Ideology sinks opportunities in SA – Terence Corrigan - Biznews

15 March 2022 - Like a dreadful inevitability – because that is what it is – load-shedding is back. Once more, the economy stutters as opportunities are lost, and prospects for meaningful growth recede a little further into the distance.

South Africa’s parlous state is the result of ruling party leadership choices and ideologically driven policies that leave us with hollow symbols of success, like the massive Medupi power station that flatters to deceive. Here Terence Corrigan writing in the Daily Friend has what, at first glance, reads like a jolly good whinge until you absorb his argument and realise how much truth there is to it. Like his illustrations of how each time the SA economy should have benefited from global upturns signalling powerful portents of rehabilitation, some policy or choice by the ruling party conspires to turn the opportunity into a damp squib. This brings us to the analogy Corrigan draws with Russia’s Ukrainian folly where the lack of logistical planning is wrecking strategy. A 65-km tank convoy ran out of food, ammunition and/or fuel, allowing Ukrainian defence to mobilise and hit back. SA is big on strategy (read socialist-driven policies,) but pathetic on course correction and getting the basic logistics right. – Chris Bateman

Terence Corrigan

Like a dreadful inevitability – because that is what it is – load-shedding is back. Once more, the economy stutters as opportunities are lost, and prospects for meaningful growth recede a little further into the distance.

Many South Africans feel this personally, since the Covid-19 pandemic pushed for modes of work dependent on remote communication networks and the energy systems to power them. As I write these words, my own household’s power is off. I missed a meeting and the battery on my phone is just about dead.

Still, we can take some small measure of comfort that we are not under military attack – an invasion – by a hostile power, as is the case in Ukraine. Hillbrow and Sandton are not under artillery fire, and no armoured columns are attempting to advance on Mahikeng, as is the case in Kyiv and Kharkiv.

In fact, some optimists see in the latter an opportunity. Since South Africa and Russia dominate the supply of Platinum Group Metals, sanctions on Russia would leave a hole in the market that South Africa would be well placed to take up. It’s a compound comparative advantage, a can’t-lose proposition.

In the light of load-shedding, my colleague Chris Hattingh made a prescient observation: “Every time you think SA can benefit from global events, remember the myriad – and exceedingly deep – self-inflicted wounds that continue to bleed.”

Whatever damage Russia may have done to its participation in the world economy, and however well-placed South Africa should be to seize an advantage for itself, there is no guarantee that it will be able to do so.

We’ve been here before. Two decades ago, the world was undergoing what has been described as a commodities ‘boom’ or ‘super cycle’. Driven substantially by the demand for goods, not least minerals, it should have presented South Africa with a lucrative opportunity for economic expansion. In the event, its performance was disappointing. Receipts went up on the back of rising prices, something that made the expansion of South Africa’s welfare state possible. But as a stimulus for South Africa’s mining industry, it was sadly deficient.

Performed poorly
To put this into perspective, note what the National Development Plan had to say in 2012: “The South African mining industry has performed poorly over the past decade. During the commodities boom from 2001 to 2008, the mining industry shrank by 1% per year, as compared to an average growth of 5% per annum in the top 20 mining exporting countries. The mining industry is smaller now than it was in 1994.”

Much of this was the direct consequence of choices made. It should not be forgotten that the commodities boom took place at a time when the state was very consciously extending its influence into the mining industry. Of special importance here was the introduction of the Minerals and Petroleum Resources Development Act in 2002 (effective from 2004), and the associated Mining Charter. These imposed a set of onerous demands relating to ownership and operating rights; indeed, minerals were now vested in the state as ‘custodian’.

Prominent mining lawyer Peter Leon has remarked that the legislative environment allowed far too much ministerial discretion along with vaguely formulated demands on mining companies. This created chronic uncertainty. Add to this the sporadic nature of electricity supply (and the poor state of infrastructure more broadly), the onward march of costs, and omnipresent corruption.

Our mineral riches aside, South Africa is just not a great environment for mining.

Neither is its future looking terribly bright, even as high commodity prices have given the fiscus a desperately needed injection. Mining executives and observers have been warning for years that the industry was declining in terms of capital investment and perhaps even more critically, in exploration. At the 2019 Mining Indaba, John Paul Hunt of SRK Exploration Services, commented: “Globally, around 10% of all capital expenditure in mining goes towards exploration. In South Africa, it’s around 2%. We are not really replacing the minerals that we are mining.”

Indeed, Paul Miller of AmaranthCX, a mining consultancy, has calculated the magnitude of South Africa’s decline in the global exploration space over the better part of two decades: from 5.4% in 2004 to 0.76% in 2021.

Unafraid
Neal Froneman, a rare example of a South African business titan who is unafraid to voice his opinions, remarked to the Daily Maverick recently: “Government leadership has created this problem and they are doing nothing. The government can’t deal with it because it goes against their ideology. There is neither the capacity nor the competence to deal with it.

