Much has been said over the past few days about the political earthquake we have just experienced. It is important to understand the reasons for this major shift, even as none of us yet know its implications.
It is clear that much of the explanation lies with the general underperformance of the state, and its inability to confront its own weaknesses, especially in relation to the management of the economy.
Many political players are committed to addressing unemployment and poverty, but few have any compelling ideas about how to do so. Perhaps even more importantly, there is a crisis of implementation. A state cannot be developmental if it lacks ideas. A state cannot be developmental if it cannot manage its own machinery. Too many public sector managers adopt a laissez-faire attitude to their work. There is too little individual accountability. Too many politicians and public servants are involved in corrupt activities.
Nowhere is this clearer than in the realm of local government, especially the management of the large cities. You might argue that local government had no impact on the outcome of this election. It was, after all, a national and provincial election. Nothing to do with local government, right?
Wrong. People experience government first and foremost at the local level. When they enter the ballot box, they respond to their own conditions. They do not say that potholes, water outages, power outages, poor public transport and collapsing inner cities are local issues and should not influence their vote. We all vote on the basis of how we experience the state, including, and perhaps especially, at local level.
Yet the leadership of many political parties pay scant attention to local government. They can see it collapsing around us, but they treat it as if it is of little consequence. Indeed, there is little public discussion about why local government is doing so badly. And very little commitment to fixing it.
If we want a growing and more inclusive economy, investment must be prioritised in almost every decision
Of course, local service delivery is not the only factor. The management of the economy is crucial, and is influenced by both public and private players. The most important determinant of economic performance is investment. Investment is the driving force that will determine our future. In particular, investment in infrastructure and fixed assets.
We have a credible indication of such investment through the measure of gross fixed capital formation (GFCF). According to the Reserve Bank, growth in SA’s real GFCF plummeted from an annual average of 7.5% in 2000-09 to only 0.9% for the period from 2010-19. This is disastrous for any economy. The trend holds for both the public and private sectors.
During the period 2000-09, the average real annual growth rate in private fixed investment was 6.5%, whereas from 2010-19 the average dropped to 2%. Public corporations plummeted even further, from 12.6% in 2000-09 to minus 2.8% from 2010-19. General government real fixed investment over the same periods declined from 6.6% to 0.7%.
It is not that the state has been unaware of the importance of investment, as the presidential investment summits have shown, though these are designed mostly for the private sector. For both sectors, one important fact remains true. Government decision-making does not sufficiently prioritise investment. Instead, investment is one among many competing — and often contradictory — objectives. We can no longer afford that. If we want a growing and more inclusive economy, investment must be prioritised in almost every decision.
As we look back at the 2024 elections, there are many possible lessons we can learn. Many observers will point to explicitly political factors and underestimate the underlying economic causes. The next government — no matter its composition — will have to go further. It will have to address the disastrous performance of local government. It will have to build its own capacity to plan and to deliver. It will have to prioritise growth in public and private investment.
If that happens, it will show that when voters speak, governments are able to respond. If not, our national government will come to resemble our local governments — endless conflict over a shrinking pie. Let us hope that our political leaders can put their focus where it matters.
• Bethlehem is an economic development specialist.
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