Shawn Hagedorn takes a look at the challenges of collaborating with the ANC as it prioritises its patronage network over national interests, which has led to a decline in foreign investment and growth prospects in South Africa. The ANC’s history of oppression-induced conflict and prioritising redistribution over competition has further degraded the country’s growth trajectory. The article suggests that China may be an appealing alignment partner for countries with patronage-reliant ruling parties, but even China may view South Africa with trepidation due to the prohibitive difficulty of collaborating successfully with the ANC. The ANC’s failure to collaborate competently with business leaders and investors is a setback for the country’s growth prospects.
Is working with the ANC unworkable?
By Shawn Hagedorn*
Deflated expectations for investment-led collaborations reflect punctured confidence.
The ANC’s 1990s transition from its liberation movement origins to being a ruling political party did not make it easy for outsiders to understand and align with the ANC. Constructive collaborating was made more elusive still by the party subsequently spawning a pervasive patronage network whose feeding requirements it now prioritises ahead of national interests.
That the party’s heritage mixes liberation movement militancy with Marxist ideology and unionist perspectives explains its constantly framing issues in terms of oppression-induced conflict. The country’s history of sidelining the majority population made such framing of issues around racial injustices electorally appealing.
The core advantage for a patronage-beholden ruling party of framing issues within an oppression-induced context is that more patronage can always be justified. Among the disadvantages, seeking to grow through competing is irreconcilable with policies designed to support redistribution and patronage.
This is a serious disadvantage as today’s global economy rewards well-executed competitive efforts. Conversely, redistribution-focused economies are destined to wallow.
In addition to directly flattening a country’s growth trajectory, prioritising redistribution also indirectly degrades growth prospects. Today, more than ever, economic success relies on sophisticated collaborating which, in turn, requires much trust.
Builders can build long-lasting, mutually beneficial relationships with other builders. This is at the heart of 21st century economies growing through integrating within global supply chains. In seeking to justify its redistribution and patronage, the ANC has provoked much hostility toward building blocks as basic as commercial merit and productivity. This leaves SA’s relationship building capacity similar to Russia’s.
Commodity-exporting countries have always been prone toward patronage politics. What is so unusual today is that China is the world’s manufacturing powerhouse and the top value-added exporter. That its leader now wants to reconfigure the global rules-based order makes China an appealing alignment partner for countries that export raw materials and are run by patronage-reliant ruling parties.
Yet China almost certainly views South Africa with much trepidation. President Xi’s signature ‘belt and roads’ project has been wobbling. Many of his targeted alignment partner countries are experiencing financial stress while the project’s potential for massive loan losses compounds. South Africa’s economy requires substantial infrastructure funding whereas the ANC’s economic stewardship points toward performance disappointments and repayment challenges.
China’s leaders would almost certainly have mixed reactions to the Financial Mail’s current cover story, ‘The truth behind Cyril’s R1.5-trillion investment pledges’. The article counters ANC spin with facts and figures. As the investment pledges shrink under such scrutiny, this would seem to signal an opportunity for China.
An alternative interpretation is that South Africa is becoming uninvestable due to the prohibitive difficulty of collaborating successfully with the ANC. International investors that follow the ANC’s local coalition governments antics will be further discouraged.
Of course China could run Eskom and our transport and mining sectors vastly better than the ANC could. This could suit China and it could meaningfully boost our commodity-export capacity. Such an arrangement would however need to also suit patronage-feeding requirements. Would China’s leaders be so naive as to trust our president’s assurances that he can prevent sabotage being provoked by disgruntled cronies?
Emerging market investors and mininghouse executives can tolerate many moral shortcomings if the risk-adjusted returns are adequate. That such people ratchet lower their hopes of working effectively with the ANC is distressing.
From a foreign perspective, it appears that our senior business executives bent over backwards to work with the ANC to attract foreign investments but that the ANC just couldn’t hold up its end of the bargain. It seems that the patronage crowd is not answerable to the ANC’s leadership but rather the ANC’s leaders are fearful of crossing the crony network they created.
South Africa’s governability and collaboration capacity is further threatened by our having the world’s highest level of entrenched youth unemployment. Prospects for a majority of our ‘born free’ adults are truly horrific. This has been met with much equanimity locally but it foretells unacceptable levels of ‘social upheaval’ risks to all but the most predatory of would-be alignment partners.
Ramaphosa’s investment-led growth initiative has failed at its two most important tasks. It failed to generate sufficient investment flows to improve economic prospects. It also failed, no less spectacularly, to show that the ANC can collaborate competently. The two messages are mutually reinforcing and they are further corroborated by the ANC’s routinely inconsistent and incoherent messaging on the governance issues where South Africa features in international headlines.
We now have clear confirmation that the ANC can’t collaborate effectively with business leaders and investors. We should better appreciate how large a setback this is.
*For 20 years, Shawn Hagedorn has been regularly writing articles in leading SA publications, focusing primarily on economic development. For over two years, he wrote a biweekly column titled “Myths and Misunderstandings” without ever lacking subject material. Visit shawn-hagedorn.com/, and follow him on Twitter @shawnhagedorn
This article was first published by Daily Friend and is republished with permission