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IT'S that time of year again. In preparation for the State of the Nation address and in an attempt to set yet another policy agenda for the coming year, the ANC and President Jacob Zuma have been talking up the notion of a ‘state-managed developmental economy’.
The term may be loosely defined as economic planning and implementation undertaken by the state and using state resources or influence to counter poverty, inequality and in South Africa’s case, racial bias in the ownership of the economy.
For the last decade, the term has been dangled as either a carrot or a stick – to promise economic transformation to those in need and to threaten those perceived as the exploiters. Ultimately, what attempts we have seen vis-à-vis developmental economy - or its synonym, ‘radical economic transformation’ - have offered few, if any, examples of success.
But that’s not to say that the state has no role and should be prevented from intervening. Indeed an efficient, trustworthy and transparent state can augment the private sector and modify the negative effects of unbridled capitalism.
And there’s the rub. The continued bad-mouthing of capitalism and big business pits this group against those ‘statists’ in favour of a developmental agenda. Ideally, South Africa needs a thriving corporate sector, an enabled small business or nascent entrepreneurial component and a state capable of best practice in the implementation of both policy and delivery on the ground.
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The current framework satisfies no one. Attacks on the corporate sector continue to hamper their domestic inward investment and resultant job creation. The fledgling entrepreneurs of this country encounter labour, taxation, regulatory and input cost challenges that set them back. And, most importantly, the state’s propensity to deliver efficiently is highly suspect.
It is precisely the ability of the state to really deliver in a reliable and investor-friendly manner that leads one to question a looming ‘developmental’ shift.
For starters, the state needs to be less ideological. It needs to embrace the requirements of business and demands of global finance in its own regulatory endeavours.
Without that, flawed banking regulations, confidence-sapping mining charters, moribund state-owned enterprises and a host of inefficient government agencies will simply erode the ability of the state to distribute to the poor – instead just allowing it to keep its own cronies happy.
A developmental state can only prosper in a climate of cross-sectoral and investor buy-in. Encouraging the corporatist interests should be seen as critical in building and creating wealth.
Yes, the state can ameliorate the inequalities that exist through a more effective distribution of resources to the broader society – but without the wealth creation aspect of the economy, this will come to naught.
Doomed to failure
In order to equitably distribute cumulative wealth and uplift the lives of those in need, the wealth needs to be created in the first place. With onerous regulations, investor-unfriendly policies and a deficient state beholden unto rent-seekers rather than the real poor, a developmental approach is doomed to failure.
So as we move towards the president’s opening of Parliament next week, it behoves us all to look beyond the headline rhetoric and assess what we can do better. And what we need is an holistic approach from the state taking government, the unions and both the domestic and foreign private sector on board. Simply put, a unilateralist approach of bad regulation and uncompetitive policy is the last thing we need.
READ: How ANC plans to take SA from capitalist to state-managed economy
State intervention should be something we all desire – after all, if we lived in Finland or Sweden or even in South Korea and Taiwan of the 1960s, we might all be the biggest proponents of the developmental state. If we trust government through their outstanding examples, it all becomes so much easier.
In the South African context, government has yet to earn our trust to take on these tasks. Until that time, developmental policy-making will be problematic – not just because it causes doubts about policy coherence, but because the examples we have had thus far have been so disastrously implemented in the past.
Perhaps, before you ratchet up the notion of the developmental economy, you had better make sure that your existing developmental agencies are thoroughly cleansed. Now that might qualify as real radical transformation.
* Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own. Follow him on Twitter at @DanielSilke or visit his website.
