SHAWN HAGEDORN: Hosting the G20 could be a reality check

Since our economic path is not viable, the ANC should exploit SA hosting the Group of 20 (G20) by aggressively pivoting its policies to pursue export-led growth. This would be most beneficial when it leads to investor concerns such as improving critical infrastructure being prioritised.

However, meeting basic governance standards is necessary but insufficient to counter SA having the world’s most entrenched youth unemployment crisis. The ANC clinging to localisation policies despite our having a huge purchasing power deficiency is the core problem.

It is delusional to think our domestic purchasing power can spur sufficient growth to achieve something resembling normal workforce participation. Every year another 300,000 or so 20-something South Africans morph, quietly and anonymously, from being merely long-term unemployed to being permanently marginalised. Growth projections from the IMF and others confirm that this will continue throughout this decade. Soon a majority of our black 20-somethings and 30-somethings will have become permanently marginalised. There are no plans under consideration that would avoid this dreadful result.

If GDP growth averaged 5% for five years, employment would surge and our consumers would be spending far more. But as our domestic consumers are too tapped out to fund such growth, such musings are delusional. ANC policies have induced a type of balance sheet recession. Far too many SA households are excessively indebted. Accelerating the liquidation of pension assets is unlikely to provoke prudential financial management by such households.

Nothing under consideration will sustainably increase our domestic purchasing power. Eliminating load-shedding did not unleash high growth. Before the end of this decade our per capita income will have been stagnating for 20 years due to a localisation focus, notwithstanding ultra-elevated unemployment alongside excessive indebtedness.

Why would international investors choose to invest in an economy that is stagnating while accelerating the liquidation of pension assets to fund consumption? Besides, relying more on foreign investors further dims long-term prospects as more funds will be sent offshore to service debt and fund dividends.

Nor can higher commodity exports change our economy’s direction of travel. That would slow our economic decline, not reverse it. The global economy has been reconstituted since the 1980s. Today, most poor countries are commodity exporters while most commodity-exporting countries are poor. Global growth is now dominated by services, with digital services such as artificial intelligence reshaping commerce and lifestyles. 

SA is hosting the G20 as unfolding events suggest efforts by Russia, China and Iran to reshape the global order have undermined their growth and influence. This has contributed to momentum for reshaping the global order having shifted to Donald Trump. Other national leaders cannot help but appreciate how his overcoming extraordinary efforts to block his re-election make him truly formidable. That the US economy now seems far better positioned than those of Europe or China is also a key factor. This consideration is amplified given how many countries are reliant on exporting to the US.

The US’s huge trade deficits create millions of jobs in other countries, most particularly in China. Chinese leaders now hope to leverage their manufacturing competitiveness by subsidising key industries, such as the production of vehicles, steel and solar panels, to bankrupt foreign competitors. Europe and the US are expected to maintain high tariffs to undermine such trade practices, which violate trade agreements. 

Trump’s decisive victory also confirmed that the diversity, equity and inclusion movement is retreating in the US and beyond. Thus SA will be hosting a long series of G20 gatherings while the country’s geopolitical positioning and economic policies are being emphatically rejected by major global trends. Might this make it easier for the ANC and its unity government partners to pivot towards pro-growth policies?

If Trump comes to SA for the gathering of G20 leaders in November he won’t quietly tolerate ANC elites blaming the underdevelopment of poorly governed nations on Western greed and exploitation. Our governing elites must see hosting the G20 as a reality check and pivot their policies to unlock this country’s growth potential.

• Hagedorn (@shawnhagedorn) is an independent strategy adviser.