After Richard Nixon had lost election to the governorship of California in November 1962 he told reporters, “You don’t have Nixon to kick around any more, because, gentlemen, this is my last press conference”. But he came back as president in 1968.
Election day yesterday was probably the last time trade, industry & competition minister Ebrahim Patel could plausibly have intervened in the fate of our economy. His decision not to seek another term in office put me in mind of Nixon. Who will I have to kick around any more? Will he come back too?
Patel has had a profound effect on SA since he was first plucked, at the last moment, from obscurity to become economic development minister in Jacob Zuma’s first cabinet in 2009. His appointment was a sop to the unions but he busied himself under Zuma producing an ambitious New Growth Path document, proposing a whole new joined-up vision of government, but Zuma’s mind was elsewhere. It was only under Cyril Ramaphosa, though, who appreciated his gifts for soft-left oratory and presentation, that he began to make an actual impact.
The results have been poor. Enthusiastically riding the end of globalisation and the rebirth of industrial policy, he has created new hierarchies in local manufacturing, rewarding big firms that pay high wages with protection from imports and neglecting those that don’t, or can’t. Manufacturing continues to slide as a proportion of our total GDP and safe factory jobs are either heavily subsidised, as in the motor industry, or protected, as with textiles.
Earlier this year, the owners of a small business applied for a tariff rebate on an edible substance, not manufactured locally, as a tiny part of a bigger packaged product. The reply from the International Trade Administration Commission (Itac), which reported to Patel, said the importer would be granted the rebate if they provided regular and detailed job and investment numbers promised in order to trigger the rebate in the first place.
They would sign an “irrevocable undertaking” not to raise prices higher than the cost increases of raw materials, provide two reports a year detailing compliance with the agreement and commit to buy their ingredient from an SA supplier should one ever be created.
The opportunity for Ramaphosa now is to reset the department of trade, industry & competition and Itac, and perhaps the entire focus of our economic effort.
This level of control was vintage Patel. A trade unionist to the core, he wasn’t so much interested in the intellectual horizons of industrial policy but in the granular detail of it at a company level. He drove many functioning businesses crazy, which was fine by him. In a fundamental way he held private sector companies in contempt. The new inclusive economy would be forced on them. And still he got nowhere. Scrap metal, which Patel made so hard to export, is said to be piling up in storage facilities. The steel industry he tried to protect is on the verge of major job losses.
The opportunity for Ramaphosa now is to reset the department of trade, industry & competition and Itac, and perhaps the entire focus of our economic effort. For a long time we have been in the thrall of Mariana Mazzucato, a rock star London-based economist whose 2013 work, The Entrepreneurial State, landed on the desks of intellectually exhausted ANC ministers such as Pravin Gordhan like manna from heaven. Suddenly they had a whole argument for throwing money at Eskom, Transnet, Denel and other public assets.
Mazzucato was swept onto Ramaphosa’s presidential economic advisory council just in time for her next intellectual pivot — to industrial policy. Here, she believes, is a new opportunity for inclusivity and, possibly, growth.
President Joe Biden’s “focus on industrial policy marks a notable shift”, she and a University College London colleague wrote in May in Foreign Policy magazine. “Although government intervention in the economy is nothing new — indeed Silicon Valley would not have emerged without it — US leaders have long shunned industrial policy as running counter to the accepted wisdom that the state must only create the conditions for markets to operate, fix market failures when they occur, and otherwise stay out of the way.
“By making industrial policy a centrepiece of his economic strategy, Biden has made it possible to have a thoughtful policy debate about what kind of growth the US wants and who it should benefit.”
All well and good, except that when Biden’s industrial policy — effectively a giant version of Patel’s localisation, or import substitution — was first introduced by Donald Trump, he was considered mad. The new industrial policy argument is for greater inclusion and fairness, but unless it is infinitely conditional and perfectly woven through every stitch of the economic fabric, it can’t seem to work perfectly enough. It’s exhausting.
At some stage, the ANC is going to have to rethink the industrial space we are in. Mazzucato’s ideas are exciting but they land in a body politic like ours like an excuse merely to control more rigidly. There is no space here for thoughtful policy debates when the daily grind is so contested and febrile.
You can’t transform a stagnant economy nor include more people into a shrinking room. We need a new approach. Patel was always full of numbers — this amount in new investment, that to black industrialists, this exact number of jobs saved, this exact number in foreign investment. At the end of it all, though, unemployment is higher, our currency weaker and our debt more expensive.
We should think differently. We are not the US or China. We can’t afford to close ourselves off, to stop the world until we transform it. Instead of picking industries to “win” and transform and protect, let’s have an industrial policy to double our exports — of whatever — in the next five years. Let’s agree we cut core unemployment to 25% in the next five years however and increase the number of employers by 25% however.
Let’s not rest until annual fixed investment in the country is 30% of GDP, not the 13% Patel and Ramaphosa tried to sell us as a success. Let’s stop taxing exports and incentivise them instead. Let’s stop lying to ourselves. Let’s make some goddamn money.
• Bruce is a former editor of Business Day and the Financial Mail.
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