Is the ANC going to embrace Thatcherism? – Moneyweb, 15 July 2015

Narrow road: Frans Cronjé on the possibility of the party turning to the economic right.

By Frans Cronjé, 

In the Institute of Race Relations’ (IRR’s) Time Traveller Scenarios, published in April of 2014, we set out four future South Africas the morning after the 2024 election. What many audiences have thought the most unlikely of these, the Narrow Road scenario, is the subject of this article.

In our ‘Rocky Road’ scenario the ANC wrecked the economy and destroyed democratic institutions in a desperate bid to cling to power. Many audiences see this as the most likely outcome on current trends and they may well be right.

In ‘Toll Road’ the ANC continued to sink the economy but, unlike Rocky Road, was unable to fully destroy rights and freedoms and so found itself losing the 2024 election thus catapulting South Africa into the instability that will attach itself of a new era of coalition politics.

In ‘Wide Road’ the ANC embraced the need for policy reform to secure higher levels of investment-led growth and sought and won a popular mandate for reform. The trouble with this scenario has always been that seeking a popular mandate for economic policy reform will be tough in a country where much of the media, most civil society, and many individuals believe in the naïve ideal of a redistributive economy driven by government regulation and the erosion of property rights.

In the ‘Narrow Road’ scenario the ANC does, politically and economically, precisely the opposite of what both its critics and supporters expect of it. It destroys democratic institutions to force unpopular and deeply conservative economic reforms (think Thatcherism), in a desperate bid to save itself from the political collapse that will follow continued economic stagnation in South Africa. It is the Singaporean or South Korean (of the 1970s and 1980s) option. We are starting to see a fair amount of early evidence suggestive that this is what a number of alliance leaders may want to do.

Our argument is as follows:

Very few analysts have ever understood the ANC properly. It was feted in the 1990s, and before, by its supporters as a party that had very strong democratic intentions – however this has never been clear. Many ‘activists’ are now appalled, and claim surprise, at the ANC’s corrupt and undemocratic behaviour. However the IRR writing of the 1990s had warned that such behaviour was perhaps inevitable – a prescient analysis as things turned out. We have never seen the ANC as a democratic organisation and are not surprised at its current behaviour.

On the other hand the party’s more capitalist and private sector critics were privately very worried that its socialist roots would see it wreck the economy on coming to power. It surprised these critics too when between 1991 and 1996 it abandoned a lot of its socialist economics and rather relied on the conservatism of the Growth, Employment, and Redistribution (GEAR) policy, to reverse the decline of the apartheid era economy. On this score we backed the ANC very strongly.

The point is that the ANC is not necessarily what it seems. It has very little intrinsic commitment to democracy while its commitment to socialist economics has for much of the last 20 years (to 2007 at least) been just as shaky. It is this understanding that opens the door to the Narrow Road scenario particularly in an environment of sufficient economic pressure.

There can be little doubt that the economic pressure the party and its government is now under has never been greater. The dramatic political events at Polokwane in December 2007 saw Cosatu, the SACP, and Julius Malema drive out then President Thabo Mbeki and jettison the sound macroeconomic thinking of the GEAR era. Contrary to much ill-informed analysis the GEAR era had secured high growth rates and falling unemployment rates in the latter 2000s.

The post-2007 party leadership replaced GEAR’s liberal-conservatism with the socialist idealism of the National Growth Path and the woolly-gumpf of the National Development Plan. In line with both policies the new-leftist dominated Cabinet set about a regulatory onslaught against the private sector, foreign investors, and property rights. Now the ANC reaps the results of these six-to-seven years of socialist economics – and the results are predictably awful.

The budget deficit is unsustainable, money is being borrowed to finance the civil service wage bill and social welfare, the current account deficit is extremely large, the debt to GDP ratio turns continued future borrowing into a very dangerous exercise, the silverware is being sold to fund Eskom, a lot of money and investment is exiting the country, the rand is tanking, job creation is non-existent and the GDP growth rate is sub-2%.

It is a crisis that is going to get much worse in the short term. The consumer confidence index, which leads consumer spending, has shot downwards to a near decade-long low point and will pull such expenditure (which accounts for 60% of GDP) down with it. Just think what that will do to an economy already growing at less than 2% of GDP. Belatedly, some in the ANC are starting to connect the dots between its economic and political performance and we have identified at least three quantitative sources showing that confidence in the government and the ANC is following the economy downwards – and the ANC is aware of these.

