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The 2020s beckon. What will it be?

Cees Bruggemans and Willie Esterhuyse take a trip through the decades of South Africa’s socio-economic past. With the 2020s looming, what will happen to SA’s economy? Will government manage to sort out its problems before catastrophe occurs? Will we be able to learn from our past mistakes and grow in confidence? Can we address labour issues, failing infrastructures, wage disputes and constant strikes? These are all convoluted questions indeed and only time will reveal the answers. Perhaps, as Bruggemans and Esterhuyse suggest, the 2020s will be a decade of “let’s go for it and pull out all the stops” to move South Africa into a better socio-economic space. – Tracey Ruff

By Cees Bruggemans  and Prof Willie Esterhuyse

Confidence is a funny thing. Very fluid. Ongrypbaar. Difficult to define or pin down, but you will recognise its presence or absence in an instant.   

And in mixed economies like ours, where a social-democratic state harnesses the full productive power of a private market economy by being attuned to its needs, private confidence is the main lever that can deliver the heavy lifting towards growth outperformance, or its absence or eroding simply preventing it.

The PW Botha Decade (1980s) had been a disaster as apartheid grinded to its logical conclusion, devastating the state finances as it went, causing major macro disturbances (foreign debt default, Rand, inflation, interest rate shocks), undermining demand growth.

With the onset of the FW De Klerk half decade from 1990, business saw the writing on the wall. A fully democratic government coming after it, a roaring labour movement ready to use its muscle, and intensified foreign competition as trade reform opened the economy to greater outside influence.

It was a time to be very, very cautious. Its very caution invited the longest recession in decades as private business dug in for the challenges it could see immediately ahead.

Come the April 1994 election, the magic of the behaviour on show caused a wholesale business rethink. Perhaps the caution had been overdone?

In an instant, the mood flipped. Private business re-engaged. But only at half speed, mind you, as the next 18 months would show. After all, the new political crew was untested, had some very unfunny ideas, and it could still turn out rather disappointing.

This assessment was not wrong, especially in retrospect. But it meant that though there was a change of heart, business as yet did not fully carry through. GDP growth could recover from a lost decade average of 1.5% to 2.8% but was thereafter stuck in a new groove from which it had difficulty fully escaping.

GEAR was supportive, and the wild commodity super-boom and credit binging allowed an imagined escape to 5.5% growth in the late Mbeki decade, but it was all make-believe. Fundamentally, structurally, too many mistakes were being made, private business remained too much aloof for very good reasons, and growth just could not hit its full stride in a sustainable manner.

The subsequent Zuma decade saw a renewed descent into ultra private caution, as the outside world turned less accommodating (the loss of the commodity supercycle and its magnificent Dollar export prices) while the confusion of domestic micro policy stances, an angry labour relations environment and progressive infrastructure devastation undermined our supply-side and made business recoil in horror.

Its loss of confidence translated into a new lost 2010s decade at half speed (1.5% growth) rather than full speed escape velocity (5% plus) from our Middle Income Trap structural stagnation of decades.

The litmus test here is the structural insider/outsider dichotomy stuck at more than 1-out-2 potential SA labour participants not fully benefitting from our modernity. This critical ratio has simply refused to budge for decades.

As in the 1980s and early 1990s, the 2010s Zuma lost decade did not mean an inherent loss of growth capability. All the resource factors remained in place, if increasingly badly frayed in the public sector.

Recovery remained feasible, as seen in the Mandela half decade in the second half of the 1990s, but policy needed to be supportive and engage private business imagination.

The dirigiste Zuma policy decade, with its developmental state, redistribution and transformative agendas thought it was leading from the front, but it wasn’t a growth spurt it was unleashing, but instead was again inviting a private rush for fox holes.

In the process, one of two future realities opened up.

Either all was lost, with yet more policy ineptitude and sub-par growth to follow in yet another lost decade following on from the 2010s. Or the policy rudder would be thrown, having learned from governance mistakes and mistaken micro policy choices in preceding decades.

A thesis followed by an anti-thesis giving a synthesis of decades.

It was not as if private business had closed its collective mind to this possibility. Instead, it was a matter of “seeing is believing”. Old Descartes come back to life.

In the course of the lost Zuma decade, there were early signs that something very fundamental could be stirring, with deep post-Zuma implications.

Firstly, the world economy would not forever remain in slow recuperation mode. After more than a decade of fixing what needed to be addressed, a more normal kind of global performance was possible again, considering technological change and potential capital formation.

SA as an open trading nation could only benefit from such a 2020s unfolding.

But secondly, internally, the reform synthesis of decades slowly started to take form, even if its full flowering had to await the post-Zuma era. In governance, macro discipline, micro support for a mixed social-democratic market economy rather than the emphasis on forced structural transformation undermining private confidence and causing its withdrawal to the sidelines (and overseas migration).

In a manner of speaking, therefore, another 1994-kind of experience potentially looms.

The price for ending apartheid in the 1980s could not be sidestepped. The price of having to digest an untried crew full of ideals after 1994 could not be fully sidestepped either, even if the evident rainbow magic suggested much was possible. This strange combination of events resulted in half speed, as compared to no speed dead-in-the-water or full speed ahead.

So what will 2020 give us as a new era dawns? A sense of doom, as yet more poor leadership and forced change invites private confidence to whither yet more, seeking yet more salvation elsewhere on more welcoming shores?

Or will it this time be “jackpot!!!”, let’s go for it, pull out all stops, full speed ahead (“riemen los!!!”) as the right lessons turn out to have been absorbed, governance is pulled back on track, labour is invited to be more constructive, infrastructure failures are addressed for the long term, and private confidence is once again supported by a policy mix aimed at bolstering our growth potential and through it structural transformation rather than will-of-the-wisp paralysis-inducing agendas?

Especially the larger businesses have the manpower and talent to recognise the nature of these processes, as much as they did in the 1970s and 1980s, as they have done in the 2000s and 2010s wilderness decades.

When the moment comes, business will vote, too, each entity individually. It either will mean yet more defensive stagnation, for good reason; or continuation at half speed, for similar good reasons; or it may be full steam ahead, as the potential of the coming decades more clearly unfold after the interruptions of the past half century. All these of course proceeding in measured strides.

It may be that too many of us are caught in a sense of desperation, in the sense of feeling caught in a death spiral from which there is no escape. Yet institutionally, especially in the private sector, the country remains viable, vibrant, flexible, adaptable, tenacious.

If the political synthesis can give us a new beginning, the business follow-through will likely be strong, and create its own luck, as is in the nature of these things. But for that moment to dawn, we have to first complete some unfinished business.

The 2020s beckon. What will it be?

* For more in-depth business news, visit biznews.com or simply sign up for the daily newsletter.

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