Research and Policy Brief: Forewarned is forearmed - 23rd June 2011.

Jun 23, 2011
In this speech to the AGM of the Southern African-German Chamber of Commerce and Industry in Johannesburg on 23rd June 2011, John Kane-Berman begins with Trevor Manuel’s National Planning Commission. He then poses 16 questions about South Africa's future. Thirdly, he shows where Mr Julius Malema fits in. Finally, he suggests how business and others might act to halt South Africa's downward slide.

I recently had the pleasure of spending 10 days in Leipzig at a Mahler Festival, with a couple of side trips to Dresden. It is inspiring to see the baroque parts of Dresden around the Frauenkirche being rebuilt after the bombing in the Second World War. Both cities are, of course, also part of a wider process of reconstruction after communist rule.

So I ask a question about my own country: 20 years from now will we look more like the old Deutsche Demokratische Republik (DDR) or the unified Federal Republic?

Let us start with the recent "diagnostic overview" published by the National Planning Commission (NPC) under the signature of Mr Trevor Manuel, minister in the Presidency.

Mr Manuel’s overview lists ten components of a proposed “vision statement for 2030” and nine problems to be overcome. Combining the two yields six steep challenges:
1. Provide jobs, and especially low skilled employment, via higher productivity, better training, less regulation, more competitive pricing, and improved transport.
2. Fix the substandard education of poor black South Africans, inter alia via better teacher performance and school leadership
3. Replace the “collapsing” public health system and its “massive” disease burden with high-quality health care
4. Overcome corruption and the “uneven” performance of the public service with an efficient state able to protect citizens, provide quality services, lay on adequate infrastructure, housing, and energy, and deliver comprehensive social security
5. Provide an environment for business to invest and profit, while promoting decent work, harnessing natural wealth sustainably, and fostering less resource-intensive growth, and
6. Secure a democratic state rooted in the values of the Constitution.

Referring to the Habsburg Empire, Argentina, and post-colonial African states, the overview identifies five indicators of decline:
A. Rising corruption
B. Weakening state and civil society institutions
C. Poor economic management
D. Politics dominated by short-termism, ethnicity, or factionalism
E. Lack of maintenance of infrastructure and standards of service

"Elements of these indicators are already visible in South Africa,” the overview says. If they become more prevalent, it warns, democracy could unravel.

None of these problems, challenges, or risks will be news to anyone familiar with the annual yearbooks and monthly updates published by the South African Institute of Race Relations. Some have been previously admitted to by the Government itself. Most of us would agree with most of the action list. But what is going to happen between now and Mr Manuel’s chosen year of 2030?

Though not presuming to be "tips for Trevor", my 16 more detailed questions are these:
1. Will unemployment be lower or higher?
2. Will our labour market be more or less restricted?
3. Will black South Africans receive better or worse education than they do now?
4. Will the private health system have followed the public one into collapse?
5. Will corruption be even further entrenched than it is already?
6. Will the public service be more, or less, efficient than it is now?
7. Will the public sector be bigger or smaller?
8. Will South Africa have enough electric power?
9. Will we have lost out, or cashed in, on a third commodities boom?
10. Will we have become a permanent net food importer?
11. Will business be subject to more, or less, red tape than now?
12. Will tax rates be higher or lower?
13. Will the Government have defaulted on some of its debt?
14. Will our police force be even more lawless than it is now?
15. Will we still have a free Press?
16. Will we still have an independent Judiciary?

There is no time today to answer these questions. But the very fact that they can plausibly be asked… testifies to the risks this country faces. Moreover, I drew my list up last week – before Mr Julius Malema was re-elected president of the youth league of the African National Congress (ANC). The questions would be valid even if he did not exist. Some arise out of policies already in place. Others emanate from legislation in the pipeline. Still others arise from how this country is ruled, including weak accountability, the cadre deployment policy, antipathy to the free enterprise system, and the ANC's commitment to what it calls a “national democratic revolution”.

The alienation of the white, coloured, and Indian minorities from the ANC apparent in the recent local elections is arguably the result not only of Mr Malema's threats to "kill the Boer", but also of laws already on the Statute Book, plus recent anti-coloured remarks by Mr Jimmy Manyi, the official government spokesman. Two days ago the Transvaal Agricultural Union complained that Mr Malema was creating a climate for land invasions. However, legislation that will encourage such invasions was approved by the Cabinet at the end of last year. Mr Malema is accused of discouraging foreign investment, although it was not he but the Congress of South African Trade Unions (Cosatu), and no fewer than three cabinet ministers, who put the Wal-Mart deal in jeopardy. So also, Mr Malema’s proposed “big bang” of nationalising the mining industry is but the culmination of a series of incremental interventions by the Government which have already injured the industry. So let us be grateful to Mr Malema for spelling out a scenario for South Africa which is as plausible as any other. Forewarned is forearmed.

The question then is how to halt the slide into a DDR scenario, or an African nightmare like that of Zimbabwe, or Habsburg or Argentina, or the banana-republic-predator-party scenario which the general secretary of Cosatu has warned against. Unfortunately, Cosatu unions have not yet decided whether they wish to reverse the decline they fear. They recently came to the defence of a free press, but their stranglehold on public schooling is busy destroying the prospects of millions of black children.

