What does the future hold for South Africa under continued ANC Rule?

Firstly before any hand-wringing commences, let us review the economic and political situation in South Africa on the release of Nelson Mandela from incarceration after 27 years.

South Africa was increasingly assailed by many forms of sanctions. The economy was on a downward death spiral. Technically South Africa was bankrupt and could not meet its obligations. This dire position had been caused by the withdrawal of foreign lending to South Africa. It was only the introduction of the innovative Financial Rand which prevented the total withdrawal of all foreign currencies. In spite of this financial sleight-of-hand, the situation was precarious with demands on the Treasury unsustainable.

South Africa was on the road to oblivion with hyper-inflation an imminent possibility. Most Whites cocooned in their lavish homes were still immune to the gale force winds rapidly approaching.

Instead of the anticipated messenger of death, the ANC became the knight in shining white armour. However one must clearly distinguish where the credit must be placed for this magical situation. One can split hairs as to the percentages which arose merely as a result of the removal of the financial sanctions and the percentage arising due to prudent financial policies but at worst the ANC should be credited with 50% of the improvement.

Another factor which can clearly solely be attributed to the ANC is the cauterising of a creaking and leaking tax system. In a steady measured way, the SARS under Pravin Gordin staunched the haemorrhaging of unreported earnings and the profligate allowances granted on certain expenditures such as motor vehicles. These measures topped-up tax revenues dramatically. By a continuous process, all loopholes have been closed and the Fiscus now obtains its rightful share of SA’s wealth.

In many quarters, the ANC is not given sufficient credit for this financial turnaround.

From such a success story, what does the future hold under continued ANC rule?

Let us examine all the pointers whether the future will be a Utopia or a Dystopia.

Misreading the reasons for the Chinese economic miracle

Like the analogue so beloved of Mbeki, China is a country with two economic systems. It is bifurcated with the State Commercial Sector a net consumer of wealth much like SAA’s profligacy and incompetence and the private entrepreneurial sector being the generator of wealth.

After Mao Zedong’s disastrous economic policies, his successor Deng Xiaoping had the unenviable task of lifting more than a billion people out of poverty. After the 1979 visit to the USA where he concentrated upon reviewing their economic system, Deng performed a volte facie on economic policy: adopt the American economic system in totality. In this call, he was strenuously opposed by those who insisted on a Chinese approach. Deng maintained that he was not concerned whether the cat was black or white but only whether it was able to catch mice. By implication economic matters would no longer be determined on ideological grounds like in the past but rather based on a purely economic rationale.

By unleashing the entrepreneurial genius of the Chinese people, 300 million people have already been lifted out of abject poverty.

 

The rump of the old state-run companies is currently a hindrance to the economy and needs to be slowly dismantled over a period of time.

 

Instead what has the ANC learnt from the Chinese experience: that the path to a Utopian future lies in increasing state control of the economy. This is the very opposite of what has enabled the Chinese economy to prosper.

The first peg in this policy is the recent passage of legislation which entitles the government a free 20% ownership stake in all future minerals and energy projects. Combined with a free 25% BEE stake holding, that means that the funders of 100% of the project will be entitled to 55% of the rewards.

If South Africa had vast reserves of minerals in which it possessed a monopoly, this might be sustainable but, apart from platinum, South Africa no longer has a strategic incentive for investment. Instead what SA requires is additional investment incentives in order to bolster investment in this sector.

Due to our poor labour relations situation in SA, combined with regulatory uncertainty, South Africa missed the last minerals boom. Instead countries such as Australia were handsomely rewarded.

Misreading the effects of Hugo Chavez’s economic policies

The ruinous policies and their long term implication of economic regimes such as Venezuela’s Hugo Chavez’s and Mugabe’s Zimbabwe are often touted as the saviour to South Africa’s anaemic economic performance. Again both will be the death-knell of the South Africa’s economy.

