ANC’s rejection of western alignments is leading this country down a path where, like Russia, SA becomes a vassal state to China.
China's greatest strength is its manufacturing competitiveness. It is the ultimate competitor whereas Europe and North America are the best customers and alignment partners.
Once it has torched SA’s bridges to the West, our ruling party will likely learn that China’s leaders see the ANC for what they are: greedy plunderers that have betrayed the next generation of South Africans and that will fail to meet their obligations to those reckless enough to align with them.
