SONA2017: South Africa Deserved Better

As if scripted, the portending EFF disruption at the State of the Nation address played out on time. The lead actor, supporting cast and stunt-men (and women) all played their role in yet another depressing and debilitating spectacle already splashed on the front pages of global media.

With the parliamentary precinct resembling a theatre of war rather than democracy, the evening, unfortunately, was not rescued by President Zuma’s eventual address. Indeed, the negativity of the physical disruption was carried into the negativity of the policy message contained in the speech.

Just like Donald Trump, whose promises one might prefer are not kept, so the ANC have been trumpeting its ‘Radical Economic Transformation’ platform. And President Zuma faithfully expounded on this threatening enhanced legislation, regulation, further black economic empowerment charters and even the budgetary process to address ownership inequality within the broader economy.

The rhetoric was the most populist yet from Zuma at a SONA event. Whilst stopping short of using another favoured term, “White Minority Capital’, the message was clear. And, the President went further at the New Age’s event by directly fingering the country’s top four banks for controlling the economy.

Zuma therefore did as predicted. Having found himself in an increasingly tight political corner within a fractious and deeply divided political party, he shifted to the populist Left.

The language and rhetoric used would’ve pleased the likes of the Black Business and Progressive Professionals Forums and is politically a safer crutch to use as his term winds down and the succession battles rage.

Zuma has effectively set up those vying for his job to express themselves within the context of his turbo-charged transformation plan. In this way, he has deftly concentrated the minds of his opponents on an issue that finds substantial resonance – even within the EFF’s support base.

How ironic it therefore was that the EFF’s animus towards the President meant that they did not witness his most EFF-friendly SONA yet – certainly on the issue of broad macro-economic restructuring.

For all the political aspects of the speech, it’s the economy that really counts. And the key issue is whether this more populist approach – including state intervention in the banking sector – will really aid or, more likely, hinder growth, confidence and investment prospects.

Few would disagree that access to capital is critical for growth. And, historical inequalities together with more onerous banking regulations create a double-whammy for those caught in-between. An advanced economy like the United States is similarly grappling with the same issue and has caused President Trump to tackle the Dodd-Frank banking regulations that also holds back many small-business entrepreneurs. We can all agree with the President that giving opportunities to everyone is essential.

With the headline motives agreed, the rub is not only in implementation but in deeper systemic issues of ethics, good governance and global financial accountability. A heavy-handed approach via more layers of regulation is likely to undo any of the benefits the transformation plan seeks to achieve.

Business is already reeling under mounting costs within South Africa. At the same time that the President rightly calls for making it easy to do business, the threat of state intervention can make South Africa uncompetitive on the global market.

Attempts to redress inequality and ownership may need the state to step in. But, can the state really be trusted to do this equitably and transparently?

With too many question-marks about state capture, crony capitalism, rent-seekers and political patronage, the language of ‘radical economic transformation’ may just be a euphemism for extending the networks of well-connected individuals with little trickle-down to the ordinary population. With a trust deficit in the ability of the Zuma administration to deliver good governance, both domestic and foreign business will be right to be sceptical.

With the hands of the state dirtied by multiple scandals and increasing corruption, additional regulations may also negatively affect South Africa as a destination for foreign investment. And, whilst cartels (and monopolies) certainly do negatively impact South Africa’s citizens, a sledgehammer approach can again force many to look for offshore investment opportunities rather than invest within our borders.

An approach that perpetuates, on a racial basis, a negative view of a sector of South African business not only sews division within society, it kills the goose that lays the golden egg.

Don’t expect President Zuma’s SONA remarks to go unnoticed in the board-rooms of London or Washington and amongst the ratings agencies. But then again, with a renewed commitment to China in the SONA speech, South Africa clearly knows where the next tranche of investment will come from.

Finally, even if we agree on the need for transformation, this will only succeed in a climate of economic growth. And this was SONA2017’s glaring omission. Transformation got the lion’s share of the President’s attention. But growth didn’t. It was more a speech about redistribution and redress (in ownership terms) than about forging a new economic course to meaningfully increase GDP in a sustainable way.

You have to pity Finance Minister, Pravin Gordhan after last night. He has to bear the consequences of explaning all the ‘radical’ terminology to investors and those pesky folks at S&F and Fitch. He will have to count the cost of a government simply unable to deregulate the economy and unblock the drain of ailing state-owned-enterprises. He will have to be the bearer of even more onerous taxes to fund a continued commitment to ideology that lacks a competitive driver for real growth.

Devoid of innovative policy but full of populist rhetoric, this SONA plays to an ever-decreasing support-base of the President.

Perhaps the real pity is that the sentiments therein could’ve gained broader buy-in if they were couched in more diplomatic language and coming from a credible, respected President and his government. After all, this economy cannot be in the hands of the few. It must be inclusive. It has to work for all. But making it a ‘them vs us’ battle on racial lines helps no-one – especially those 40% of South Africans still unemployed.

SONA’s violent prelude and the substance of the speech really did reflect the state of the nation – fractured, factionalised, frustrated and fraught with uncertainty. South Africa deserved better all round.