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"Money talks, bullshit walks.” The writers of the ANC’s latest discussion document on economic policy probably had this expression in mind when they sat down to pen the paper titled Economic Transformation.
The 19-page document appears to represent the dominant economic policy thinking in the upper echelons of South Africa’s ruling party ahead of its national policy conference to be held in Johannesburg from 30 June to 5 July.
The party’s rank and file, buoyed by a few ANC leaders, have been clamouring for the ruling party to implement radical economic policies, including expropriating prime farmland and mines (without compensation) from so-called “white monopoly capital” and redistributing this wealth to the poor majority.
Instead, the radical slogans that appeal to the masses have given way to economic pragmatism – a posture that signals that investors hold the upper hand. The ANC is unwilling to admit it, but the party has clearly been cowed by an investment strike by foreign and local investors, with local corporates now hoarding more than R1tr in cash which could have been ploughed into the economy.
If the ANC ever wants to see this massive pile of cash flowing back into the economy, it has to play ball and craft policies that give investors regulatory certainty. Thus the voice of investors carries significant weight, since the ANC is aware that revolutionary slogans do not put food on the table.
Confronted with this reality, the writers of the Economic Transformation document are clearly preoccupied with making sure that SA avoids credit downgrades, laying the groundwork for the country to attract substantial investment. For this to happen, the writers of the document understand that SA has no choice but to eliminate policy uncertainty and endemic corruption.
The ruling party proposes that the government must conduct an audit that identifies policy and regulatory constraints that impede private sector investment and set a clear timeframe for removing those constraints.
Interestingly, President Jacob Zuma and the writers of the ANC policy discussion paper seem to hold differing opinions on what constitutes “radical economic transformation”.
In his State of the Nation Address on 9 February, Zuma described radical economic transformation as follows: “We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female, as defined by the governing party, which makes policy for the democratic government.”
Zuma believes that the solution to undoing skewed economic ownership is for the state to use legislation, regulations, licensing, race-based procurement and black economic empowerment (BEE) policy to give black people a bigger share of the economy.
But the crafters of the ANC’s policy discussion document have a different version of radical economic transformation in mind.
“Primarily, radical economic transformation is about fundamentally changing the structure of SA’s economy from an exploitative exporter of raw materials, to one which is based on beneficiation and manufacturing, in which our people’s full potential can be realised.
“In addition to ensuring increased economic participation by black people in the commanding heights of the economy, radical economic transformation must have a mass character,” the document explains.
As far as the document’s writers are concerned, who owns the economy is secondary and attaining job-creating economic growth is primary, whereas Zuma is more concerned about forcing through policies that fundamentally change the ownership and control of the economy in favour of black South Africans.
Perhaps one of the most interesting sections of the document is the argument in favour of a developmental state, where the state manages a mixed economy that accommodates the interests of both the public and private sectors.
The developmental state must also intervene to reduce inequality, de-racialise the economy and participate in strategic economic sectors alongside the private sector.
However, the ANC says, despite the superior political and economic logic of its vision, the developmental state has come under continuous ideological attack. Although it does not mention the EFF by name, the ANC seems to be wary of the growing political influence of the leftist upstarts, who are calling for the nationalisation of mines and the expropriation of land without compensation. The EFF was instrumental in the ANC losing the key metros of Port Elizabeth, Pretoria and Johannesburg in last year’s municipal elections.
“The ANC’s political opponents on the right have resisted interventions aimed at increasing the state’s role in guiding the process of economic development. On the other hand, populist voices have sought to dismiss the ANC’s programme as not radical enough, often calling naively for nationalisation as a panacea for all ills,” the ANC document reads.
It warns that the nationalisation of mines would lead to massive job losses and severely damage SA’s fiscal position. The question is: who holds the biggest sway in a deeply divided ruling party – Zuma, or those who drafted the economic policy document?
Andile Ntingi is CEO and co-founder of GetBiz, an e-procurement and tender notification service.
This article originally appeared in the 6 April edition of finweek. Buy and download the magazine here.