Cosatu’s contradictory position is mirrored throughout the ruling tripartite alliance. The most delightful contradiction is between President Jacob Zuma’s recent call on ministers to announce their job targets, and Mr Manuel’s statement 11 years ago that "governments around the world are impotent in creating jobs”. The ANC wants South Africa to be counted among the BRIC heavyweights (Brazil, Russia, India, and China) but its policies will ensure that we are left behind by these and other emerging markets. It thinks it can run a modern economy, fix local government, build infrastructure, combat crime, tackle poverty and inequality, finance a welfare state, create jobs, and generate electricity - without fully exploiting the skills of the white population, fixing black education, liberalising immigration laws, professionalising the civil service, or making the country more attractive for business. The absurdity of this position needs to be pointed out without reservation or apology, over and over again, until such time as a critical mass within the alliance comes to recognise it.

Business has a role to play here: it can be more forthright about some of the destructive policies that the alliance is imposing upon the country. If you want to influence the direction of policy, you have to join the debate. Minister Ebrahim Patel has invited contributions. Let him have them! You can barely open a newspaper these days without some or other minister berating the private sector one day - only to call for public-private partnerships the next. The more the State fails… the more the private sector will have to come to the rescue. This gives business an opportunity to spell out a few home truths – such as… that the Government cannot keep on having it both ways forever.

So part one of the strategy for halting our downward slide is to exploit policy contradictions to weaken their support base. Part two is to be vigilant in defence of such vital attributes of a free society as… the rule of law, independent courts, an independent central bank, autonomous prosecutors, a free press, independent civil society, academic freedom, property rights, and a market economy. To assume, as some people do, that the case for these things is self-evident and universally accepted, is naive. It has to be made time and time again. Your own chamber rightly pointed out last year that a free press was not only a pillar of democracy but also a precondition for a functioning economy.

The third contribution to halting our downward slide is to put forward alternative ideas based on the tried and tested principles of political and economic liberalism.

Julius Malema – “JuJu” as the tabloid press calls him - has identified a fast-growing, political market: black youth. A minority of this group can benefit from cadre deployment, patronage, nepotism, tenderpreneurship, fronting, affirmative action, black economic empowerment, and the other familiar components of ANC policy. The rest have little hope: their education is mostly dreadful, their employment prospects are low, and their chances of winding up in crime statistics or dead from AIDS are quite high. When Mr Malema says Cosatu and the South African Communist Party have betrayed the poor he is right.

Of course, Mr Malema himself has nothing to offer them except nationalisation. This is his equivalent of the garlic-and-beetroot offered not so long ago by the ANC and its late health minister as a cure for AIDS. The problem - and a source of potential growth for the Malemas of this world - is that no one else is offering them anything better. Cosatu is interested only in protecting the unionised labour aristocracy. The communists are interested mainly in getting their hands upon as many levers of power as they possibly can without having to fight elections. The ANC - with its own threats to mining and agriculture, and its racial and labour policies - is offering them what is best described as… Malema-lite. As for Mr Manuel and his commission, they propose a "development plan” to give effect to that “vision 2030”. Part of this vision is a "social compact”. This is a mirage, as Mr Manuel knows. In the meantime Mr Malema's constituency will grow.

If he were really smart and constructive… he would launch a campaign to liberate the labour market to enable unemployed youngsters to get jobs more easily. He would take on the teaching unions who are destroying the prospects of yet another generation of schoolchildren. Unfortunately, however, just like President Zuma, Mr Malema is a creature of the ANC. He may be younger, but he is also an anachronism.

Which leaves the Media, business, and civil society. There is an opportunity here to be bold in propagating classically liberal alternatives to the present dirigiste policies. The South African Chamber of Commerce and Industry, reacting with consternation to Mr Malema, says it will join the political debate. So too will Business Leadership South Africa. But panic is not a policy. Nor is it good enough only to offer “a robust anti-nationalisation strategy”, as BusinessDay suggests in today’s editorial. You have to offer something better than either business or government is doing right now. A start would be for business to clarify whether or not it actually believes in liberalising the labour market. The plan must be to steal Mr Malema's constituency from under him by offering it something better than he does. And this has to be done by public debate. Mr Malema gets huge press coverage, and you can't counter his ideas by taking tea with the minister.

Nor should we lose sight of a potential market for liberal ideas within the broader tripartite alliance. That market will grow as policy contradictions work their way through.

One of the things that brought about the demise of apartheid was the loss of support for it among the Afrikaner intelligentsia. My Institute played a key role in that. An equivalent process of eroding support for some of the present government's destructive policies has already begun. Professor Kader Asmal, who died yesterday, was a good example. But the process of erosion needs to be intensified and sustained. If Mr Malema's threats have helped to shake people out of their World-Cup complacency, and to alert them to risks ahead, then he would have done some good. So, JuJu, take a bow.

* John Kane-Berman is Chief Executive of the South African Institute of Race Relations.

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