The need for structural socioeconomic change has become a platitude — something everyone can agree on, but only if we don’t explain what we really mean. This sort of pseudo-consensus comes with risks, because it can block efforts to achieve real compromises as the basis for consistent action.
In practice, for most of the past 25 years policy has deadlocked largely because of profound disagreement about what structural changes to prioritise. Debates emerge about what economic ills to address as well as their causes. Three main perspectives have emerged.
In one view, SA’s biggest problem is slow growth by established business as a result of inadequate infrastructure and excessive red tape. As a rule, supporters of this view are clear on the need to fix electricity, and to a lesser extent rail transport, mostly by bringing in private competitors for Eskom and Transnet.
They have been more opaque about how to improve the regulatory framework, apparently because labour laws, progressive taxation and broad-based BEE, all of which impose costs on business, have broad political and social support. The fallback position has become a call to reduce the delays and red tape needed for most licences required to operate, from water to mining to environmental permits to visas and municipal zoning rules.
In contrast, proponents of industrial policy hold that slow and inequitable growth arises from continued dependence on mining exports, which cannot directly generate decent work on a large scale and leaves the whole economy vulnerable to global commodity cycles. The structural solution is to promote manufacturing and services such as tourism and software design.
However, efforts to promote economic diversification have been undermined by an inability to agree on the end-state — what industries should government facilitate, and where does mining fit into the new order? What is the role of established business as opposed to emerging enterprise?
The lack of consensus on these core questions makes it difficult to define a shortlist of strategic interventions that is needed to mobilise consistent government action and resources on the scale required for change.
A final perspective argues that neither social nor economic progress is possible until SA addresses the profound inequalities left by apartheid. In turn, that necessitates vastly scaled-up measures to overcome the factors that maintain inequality.
The critical issues are extreme disparities in basic education that align with class and location; unequal access to assets, including small business ownership, financial resources, urban and rural land, housing and infrastructure; the persistence of apartheid work organisation in much of the formal sector, which deskills the majority and leads to deep pay gaps by international standards; and residential patterns that keep poor and working people far from economic hubs.
An effective development strategy must chart a course that addresses all of these concerns to some extent. This month, Operation Vulindlela and the budget indicated the state’s approach. Both strategies centre on improving infrastructure for established businesses, especially around electricity, water and transport. The budget cuts overall expenditure but expands spending on physical infrastructure. Operation Vulindlela also aims to facilitate visas for skilled personnel and tourists.
Neither the budget nor Operation Vulindlela expands programmes required to build the middle class or diversify the economy. In real terms, compared to two years ago the budget shrinks per-person expenditure on education, social grants, housing and land reform. Within housing, funds are shifted to informal settlement upgrading, which militates against efforts to foster communities closer to industrial and urban centres.
Neither strategy makes any commitment to address workplace and pay inequalities, or suggests how to upgrade the historically impoverished labour-sending regions. As for industrial policy, the budget cuts spending by the department of trade, industry & competition by a seventh in real terms compared to 2019.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.