Attributing our economic stagnation and jobs crisis to investment shortfalls could have prompted big policy reforms. Yet ANC leaders attending investor conferences have not been inspired to adopt commercially astute policies capable of driving rapid economic growth or large-scale job creation. Nor is subsidising beneficiation a workable solution.
Weak investment flows do not explain our low growth; the causality runs the other way. Misguided policy choices have flattened our growth trajectory and investors have responded accordingly. Subdued investment flows ultimately trace to policies antithetical to growth.
For many years ANC leaders have heard ― and ignored — the views of investors and business leaders about policy shifts needed to unlock higher growth and meaningful capital mobilisation. The core blockage is that ANC leaders reject the need to sustain growth through persistently expanding, while widely dispersing productivity gains.
The ANC perspective is that of a labour union zealot who views productivity gains as threats to union jobs. Technology-led advances, such as the shift from landline phones to smartphones, often destroy traditional jobs. Yet such advances frequently deliver a net increase in employment while improving living standards.
From a grassroots perspective, imagine you are about to attend the 10-year reunion of your statistically typical South African high school. Most of your former classmates never graduated and most have never been meaningfully employed — in the sense of an employer investing to raise their productivity. Far too few will benefit from the types of sustained employer investments that lift lifetime earnings and skills.
Such investments range from software or AI subscriptions to timeously replacing a tired motorbike. Few such economically sidelined former classmates will ever become meaningfully employed.
Growth now relies on rising productivity, adaptability, global integration and competitiveness. The ANC’s labour union perspective rejects each of these elements as well as the vital role of creative destruction in the highly globalised economy.
While these unaffordable policy biases are often attributed to the ANC’s roots as a Marxist liberation movement, the party’s counter-productive policies are better explained by its deep embrace of patronage. Yet sidelining merit is unsustainable as it is irreconcilable with improving productivity and competitiveness.
Growth now relies on rising productivity, adaptability, global integration and competitiveness. The ANC’s labour union perspective rejects each of these elements as well as the vital role of creative destruction in the highly globalised economy.
Raising a country’s living standards requires steady increases in workforce productivity to grow real wages and consumer purchasing power. Most countries therefore go to great lengths to avoid high youth unemployment, recognising that workers record their largest productivity gains early in their careers. The resulting wage increases then support growth pillars such as home ownership and child development.
After entrenching the world’s most severe youth unemployment crisis the ANC has doubled down by embracing localisation. Such extreme youth unemployment locks in low productivity growth, leaving domestic purchasing power too weak to encourage robust capital formation. Such a surge would have to target export-led growth.
This exposes the central disconnect: the ANC’s organisational logic relies heavily on patronage, which precludes the productivity gains needed to grow domestic purchasing power or the competitiveness required for meaningful value-added exporting. Such inept stewardship is unsustainable, politically and economically.
Most South African households are poor, heavily indebted or both. Meanwhile, only a small fraction of our young workers add value to exports. This situation can’t be improved through subsidising otherwise noncompetitive union jobs at energy-intensive smelters crippled by Eskom’s patronage-driven inefficiencies. Protecting union jobs in this manner will merely burden the struggling majority further; it will not deliver a net increase in employment.
As the ANC has shown no appetite for reassessing its policy biases it risks losing its electoral dominance by 2029. But as we cannot wait until then to focus on developing workable solutions, we must acknowledge our own biases.
We have been too receptive to investment-led growth arguments, viewing the economy too narrowly through capital market lenses and metrics. While the ANC is dismissive of commercial economics, our national discourse underappreciates the importance of economic development basics such as growing productivity and expanding household purchasing power.
• Hagedorn is an independent strategy adviser.
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