Racial harmony is not at risk, but our economic future is - Business Day, 13th December 2013.

The real threat to Mandela's legacy, John Kane-Berman argues, is not disintegrating racial harmony in South Africa but current economic policies that could damage growth.

Many years ago, when he was still president, I was asked at a meeting in Washington, DC, "What will happen when (Nelson) Mandela goes?" My answer was: "Nothing."

The audience seemed a bit surprised. But I drew an analogy with Charles de Gaulle.

He was architect, and first president, of the Fifth French Republic. At the time of the 1968 student revolt in Paris, there was a widespread belief that somehow the outcome would be a return to the chaos of the Fourth Republic. But when De Gaulle resigned the next year, France made a smooth transition to the presidency of Georges Pompidou.

Even though it was early days in Mandela’s presidency when I spoke in Washington, I was confident that the new South African constitutional dispensation was well established enough for it to survive his departure from the political stage.

Mandela’s own dramatic reconciliatory gestures — to the white right, to whites in general, and to Mangosuthu Buthelezi — had, of course, played a key role in bedding down the new constitution.

But another factor was that even before Mandela’s release from jail in 1990, South Africa had been undergoing a "silent revolution", which included steady social desegregation and economic liberalisation to which people of all races had adjusted with remarkable ease.

The colour bar, after all, had been removed from the labour relations system as far back as 1979, following the report of the Wiehahn commission.

Black trade unions had in fact been gaining steadily in influence since the early 1970s, and the skies had not fallen in as some people predicted they might.

Starting on the factory floor, the slow and reluctant process of dismantling white minority rule had thus been under way long before FW de Klerk made his dramatic announcements on February 2 1990.

That was, of course, as brave and fundamental a change of direction by the leader of a ruling party as any in history.

But it was at the same time the next logical step in the process of social and economic liberalisation that had begun much earlier.

The National Party (NP) eventually opted for political liberalisation because all other plans had failed. It had no serious support among blacks, and their social and economic costs were becoming too high for the country to bear any longer.

This was why the NP government, under the much maligned PW Botha, had been in secret talks with Mandela since 1986.

Against this background, the South African Institute of Race Relations last week expressed confidence that Mandela’s death would not undermine racial harmony, contrary to the view sometimes expressed to us by foreign journalists in particular.

As one paper put it: "Now that the moderating influence of Nelson Mandela is gone, the delicate social harmony of the past 20 years could be torn apart."

The institute has been highly critical of present proposals to enforce racial preferencing legislation by punitive measures. But this is less because they threaten to undermine racial harmony than because they are likely to damage growth.

And it is here, not in racial conflict, that the real risk to Mandela’s legacy is to be found. To the consternation of many in the African National Congress (ANC) and those allied to it, Mandela repudiated nationalisation even before he came to power.

This was brave and bold leadership as dramatic as when Tony Blair renounced the British Labour Party’s commitment to nationalisation in "Clause IV" of its constitution in 1995.

Blair made Labour electable, and Mandela made the ANC respectable in global business circles. Like the prodigal son, South Africa was rewarded with inflows of investment and successful reintegration into the global economy from which to a large extent it had been barred. Most people thought the country’s economic future was as promising as its political future.

This is now at risk, but not because of dramatic nationalisation threats from Julius Malema and his Economic Freedom Fighters. Rather, it is because ministers dealing with mining, business, local and foreign investment, labour, intellectual and other property rights, and land reform are bent on measures that will undermine investment and growth.

These measures may not be as obviously damaging as outright nationalisation threats, but they have a cumulative long-term insidious effect. The danger is not that we will suddenly be abandoned, but that we will be slowly written off.

Some of these measures are only to be expected given that some of these ministers are members of the South African Communist Party. Others may arise from attempts to implement aspects of the National Democratic Revolution to which the ANC reiterated its commitment in Mangaung in December last year at the same time as it endorsed the National Development Plan. 

Another factor likely to be driving some of these policies — especially tougher employment equity and black economic empowerment requirements — is the widespread commitment in South Africa to "redress".

This goes far beyond the ANC and its allies, and is used to justify all manner of interventions in the economy.

Critics of "redress" are accused of merely trying to preserve white privilege. But the real damage is to the economy.

This is because "redress" involves redistribution of some kind, or interference in the allocation of capital or human resources, or additional uncertainties in the administration of licences, or new threats to various kinds of property rights, or additional discretionary powers for ministers and officials.

Among the results is slower growth, which translates into fewer jobs. "Redress", in other words, however appealing or justified it might appear to be, cannot be ring-fenced. It comes at a price. Few of those arguing for it are willing to consider the price — or who might be paying it.

The conventional wisdom is that whites are paying it. It is also argued that it is only fair that they should be forced to pay it. But a bigger price is being paid by all those who are denied jobs they would have had if the economy had grown faster.

Although employment has grown 70% since 1994, unemployment on the official definition has grown 125%. And the unemployment rate has risen from 20% to 25%.

If discouraged workers are taken into account, the unemployment rate has risen from 32% to 36%.

Obviously no single factor accounts for the rise in joblessness, but numerous surveys of business opinion and international comparative studies record the growing difficulties of doing business in South Africa. And, love it or hate it, business is the main source of jobs.

Mandela may have approved of some of the redress measures. But even if he did — or would — they are damaging the investment climate he sought to improve by endorsing the Growth, Employment, and Redistribution strategy of 1996, providing political backing for fiscal and monetary prudence, and repudiating nationalisation.

South Africa is thus in need of another De Klerk or Mandela "moment" — a moment when a leader changes course, as De Klerk did in releasing Mandela in 1990 and as Mandela did in repudiating the ideology of nationalisation two years later.

First published in Business Day on 13th December 2013.

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