Terence Corrigan
With the election now over, South Africa is looking towards the future and preparing for the coming years. Given the nature and scale of the challenges into which the country is staring, it's no hyperbole to say that the next five years could represent a tipping point – one that shifts South Africa back on course to the prospects of development and prosperity, or onto a winding pathway to dysfunction and destitution.
The central question will be whether the government – whether under President Ramaphosa or anyone else – is able to get the economy into gear. This means above all raising the GDP growth rate to a sustained 5.4% (as envisaged by the National Development Plan), where now projections are that South Africa will not even touch 3% in the coming years.
Doing so will ultimately demand tackling a multitude of issues, many of them daunting and intimidating in the extreme. South Africa is located far from its key markets. Its savings pool is insufficient, and the rising cost of living (along with government demands) provides little hope that this will change. The country suffers a debilitating crime burden. Its mediocre education system, meanwhile, shorts entrepreneurship and innovation.
More prominent in recent years has been the near-collapse of many of the country's state-owned enterprises, and the consequent threat to the infrastructure they are meant to provide. A murderous disincentive to business is the inability to guarantee a steady supply of electricity.
And then there is policy, a perennial issue for investors and entrepreneurs. President Ramaphosa acknowledged this in his State of the Nation Address in February. "We have addressed these concerns and we continue to engage those stakeholders who raise concerns about our policy direction," he remarked.
Fine words, but their significance is diluted somewhat by the regularity with which such promises have been made over the years.
In fact, the country's policy problems go beyond mere uncertainty, as bad as that is. Counterproductive policy has caused grave damage to the country's economic fortunes. The impact of the current legislative and regulatory regime in the minerals sector is a case in point. Once the country's economic flagship, mining has undergone a steady decline over the past three decades. Government demands for the ceding of significant ownership stakes, extensive executive discretion in the administration of the sector, not to mention a well-founded concern that existing conditions may well be superseded by something more onerous has done the industry no favours.
The NDP, written in the shadow of South Africa's failure to seize the windfall of the commodities boom in the preceding decade, had this to say: "Yet over the past decade, domestic mining has failed to match the global growth trend in mineral exports due to poor infrastructure, alongside regulatory and policy frameworks that hinder investment."
Indeed, even allowing for the generally welcomed accession of Gwede Mantashe to the ministry of mineral resources, these concerns have by no means fully abated. The implications for the future of mining are not encouraging.
The new administration takes office to the echoes of raucous promises to accelerate land reform through expropriation without compensation. It fails to address any of the real problems in land reform – administrative incapacity, corruption, indifferent post-settlement support – and is a real threat to any hopes of an economic renaissance. There is plenty of evidence that the very discussion of this option has harmed the country over the past year, along with economic modelling that suggests some very serious adverse consequences if this is implemented.
Nothing, after all, is quite the disincentive to investment than a threat to property rights.
Indeed, the drive for expropriation without compensation shows a dismal inability or unwillingness to learn either from history or experience. Not only have experiments with expropriation without compensation invariably ended badly (Venezuela being a prime example today), but government's own questionable record on mining policy illustrates the risks. Back in 2017, when mining was in the hands of highly controversial minister Mosebenzi Zwane, AngloGold Ashanti executive Ria Sanz phrased the nature of the problem crisply: "Policy ambiguity strikes at the heart of mining investment; at the sanctity of ownership. If there is no sanctity of ownership it makes investment impossible."
She might very well have been talking about the looming threat of expropriation without compensation today.
Since policy is a reflection of the choices that government makes about the direction it wishes to take, there is an element of farce here. Perhaps nothing is so firmly within government's power to alter or to adapt as policy. To refuse to do so is to submit to avoidable harm.
But perhaps this is seen as an acceptable price to pay to satisfy an ideological yearning. South Africa would by no means be the first country to do this (and from time to time, prominent South African thinkers have spoken of the need to accept hardships in the interests of an ideologically remade future). Director of the Centre for Development and Enterprise, Ann Bernstein, recently commented that too many of our policy-makers evince a strange duality. They are at once pro-growth and anti-business, hankering after prosperity but undermining the conditions necessary to achieve it.
There are no guarantees for South Africa's future. There is only the hope that its leaders will see the wisdom in prudence, learn from what has gone before and chart a course for the prosperity that the country so desperately needs. There is, sadly, little in the recent past to suggest that this will be the case. For the country's citizens, critical choices will be those taken now that the ballots have been cast and counted. They had best be ready to navigate them.
- Terence Corrigan is a project manager at the Institute of Race Relations. Readers are invited to join the IRR by sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).
https://www.news24.com/Elections/Voices/the-election-is-over-now-for-the-tough-choices-20190514
