Zuma's "giant leap" - off the cliff 

The ANC's policy conference in Midrand this week has dispelled any lingering hope that the ANC can still rescue South Africa from the consequences of 18 years of ANC rule.

If the conference resolutions (couched in tired, old Marxist jargon) are ever implemented, they will undoubtedly worsen the crisis of poverty, unemployment and inequality the ANC claims it wants to address.

The ANC acknowledges in its own discussion documents, prepared for the conference, that the state is "impotent". It acknowledges that there is a "crisis of outcomes" (otherwise known as delivery failure). But its plan to fix this is - more state control!  

Despite the acknowledged failure of almost every state-driven intervention - from land reform to education renewal - President Zuma's opening speech blamed the familiar scapegoat: "white men" and the inherited disparities of apartheid.

Instead of the "giant leap" forward Zuma promised, the conference ended in a tenuous "holding operation" endorsing the re-hashed policy proposals adopted at Polokwane almost five years ago.  

To be sure, it could have been worse. A large number of delegates were pushing for more radical forms of state-led populism, such as the wholesale nationalisation of the mining industry (which reportedly led to a fist fight between delegates behind closed doors) and the confiscation of land without compensation. If this lobby had triumphed, it would have been the death knell for further investment and economic growth. It is important that these calls were resisted (even if only by a narrow margin, in the case of the "land-grab" protagonists).

But this does not represent progress. It means that President Zuma will be even more compromised than he was before the conference. Policy paralysis is the inevitable outcome. Talk of the "developmental state" leading the "second phase of South Africa's transition" is hollow rhetoric, bereft of content.  

Even if some of the policy proposals are implemented, they will make matters worse rather than better. Take the resolutions on mining: they are designed to make conditions more difficult for the mining industry, at a time when many mines are battling to survive. The proposed 50% resource rent tax on mining will inevitably lead to mine closures. The increased revenue government is trying to gain will be minimal compared to the economic and social impact of thousands more unemployed people.

Instead, we should grow mining output by working to reduce costs associated with poor transport infrastructure, inadequate export facilities and rising electricity prices. To grow jobs we need more down-stream industries in mining and to achieve this we should focus on improving the business and regulatory environment so that these industries are attractive to investors. State coercion to force mines to diversify by undertaking "beneficiation" will have the opposite effect. 

Then there is the issue of land reform. The conference resolved that land should not be confiscated without compensation unless it had been acquired illegally. And while the concept of "willing-buyer, willing-seller" was rejected, the conference accepted that constitutional change was not needed. So the legal "status quo" remains: if the state and a private owner cannot reach agreement on compensation for land, a court must determine a reasonable price. 

But the state's own central role in the failure of land reform remained unexamined. Eighteen years into democracy, an "audit" of land ownership in South Africa is still incomplete. If there was any serious intent to drive land reform and improve agricultural output, the ANC would start by focusing on South Africa's most fertile land along the country's eastern sea-board which is largely unproductive and held in various forms of "traditional" communal ownership. The state also owns vast tracts of land. But instead of using this land to broaden ownership and enhance agricultural production, the focus remains on punishing productive farmers. This is incomprehensible given that, according to the government's own statistics, over 80% of land reform ventures country-wide have failed. 

Then there is the all-important area of investment, economic growth and job creation. It is clear from the discussion papers that the ANC still believes State Owned Enterprises (SOEs) should be the core drivers of "economic transformation" with a mandate to "advance the socio-economic and political agenda of the developmental state".  

This jargon is pure satire, given the combined records of Transnet, Telkom, Eskom, South African Airways and the SABC. Between 2008 and 2010, state-owned enterprises had to be rescued by taxpayers to the tune of R243-billion. And to add insult to injury, when their CEOs and senior staff were "relieved" of their positions, it cost taxpayers R262-million to let them go.  

As if this is not enough, there are now plans for a new state-owned mining company, a state-owned bank, a state-owned construction company, and a state-controlled "human resource planning entity". Each one of these is destined for failure. If a state is so inept that it cannot even deliver textbooks to schools, its attempt to control the supply and demand of human resources throughout the economy will certainly result in a "giant leap" - over the cliff and into an abyss. 

While seeking state intervention everywhere it shouldn't, the ANC continues to resist it where it should. In 2011, R5-billion was budgeted to implement a Youth Wage Subsidy in order to encourage employers to offer "first-time" jobs to enable young work seekers to get a foothold on the first rung of the economic ladder. It remains unspent. Under pressure from COSATU, the ANC has shied away from implementing one of the few interventions by the state that would really boost productivity and opportunity, and broaden the participation of young people in the economy.  

Instead, the ANC has opted for precisely the opposite. Although details are still sketchy, the conference mooted an ill-defined "job-seekers grant" offering young people an "allowance" while they look for work. This misdiagnoses the failure in our labour market, where job search costs are a limited contributor to unemployment. Accordingly, a grant with such a narrow focus will be relatively ineffective, increase dependence on the state, and do nothing to encourage more job creation. 

One of the defining features of South Africa's unsustainable-socio economic order is that grant recipients outnumber personal taxpayers by more than 3:1. This new "grant" will merely skew this situation further. It will not enable more people to move into the productive economy and up the ladder, eventually growing the number of taxpayers. In fact, it will do precisely the opposite. 
 
To really create jobs in South Africa the Youth Wage Subsidy (that supports the demand-side of the labour market) should be matched by a supply-side "Opportunity Voucher" to give young people the choice of subsidised further education or seed capital or business loan guarantees, according to their individual needs.

As the ANC delegates argued (and came to blows) behind closed doors, it was fitting that external developments overshadowed their deliberations. These events, that grabbed the headlines, told us much more about the "real ANC" than the resolutions emanating from its own commissions.

As if to symbolise the discrepancy between the ANC's words and its deeds, the rhetoric of Midrand  was obliterated in the metaphorical pall of smoke that rose from the state-sponsored burning and shredding of undelivered textbooks a few hundred kilometres further north (appropriately near Polokwane).

Towards the end of the conference, another story took centre stage: the news that the state is finalising a R2-billion deal to purchase a new private jet for Jacob Zuma - that is bigger and better than Angela Merkel's.

That tells you all you need to know about the ANC's "developmental state" and the farce that passed itself off as a "pro-poor policy conference" in Midrand last week. 

Sincerely yours,

Helen Zille

This article by Helen Zille first appeared in SA Today, the weekly online newsletter of the leader of the Democratic Alliance.

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