I was a teensy bit startled to read this week that Standard Bank CEO Sim Tshabalala earned R83m last year. I don’t begrudge him a cent — his shareholders were merely rewarding him for the almost R30bn he earned them for the 2023 financial year. His executive team earned almost R400m last year.
They are at least partial proof that capitalism works. Through good leadership, clear strategy, innovation and iron discipline it is possible to create great wealth. SA is a fortunate country — for all the many disgraces of the past, the democracy we entered into in 1994 included a market economy.
When the scales of the old socialism most ANC leaders grew up with finally fell, however, what they saw was an opportunity to use the power of capitalism as the Afrikaner nationalists had, to transfer economic power to “their” people.
The results have not been pretty. Record unemployment, a stagnant economy and widening inequality weren’t supposed to be the hallmarks of liberation. And for some reason the more our black nationalist governments fail at it, the deeper they dig. Almost entirely this is because ANC policymakers have failed to spot the opportunities inherent in capitalism and in the markets they inherited. Rather than fit themselves into the market economy, they have tried to fit the market to themselves.
Inevitable, perhaps. The SA of old thrived on cheap black labour and rigid racial laws. Who wouldn’t want to reverse that? And there will be critics who argue that in the private sector only a few blacks have had to be accommodated. But that’s not true. Corporate SA is rapidly beginning now to look like the rest of the country.
The same mistakes
But in “transforming” the economy the ANC risks making the same mistakes whites did: it tries constantly to regulate for colour. President Cyril Ramaphosa calls it “inclusive growth” but it is neither inclusive nor is it growing. What is going wrong?
Inclusive growth became popular among liberal economists looking in the 1980s for ways to maintain the wealth-creative thrust of capitalism and the markets, but worried at the same time about people being left behind. They were right — Donald Trump in the US has tapped into those very people and Labour in the UK will trounce the Conservatives in the UK because of it.
In SA the ANC convinced itself it could tame the capitalist beast, but instead of reform it is merely distorting what’s good about it. Inclusive growth as an approach was about trying find ways of making capitalism and society work for each other. Here we risk reverting to type by racialising it.
In the past few weeks Ramaphosa’s trade, industry & competition minister, Ebrahim Patel, has been trumpeting the successes of the ANC’s Black Industrialists Scheme. Black people are being assisted into manufacturing and other industries by the arms of the state — in particular, the Industrial Development Corporation (IDC) has poured more than R50bn into the effort.
There’s nothing wrong with that. I’m an industrial romantic and for decades the IDC was a feeding trough for white businesses. Now, after six years of the programme Ramaphosa is about to celebrate it as a triumph of inclusive growth.
Separate agendas
But the two men have their own agendas. Ramaphosa sees inclusive growth almost exclusively in racial terms and Patel is happy to give him that. In return, Ramaphosa leaves Patel free to hammer established (mainly white) businesses in the manner his formative years as a trade unionist make almost inevitable.
Generally, Patel co-opts big and often listed companies into supporting his many “master plans” for various industries and they are generally happy to go along. But below them, most industrial jobs in the country are in medium-sized companies and family businesses that have little political clout.
Patel rules them with an iron fist. If you want protection from imports, Patel will consider giving it to you only if you sign an irrevocable undertaking to create a specified number of jobs. If you want to import a component, he’ll give you an import licence only if you promise to buy from a local producer should one be created.
The results aren’t good. “Re-industrialisation”, an ANC policy mantra, isn’t happening. Manufacturing remains stuck at 12% of GDP, down from more than 20% when democracy dawned. The hidden industrial heart of the country is battered and beaten, and there’s no investment.
It’s in the middle where the growth should be. There’s no investment because the ANC hasn’t yet worked out how to celebrate the market economy it inherited and at the same time regulate it lightly and for everyone.
The British writer Will Hutton, who campaigns furiously for new ways to grow and to be inclusive, wrote recently that “capitalism must be organised so it provides economic ladders that every individual can climb while a social contract must offer a floor below which they cannot fall”.
And that is so right. Capitalism, regulated to be fair, can save the country. Tshabalala would have the good grace, I know, to be embarrassed at the size of his income given the poverty all around him. But it isn’t his fault that the governing party cannot find more equitable ladders for individuals to climb.
• Bruce is a former editor of Business Day and the Financial Mail.
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.