“Whether it’s a simple thing like implementing an exploration policy,” he continued, “the government can’t do it; it can’t even fix its bloody admin systems to sign off mining licences. It’s a pathetic state of affairs.”

Ideology and competence. The macro and the micro. The epoch-making and monumental and the pedestrian and the everyday.

Unfortunately, on either level, South Africa is getting far more wrong than right. The official imagination is seized with loftier ideals. There is reindustrialisation, harnessing the Fourth Industrial Revolution, the Developmental State, bullet trains, smart cities, reforming the institutions of global governance, universal healthcare and rearranging property relations.

All of this will be achieved in accordance with the outlook of the ruling party. We shall thus achieve full employment on the basis of ‘decent work’. The state will drive a developmental agenda that history will marvel at, with a civil service selected off-the-books by a party deployment committee. A decayed state health sector will be revitalised as ever more powers over private providers and the resources that pay for them are brought under state control through National Health Insurance. A failing land reform programme will likewise be pushed forward through curtailing property rights and expropriation without compensation.

Meanwhile, the actual condition of the state is at a point where the government now has a programme (nominally, anyway) to ‘professionalise’ the public service. The government literally lost control of swathes of the country when mass rioting broke out in July last year.

Seminal image
I remarked that the seminal image was TV footage of forlorn police officers discharging their shotguns amidst determined crowds of looters; the officers’ presence being less impotent than irrelevant. The government plans amendments to the Firearms Control Act to radically restrict the ability of civilians to own guns, even as official arsenals play a significant role in keeping criminals armed. (As Mark Shaw noted in his book Give Us More Guns, the domestically produced Z88 is particularly popular with gangs. Local is lekker, as our president has said.) And the backlog at the firearms registry is now so appalling that the weight of unprocessed application forms is literally threatening the structural integrity of the building.

Zapiro’s In Charge. For more of Zapiro’s brilliant work, please visit www.zapiro.com.
And for all the rhetoric about the importance of land reform, the central problems – an inept bureaucracy, post-settlement support, predatory elites – have barely featured in the official narrative.

Our supposedly developmental local government is all too often farcically dysfunctional. Last year, the auditor general reported that more than a quarter of municipalities were in such severe financial trouble that there was “significant doubt that they will be able to continue operating as a going concern in the near future”. Around half of the remainder were “exhibiting indicators of financial strain”.

And then, of course, there are our state-owned enterprises. A decade ago – and even more recently – they were being punted as the harbingers of the mighty developmental state that was being forged. “If you look at the developmental state that we have in Southeast Asia or even Norway,” opined then minister of public enterprises Malusi Gigaba, “they reached the level of development because the state played an active part in the economy.” That was in 2012. By that time, the rot was well advanced. And that was Malusi Gigaba, about whom not much more needs to be written.

Profound species of unreality
SOEs have induced a profound species of unreality within our governing class. In late 2019, President Ramaphosa memorably described a visit to Medupi. He was struck by how “massive” – his words – it was. And it was “a fitting symbol of the importance of our state-owned enterprises”. Well…

Perhaps his reference to the size of the belated, cost-exceeding and faultily engineered facility is a fitting metaphor for the outlook of South Africa’s government. Taken in by symbolism and imagery, it struggles to grasp – let alone address – the myriad daily failings that cumulatively gnaw at the foundations of the country.

So, we have the towering silhouette of Medupi, but an unreliable electricity supply. South Africa’s people sit in impotent frustration as electricity failures effectively remove them from participation in the modern world.

And in common with people the world over, South Africans have been following the conflict in Ukraine closely. I doubt I am alone in being somewhat surprised at how tough a nut Ukraine has proven for the Russian military to crack. Ukraine has garnered – rightly in my view – the respect and admiration of people the world over for the fight it has put up against what by all accounts is vastly superior firepower. However, images of stalled Russian convoys and abandoned Russian ordnance point to some serious deficiencies in the planning and execution of Russia’s own operations.

“Amateurs talk strategy; professionals talk logistics.” This line – attributed to General Omar Bradley, although probably not in fact uttered by him – has been on the lips of analysts to explain Russia’s unexpectedly poor performance. Russia bet on the awe-inspiring sharp edge of its power, and failed to match this with an efficient machine to keep its combat forces supplied with fuel, food and ammunition. It has been suggested that while the Russian military is a potentially formidable battlefield opponent, this has been badly compromised behind the lines by the extent of corruption in Russian life.

Geopolitical affinity
In this, we might see more than the South African government’s political affinity with Russia, but a grisly and hyperbolic illustration of the impact of just the sort of skewed assumptions and priorities that animate its own conduct.

And it should warn us that it is, above all, decisions taken by South Africa’s own authorities that are cutting it off from success, even when the circumstances seemed so propitious.

Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy.

This article was first published on the Daily Friend

https://www.biznews.com/undictated/2022/03/15/ideology-opportunities-terence-corrigan

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