Sometimes you have to repeat the obvious a thousand times in SA before it has any hope of being heard.
Myths and magical thinking hold the high ground in our economic and industrial policy. We can create black industrialists. We can beneficiate our own minerals and manufacture exports the world craves. We can create labour-intensive industry and join the fourth industrial revolution at the same time. All we need to grow the economy is to transform it.
None of the above will happen. Apart from the minerals we dig out of the ground, which we freight to our expensive ports and ship to customers who have been beneficiating for decades and already have the customers we think will fall into our lap, the dollar cost of our exports (other than processed fruits and foods and tourism, still hamstrung by insane visa regulations) is simply not competitive.
The vehicles we export are heavily subsidised precisely to overcome the cost of labour.
Even where a giant exporter like China has withdrawn from basic manufacturing in, say, textiles, that opportunity has halted for the moment in Bangladesh and, where it does come to Africa, the Ethiopians have taken up the slack, particularly in footwear.
— COMPLEX ECONOMIES THAT NURTURE THE GROWTH OF MULTIPLE SKILLS ARE THE ONLY ONES CAPABLE OF MANUFACTURING THEIR WAY INTO GROWTH.
No one listens, or so I thought, until I read a very exciting piece in Business Day last week by the economics writer Sunita Menon. She had found a report produced in April by the Industrial Development Think Tank (IDTT), an initiative — astonishingly — of the Department of Trade and Industry, which wonderfully cut through the snivel of official industrial policy.
“Countries,” she reported the IDTT suggesting, “develop by changing the structure of the economy to move from sectors of low to high productivity and complexity and within sectors through upgrading to higher value-added activities.”
Menon added: “SA may need to look at models such as those in Thailand, Brazil or Malaysia, where economies are similarly diversified but have built up clusters for key industries. In Thailand, the automotive cluster has a strong local base, with skills, technological support and supplier development.”
She’s right, and the thinking isn’t new either. It is straight from the playbook of the Centre for International Development (CID) at Harvard University’s Kennedy School of Government. Complex economies — those that successfully nurture the growth of multiple skills — are the only ones capable of manufacturing their way into growth.
The CID is run by one of the world’s best development economists, Ricardo Hausmann. I once watched him lecture a class of (mainly Asian and Latino) first-year students on the benefits of industrial complexity. He used a comparison of the Ghanaian and Thai economies. Both were the same size in GDP terms in 1963. Today the Thais are huge and Ghana is tiny. Why?
Because while the Ghanaians in 1963 were the most skilled in the world at growing and harvesting cocoa, that is still basically what they do. The Thais, who grew and harvested mainly rice then, are now a global supplier of electrical goods and the world’s 12th largest auto producer.
The Thais increased, by orders of magnitude, their skills set by inviting companies that were already making cars and TVs and compact discs and microscopes elsewhere to come and make them in Thailand. As a result, the Thais who worked for these companies can nowadays do most of it on their own.
Their country is a growing economic force in the world. Ours is a diminishing one. We are deindustrialising.
What chance, I wonder, that President Cyril Ramaphosa or any of his Cabinet has bothered to read the IDTT report?
Its fundamental thrust is that we need to reform, not merely transform, our economy. Transformation swaps out power relations in the way we create wealth. Reform breaks the way we create wealth.
But skills transcend race. And reform, pursued with determination, would get transformation right on its own.
Meanwhile, the deeper the CID looks at industrial complexity the more it understands how complexity succeeds. They know now, for instance, that skills transfers only happen in a sustainable way between actual, physical people. To learn a new skill, one human has to watch, again and again, another one executing it. There’s no manual on the internet for it.
As South Africans, you can see the problem. To get the human with the skills to teach others, the one with the skill has to live here, buy a house and bring their family. Complex skills take years to acquire. But we don’t like that so much. We don’t want foreigners taking “our” jobs.
On a TV programme recently I asked Higher Education Minister Naledi Pandor about making it easier to import skills. All I got was the government’s Critical Skills List, which assumes only the government knows what investors need and, of course, how many years it should take to get a work permit.
Do Ramaphosa’s investment envoys seeking to bring new foreign investments worth $100bn to SA by 2022 have to carry The List with them, one wonders, just in case the investor wants to send someone to SA whose skill might not be on it? That’s a very serious matter sir. We may have to get back to you…
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