In the forefront of this charge was none other than the erstwhile leader of the ANC Youth League, Julius Malema who is hardly noted for his economic prowess and credentials. Maybe with an F in woodworking he can attempt to claim woodworking as an area of expertise but certainly not economics.

 

The unemployment time bomb

What was the underlying cause of the Bolshevik Revolution in 1917 or the rise of Hitler in the 1930s? In a word: economic deprivation. Take for instance the plight of a maid who earns R2500 per month and who lives in a corrugated shack in a squatter camp without adequate sewerage and water reticulation. This person comes into our homes and espies the opulence of flat screen TVs, washing machines and all the other modern conveniences.

Would not resentment, jealousy and anger well up in that person when they are unable to provide the basics to their family? One can argue quite correctly that she should not have had so many children or should have found a better job or a hundred and other reasons for her predicament and plight.

None will assuage those feelings of being neglected by society.

 

While all of these arguments may be logically true what would your reaction be to some populist rabble rousing politician who promised one the unattainable? Another Hitler in a black skin and a face closely resembling that of Malema will be born.

The oft quoted Gini coefficient is our barometer. A high coefficient spells trouble and the higher that it is, the more turbulent the future will be.

Be afraid. Be very afraid.

Corruption

Like a plague of ticks, this curse is slowly sucking out the life blood out of South Africa. Actions are no longer taken from an efficiency or cost effective point of view but rather from a what’s-in-it-for-me perspective. Combined with rank incompetence, corruption diverts vital resources.

Many examples can be quoted in this regard with a current example being the payment of R6m to Dina Pula’s lover for work performed when in reality no service was rendered or work performed.

This is merely only one manifestation of this scourge.

 

Political centre becoming unglued

The ANC and Cosatu do not appear to be able to contain the various forces at work in South Africa. As the ANC has proclaimed on numerous occasions, they are a broad church: conservatives, African Nationalists tub-thumpers, avowed Communists and greedy Capitalists.

 

It was always bound to become unglued. The first dissolvent to be applied was the riches accruing due to patronage, BEE and the Arms Deal. From a situation of equality where all members were impecunious, all of sudden some became wealthy beyond their wildest dreams. Even the incorruptible Mandela after earning less than R20m in salary in toto left an estate amounting to R46m. How was this vast accumulation of wealth possible on such meagre salaries?

The social cohesion inevitably frayed.

WW2 Britain serves as an analogue where all the classes felt a bond, a sense of togetherness, which in a Class Bound society was unknown. The tank commander, a lieutenant, with an Eton education fought and often died with the tank driver or gunner who had a Grade 6 grammar school education. Merit and ability and not class distinction became the arbiter of one’s worth.

 

Which of Clem Sunter’s high road competitive advantages still apply?

This article will only deal with one for the sake of brevity

Foremost amongst the bright lights in this regard was the issue of cheap and abundant electricity. With price increases orders of magnitude greater than the inflation rate and load shedding of industrial companies ongoing, South Africa’s electricity is neither cheap nor abundant.

A central pillar of job creation is the beneficiation of our raw materials. Whilst concurring with this policy position, my reservations relate to electricity supply and whether SA can beneficiate profitably.

A future through dark glasses

A sober assessment of South Africa’s future prospects presents a sombre picture. The spectre of a failed state now haunts South Africa.

The analogue that South Africans can understand is that of the national soccer team, Bafana. Despite being the richest soccer nation in Africa, they battle to beat the under-resourced impecunious minnows.

How is this possible?

The focus of the officials is self-aggrandisement and feathering of their own nests. Instead of focusing all their efforts on developing the game, its players, its referees, its infrastructure, and their energies are dissipated on Board Room politics and their next re-election.

South Africa as a nation is on that slippery slide with dysfunctional metros, towns, provinces and National Departments. Most battle to obtain a clean audit report.

Corruption, malfeasance and incompetence are the order of the day.

Sad but true; but that is the future that South Africa faces: More dystopia than the 1994’s envisioned Utopia.