Bad medicine

NATIONALISATION is the wrong policy prescription for South Africa's socio-economic ills of poverty and unemployment.

The reason poverty and unemployment remain as high as they do is not because the country's mines, for example, are run by private-sector companies and not state-owned enterprises.

So shoving a bigger chunk of the country's economic resources into the hands of the state won't create jobs and reduce poverty. Yet the proponents of nationalisation continue to trumpet it as the panacea to this country's socio-economic ills.

The proponents of the nationalisation of mines and, most recently, the South African Reserve Bank, have yet to outline a cogent case of how state capitalism on its own will create jobs and reduce poverty. It's not clear, for example, how the ownership of the Reserve Bank by private shareholders is a hindrance to the agenda of a developmental state.

The inflation target that directs the work of the bank's monetary policy committee is set by cabinet through the finance minister. It has nothing to do with the bank's shareholders.

The calls for nationalisation appear to be based on the assumption that the state has the capability to run mines profitably and do so for the benefit of the poor. However, the history of existing state-owned enterprises calls for caution. With a few exceptions during the past 15 years these enterprises have lurched from one crisis to another, some becoming regular recipients of bailouts. They have been a drain on limited state finances rather than being net contributors to economic prosperity.

Most state-owned companies have yet to run with any stability for longer than five years. SAA, Transnet, the Land Bank, the SABC and Denel have all had financial and governance problems.

Even Eskom, which has long been one of the best managed parastatals, veered off the good governance track last year.

Of course, there are exceptions such as the Development Bank of Southern Africa and the Airports Company of South Africa.

The problems of state-owned enterprises can broadly be split into two: financial and governance. The latter refers to the regular interference by political office bearers in the day-to-day running of these enterprises. Boards of directors of state-owned enterprises have for all practical purposes been turned into lame ducks as politicians meddle in the running of the firms.

So it makes very little sense for a country that has yet to find a successful formula for running its existing state enterprises effectively to create more.

Also, a country with developmental needs as huge as ours can ill afford to borrow billions of rands from financial markets to buy private shareholders out of existing mines and the SA Reserve Bank.

More sensible

A cheaper and more sensible option is for the state to cajole the private sector to buy into its developmental agenda.

In the Reserve Bank's case the solution, if indeed there is a problem with how the bank is carrying out its inflation mandate, is much easier: government must change the bank's mandate to make it much more accommodating of its development agenda.

South Korea, Japan and Taiwan rose from the bottom to the top of the economic ladder propelled by a developmental state model in which their governments were effective. They proved that nationalisation is not a necessary condition for the success of a developmental state.

Mathebula is the non-executive director of Vuma Reputation Management. He writes in his personal capacity.

- City Press