In many respects the ANC policies of Black Economic Empowerment (BEE) and its flipside Radical Economic Transformation (RET) resemble the policies of Nico Diederichs’ ‘reddingsdaadbond’ whose Nationalists of the 1940s viewed the state as the primary instrument whereby the Afrikaner capitalist would come to the fore via ‘volkscapitalisme’. Like so many socialist experiments, the ‘capital of the state’ was seen as synonymous with the ‘capital of the Volk‘, as the party mobilised for a ‘transformation of economic consciousness’.
Version two of ‘state capitalism’ in other words, government-directed economics (dirigisme) under the ANC, the proverbial ‘mixed economy’ has certainly turned into an abject failure. In the process ordinary South Africans — small businesses, patients in hospitals, commuters, and other categories of workers, are being sacrificed to accommodate what is essentially a Marxist fantasy.
One has merely to look at the huge cost overruns orchestrated during the building of the Medupi and Kusile projects, involving continual extension of catered lunches and free banquets for personnel. At the time contracts to feed workers were among the biggest catering contracts in the country, proving that providing a reliable source of energy was certainly never the game-plan. The projects have essentially turned into white elephants, considering the related climate factors.
Anyone who suggests otherwise, is living in cloudcuckooland or like so many political analysts, groomed on our nation’s campuses, armed solely with the tools of radicalism instead of data-analysis, fails to draw truth from facts instead, myopically deriving ‘truth’ from an ideological position.
Wherefore the Genie in the Gini?
A good example is the endless repetition and political cant involving the Gini coefficient. While the country may have a high score on the Gini Index a measure of the distribution of income across a population, which is cause for concern (a higher Gini index indicates greater inequality), continually harping on about this unfortunate statistic, fails to take into consideration other factors — for example, the country ranks relatively well on the human development index with a score of 0.705, above Egypt and Bolivia but just below Indonesia.
Unlike the Gini, the human development index is a ‘statistic composite index of life expectancy, education (mean years of schooling completed), and per capita income indicators’, which are used to rank countries into ‘four tiers of human development’.
Incorrectly suggesting that South Africa is effectively ‘under-developed’ or that life-expectancy is somehow on par with Chad or Niger, belies the fact that as an emerging nation, South Africa has a lot to be positive about and despite current difficulties with energy supply and the fuel price caused by failure to implement policy already in place, for example policy when it comes to biofuels (see below).
It is not all that difficult to see which aspects of the economy prospered under the ANC, and which parts continue to create an unnecessary burden on both the treasury and the taxpayer. Despite financial head-winds, those parts of the economy remaining in private hands are still in relatively good shape, with the country recording consecutive trade surpluses, R28.35 billion in May, and even modest growth of 1,9%in the first quarter of 2022, with many corporates posting a return to profit following the decline under Covid.
South Africa has a “mixed economy in which there is a variety of private freedom, combined with centralized economic planning and government regulation” according to website GlobalEdge. It is this structural centralisation and focus on market intervention as opposed to Keynesian, social democratic welfarism, ‘based on the social rights of citizenship‘ which has received criticism from the World Bank and other aid agencies.
Far from providing for its primary mandate, Eskom and Transnet have become nothing more than massively costly exercises in sheltered employment for the party faithful, requiring efforts to trim down a bloated workforce. In both cases, these parastatals were used to siphon money into the pockets of Jacob Zuma and his cronies and are the subject of a 5 volume report into corruption.
Fuel or Fool?
Analysts continue to dress up the ANC and its SACP/COSATU “RET faction” ambitions of “transformation of economic consciousness” with phrases like “the working class” and “means of production”, essentially promoting failed economic policies — policies that are at the heart of the nation’s perennial inability to drive growth and economic expansion.
In 2019 cabinet approved a ‘biofuels regulatory framework‘ mandating blending regulations, feedstock protocols, subsidy mechanisms, selection criteria for projects, licensing of product storage and blending facilities, and containing environmental, water use and land use approval mechanisms.
The legislation was published by the Government Gazette and approved by Cabinet on 13 December 2019, this after some two decades of debate on the topic, including input from the environmental justice movement. By all measures the country should have been amply-armed and primed for the current global fuels crisis. Similarly plans to restructure and unbundle Eskom were proposed as early as 2015 and an energy roadmap released in 2019, so what happened?
Instead of embracing the constitutional imperative of sustainable development our Minister of Energy Gwede Mantashe took us all on a wild goose chase in the quest to mine the ocean for gas, promoting dodgy Karpowership deals, fossil fuel, nuclear power and big coal. Instead of embracing a just transition and change at Eskom, unions dug in their heels. Instead of seeking out environmentally-friendly alternatives and demand-side reduction, we are involved in the intrigues of Russia’s Gazaprom, the closure of refinery capacity and the collapse of the national power grid. We are all paying for it at the pump, and at the electricity meter.
Though the apartheid-era steel monopoly ISCOR was sold off to Mittel, and the telephone monopoly Telkom was listed in the face of competition from mobile providers, the government retained monopolies in rail transport, sea ports, energy generation and distribution, in other words Transnet, Portnet and Eskom.
The results are plain to see. Our government’s stake in listed entities like Sasol (8.4%) have outperformed its troublesome direct holdings — state-run enterprises have thus fared dismally — demonstrating why markets are more efficient at allocating capital than governments, and essentially represent the lesser of two evils insofar as our development path is concerned.
Note: There are currently over 700 state-owned entities dependent upon the treasury.
(You can read one of my earlier postings on this subject here)