LUMKILE MONDI: Reforms are crucial if SA is to stop scoring own-goals

Orlando Pirates football club chair Irvin Khoza emphasised in his congratulatory remarks at the golden jubilee celebration of Kaizer Chiefs that SA needs to focus on building its institutions. In his view, it is institutional memory that helps societies learn and build on experience, rather than having to reinvent the wheel.

Growing up in Alexandra under apartheid, Khoza experienced the brutality of the regime, but also saw its determination to build institutions such as Eskom, Transnet and Prasa to uplift Afrikaners. By contrast, many black South Africans have been disappointed by the ANC, an institution that played a key role in downing apartheid. Yet with power and resources at its disposal it has floundered, managing the economy on a wing and a prayer.

As it celebrates its 108th birthday, the governing party looks back at a trail of destruction, from dilapidated infrastructure to failing public transport, an insecure electricity supply, water shortages and widespread malfeasance.

Like Kaizer Motaung when he left Orlando Pirates to start afresh, some individuals in the ANC who understand the economic crisis SA is facing are trying to do something about it. One such is deputy finance minister David Masondo. Speaking at the JPMorgan SA investment conference in Cape Town in December, Masondo re-emphasised that the country’s low economic growth and growing public debt is mainly a product of excessive expenditure on public-sector wages, profligate state-owned enterprises and debt-servicing costs. These have become the major obstacles to sustainable and inclusive growth. This was a bold admission by the deputy minister, indicating that the National Treasury knows full well that SA’s low growth and rising unemployment are unsustainable.

In the Budget Review of 2019, the Treasury expected a better average growth rate performance of 1.7% in 2020, from 1.5% in 2019, which has since been revised down to 0.5% as the economic crisis deepens. As the ANC parties in Kimberley this week, President Cyril Ramaphosa should send a positive signal to SA investors and the public at large by committing his government to a series of economic reforms that promote economic growth and set SA on the path to becoming a globally competitive economy. These reforms should include the liberalisation of the energy sector by fast-tracking the deployment of renewable energy. The need for this was emphasised by the president’s misleading statement during the holiday season that there would be no power cuts until the middle of January. 

Other necessary reforms have already been articulated in the Treasury’s economic discussion document, including five fundamental building blocks for sustainable long-term growth: modernising network industries; lowering barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth; prioritising labour-intensive growth in sectors such as agriculture and services, including tourism; implementing focused and flexible industrial and trade policy; and promoting export competitiveness and harnessing regional growth opportunities.

In the absence of policy clarity and a plan for SA to extract itself from this ANC-induced economic crisis, Daron Acemoglu and James Robinson’s book Why Nations Fail provides some pointers on how to avoid the trajectory followed by so many other post-independence African countries. An initially growing and vibrant economy is followed by corruption and failing institutions, with former colonisers blamed for all the ills. The story usually ends with collapsing infrastructure, capital flight and exit by the elite class, causing a near collapse of the economy.

This is happening right now across the Limpopo River. For SA, the 2020s should be about rebuilding institutions to promote inclusive economic growth and development, and not experimenting with approaches that have been tried elsewhere and have clearly failed.

• Mondi is a senior lecturer in the Wits School of Economic and Business Sciences.