Some influential voices in the broader alliance are therefore starting to understand that the influence ministers such as Rob Davies have had over the ANC’s policy thinking since early 2008 has unravelled into arguably the greatest crisis the party has faced and one that may well see the ANC lose political control of South Africa over the next decade.

Now this is where it gets interesting. How is the ANC responding? Much of the response is denial in the face of the evidence while Zuma forces his Cabinet into excruciating verbal contortions in defending decisions over crises that range from Nkandla to Bashir and Marikana. These responses are hitting the headlines and with good reason. However, there is another response that is not being picked up and points to a welcome, if still embryonic, stream of economic policy conservatism.

Where’s the evidence? Here are some examples:

  • The Cabinet still drives the youth wage subsidy. It is in itself a useless policy that will make at best minor inroads into the unemployment crisis but significant because inherent in the policy is the admission that the labour market is too heavily regulated and requires a subsidy without which the private sector cannot create jobs. Let the subsidy fall away while that reformist thinking continues and you’re talking labour market policy reform.
  • At a recent business breakfast the labour minister chose not to defend her government’s labour policies but rather expressed some ambivalence around these, suggesting they could be up for debate where they were found to curb investment and job creation. This is a change in tone from the labour ministry.
  • The ANC has published a ‘declaration’ which contained, buried in mountains of Marxist jargon, a call for people to stop relying on the State and look to their own efforts to improve their lives. This is a rare piece of true revolutionary thinking coming from a party which spent the last 20 years encouraging its supporters to rely on the State for all their wants and needs.
  • At a private think-tank some weeks back, a leading alliance voice expressed strong – off the record – concern at the role of communists within the alliance and the damage they were doing to the economy and hence to the ANC.
  • The government has acted on selling its stake in Vodacom to the Public Investment Commission in order to fund the failing Eskom. This is semi-privatisation and contradicts other policy efforts to give the State a greater stake in the economy. The fact that a contradiction now exists at the centre of government efforts to take greater direct control of the economy again raises the possibility of real policy reform.
  • The SACP’s Jeremy Cronin has seen fit to attack his comrade, Joel Netshitenzhe, (former presidential policy boss under Mbeki) for doubting ‘the revolution’. The fact that Cronin had to attack him publicly shows the extent to which some communists are worried that pragmatic alliance leaders are starting to gain some traction in influencing other leaders on the merits of policy reform. Along similar lines the SACP has published a report in which it warns that ‘neo-liberal influence’ (read the IRR etc) are having far too great an impact on popular opinion and that this is stalling the success of their communist revolution.
  • The destabilisation of Cosatu and isolation of Zwelinzima Vavi, which is driven by the ANC, is a particularly important trend. The question to ask is why would the ANC seek to cause such harm to its own alliance partner? The answer is provided by the political left of Cosatu; that the ANC wants a ‘toy telephone’ trade union partner to create room for future labour market reforms.
  • Then there’s the destruction of democratic rights and freedoms; the attacks on civil society, the media, and the judiciary. Undermining these institutions will be very useful should the ANC want to reform to the economic right unimpeded by civil society activists tying the reforms up in courts for years as leftist newspaper editors pour scorn on the conservative nature of those reforms. Do not therefore think that attacks on democratic institutions preclude right wing economic reforms. In fact eroding such institutions may be very useful in forcing such reforms. Privately we know that many leftist activists are very worried that this is what elements within the ANC are up to.
     

There are many similar embryonic green shoots of economic reformist thinking in and around the ANC –to list them all would be unwieldly. They suggest that the economic pressure faced by the government is doing ANC policy thinking some good. Such thinking may yet be snuffed out averting any move to the economic right and thus writing off any chance of an economic recovery. Sceptics will, with good reason, suggest that the trends are not sufficiently well developed to assign any degree of probability to this scenario and with that we might agree. For the time being the Rocky Road scenario remains the most likely ten year outcome.

Our argument is that as you brace for accelerated economic decline don’t completely write off the odds that such a decline may counterintuitively spark a reformation within the ANC. Consider that such a reformation will be based on limiting democratic freedoms to make space for pragmatic economic reforms and that none of this behaviour will be completely out of character for the party. Should this Narrow Road scenario emerge it will be very influential in shaping the evolution of high growth economies across Africa.

Cronje is author of the Time Traveller Scenarios and A Time Traveller’s Guide to Our Next 10 Years (Tafelberg 2014). He CEO of the IRR – a privately funded think-tank that advances classical-liberalism. 

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