As the ANC can still frame nearly every debate within a social justice context - notwithstanding obscene levels of unemployment and poverty - they can still favour the politically connected in the name of battling inequality. This twists perceptions of growth options to the point that none of our leaders can offer a workable plan.
Widespread corruption and incompetencies resemble a slipping clutch. If we were to somehow install a non-corrupt, competent government in 2024, the slippage could be remedied. But the perception that investments fuel growth resembles dot-com era companies confusing speculative investor support with a viable plan.
Success is fuelled by creating value which generates more revenues than costs. As it will take a long time for SA’s per capita income to regain its decade-long losses, fuelling adequate growth to employ most school leavers requires sharply expanding exports.
Instead, our policies are becoming even less aligned with how the global economy is rapidly evolving. This makes the ANC ever more electorally exposed to other leaders advancing a plan where many young adults know at least one former classmate who has an “internet job”. A precursor is the Cape Skills and Employment Accelerator project. The 1,400 graduates of its call centre training programme have all been offered permanent employment.
The global transition toward a digitally driven service based economy is real while over three billion people, particularly the affluent, live in countries with sub-replacement level fertility rates. The global economy has about 300 times more discretionary purchasing power than our domestic economy. Yet what we manufacture are barriers to growing youth employment - while much of the world lacks sufficient young workers.
The ANC presumes that as long as there is wealth in the country it can be redistributed and converted into consumption. This provokes an investment shortfall which our president seeks to overcome through charm and empty promises. The status quo has suited ANC elites, and those they favour, while exacerbating inequality as most black South Africans must contend with chronic unemployment, persistent poverty, or both.
The ANC has now worked out how to provide ongoing subsistence grants for millions of healthy young adults, among others, without acknowledging a need to scrutinise how its economic stewardship is cratering the nation’s prospects. They would have us believe that they are fiercely debating the pros and cons of subsistence grants internally within the party. Then all they have to do is repeatedly extend the grants “temporarily”. Conversely, a decision to permanently provide such grants would ratchet up pressure to pivot toward growth enhancing policies.
That the political opportunism of converting savings to consumption is so dangerous explains why economists distinguish between virtuous and vicious cycles. The ANC’s exploitation of inequality - to justify the redistribution-focused policies necessary to feed its massive patronage network - is an extremely harmful version of a vicious cycle. Yet, remarkably, this understates the damage being inflicted upon SA’s future.
Many, if not most, of our young adults are now on track to become life-long liabilities while our national dialogue ignores the essential role that twenty-somethings play in modernising an economy. Of course, our education outcomes are unacceptable but that mustn’t be used as an excuse for our perilous levels of youth unemployment.
After brief on-the-job training, many of our poorly educated school leavers can significantly outperform well-educated workers a generation older at many tasks - particularly those that have only emerged recently. Unfortunately, our divisive history, endowed geology, and geographic isolation lead to political exploitation constraining globally-directed entrepreneurial vigour.
Policies could be rapidly corrected but expanding domestic purchasing power to where it can support something resembling a normal level of unemployment would then take many decades. In this important sense, we can’t fix “SA’s economy”. Rather we must advance the enterprising potential of our companies, workers and investors within a global context.
Debates about subsistence payments for healthy young adults must correct the frequently voiced perception that our youth unemployment is attributable to horrific education outcomes. Such overly simplistic reasoning is refuted by domestic and global evidence.
There are many healthy young South Africans who are unemployed despite having achieved admirable academic success. Global poverty has plunged over the past thirty years primarily through low-skilled workers adding value to exports. Initially this was mostly about factory jobs but global growth is now much more services based with digital platforms cancelling distance-based impediments.
Maximising commodity exports is important for funding government expenditures and debt service but its potential to directly and indirectly create jobs is meagre. Our young workers need not be the best at anything; but they just need to be cost competitive at adding value.
Instead, the ANC supports a high minimum wage and it is pursuing a guaranteed “iron rice bowl” strategy with the innovation that there is no work requirement - and thus no on-the-job training. The rise of China began with rejecting such stultifying paternalism in favour of integrating into global supply chains. That region’s rising wages now constrains its competitiveness.
Redistribution-focused policies pummel SA’s value-added exporting prospects. Broadly shared misperceptions about 21st century economic development drivers then create further domestically imposed barriers.
Walmart buying Massmart or Amazon’s retail division challenging Takealot contribute little to the nation’s growth trajectory. Such investments seek to sideline local competitors and to then richly reward offshore investors in perpetuity. Such investment flows are however, attractive to the ANC as they can make demands which favour their alignment partners.
Investments are not endorsements of our economy when they reflect globally competitive companies expecting to capture market share from local competitors. The net long-term effect on job creation from such investment flows is probably negative. As the core driver of our long-term growth potential is the productivity of our young workers - which is horrific as the vast majority are unemployed - such companies will likely choose to repatriate cash from SA for redeployment in high growth markets.
When President Ramaphosa attracts such investments does this not undermine prospects for local companies to invest? When foreign companies repatriate profits, does this not constitute a form of disinvestment?
Average twenty year old South Africans can compete effectively to add value within global supply chains however, after being idled for, say, a decade, their prospective competitiveness will begin to sharply decline. Noticeably reducing our enormous youth unemployment bulge requires value-adding exporters be shielded from anti-competitive regulations.
The need to debate subsistence grants should be provoking a fresh set of policy debates focused around SA’s global prospects and how to seize them.
