SA’s last 20 years: Going up until Polokwane, downhill since – Leon Louw

Reflection is terribly undervalued. In this warp-speed world of ours, we are often pushed into doing rather than thinking; operating instead of contemplating. But over the next few months there is sure to be much reflection in South Africa after the country's latest economic embarrassment in falling behind Nigeria. Sliding, or Drift as Russell Loubser describes it, is becoming a trend, clearly illustrated in the World Economic Forum's Global Competitiveness reports where the country's rankings have been falling for some years. It's not exactly rocket science either. In the 2013 report, of 144 countries in the WEF's report, SA ranks 144th (ie stone last) in Co-operation between labour and employers; 143rd in Hiring and Firing practices; 140th in Wage flexibility; and 134th in Pay reflecting productivity. Having such an inefficient workforce is an unaffordable luxury for a country whose economy would rank it 17th if one of the US's States, 1/6th the size of that nations number two, Texas.  Much less in a world where globalisation and technology has led to massive productivity gains worldwide. The Free Market Foundation's Leon Louw possesses one of the nation's sharpest intellects. In this thought provoking interview yesterday on CNBC Africa Power Lunch, he tracks the start of the country's economic decline to the ANC's peaceful revolution at Polokwane where young hotheads and the "anyone but Mbeki" rallying cry among the rest of the caucus propelled Government's current decisions makers to power. – AH       

GUGULETHU MFUPHI:  Leon Louw, Executive Director of the Free Market Foundation joins us. It's good to see you again.  Perhaps, if we look back at the past 20 years and the economic strides we've made, surely, there must be several positives.

LEON LOUW:  Well, the last 20 years divides into neat ten-year periods.  The first ten-year period, we had higher growth, investment, and the economy on all internationally-published indices, the Economic Freedom index, the Political Freedom index, the Property Rights index, the Red Tape index (or doing business index) etcetera, and the Competitiveness index.  There are about eight or nine of these.  On all of them, our scores were rising.  We were going up the scales in the world, becoming a freer, more stable and more attractive country in which to invest, and our growth rates reflected that.  About ten years in – halfway through – we turned around and started going down on virtually every index, and as a result, the economy is stagnating so we've had this division into two sections of ten.

ALEC HOGG:  What happened?

LEON LOUW:  Well, it's not entirely clear.  The turning point seems to have been, in timing at least, roughly Polokwane, and it seems that that's when the moderate within the Alliance (the moderates being the ANC)…  When people use the term 'the ANC', they're never clear whether they mean one of the members of an Alliance, or an Alliance.  Up to then, 'the ANC' meant 'one of the members' and it was moderate, it was pro-market, pro-capitalist, pro-globalisation, liberalising, deregulating, privatising (or restructuring, as it was called).  From Polokwane, it seems as through the moderates lost traction, the radicals gained traction, now about half of all the people in senior positions are members of the Communist Party, and it started going the other way.  It coincided, let's say, with Mbeki and Zuma.  I'm not saying the two of them were 'the ones', but those are roughly the two big eras in the last 20 years.

ALEC HOGG:  Well, leadership defines the role, particularly in economics, which role you follow, so you can say Mbeki and Zuma.

LEON LOUW:  It could be, yes.  My view is that the world is complex.  I don't begin to say I understand it and this is really the subject for political scientists.

ALEC HOGG:  But you said it.  You said half the cabinet members are from the Communist Party, so who chose them?

LEON LOUW:  Yes, the Alliance is a strange thing.  It was an Alliance against a common enemy and made sense, as Mandela said at the launch of the Communist Party, that it never tried to impose its views on the ANC, and that's why the Alliance would continue.  After Polokwane, that changed and the SACP openly said they were going to try to take over the Alliance from internally.  The Alliance now seems to be bad for both the ANC and COSATU.  The ANC is schizophrenic about whether it's the government or a civil society.  COSATU is equally schizophrenic: is it the government or a labour union movement?  If you had an alliance for example, between the government and the churches or the government and the Islamic or Jewish church, or an alliance between the government and business, people would say it's strange, wrong, or not even democratic.  However, for some reason, this alliance has been allowed to continue and, I think now, to the detriment of the ANC and when I say 'the ANC', I mean 'one of the members of the Alliance' and not the Alliance.  I'm trying to encourage everybody to get back to understanding the distinction, which was clear, until Polokwane, and has now become foggy and has slipped away.

GUGULETHU MFUPHI:  One of the members of the Alliance is made up of Labour, an area you feel passionate about, where South Africa is falling short there.

LEON LOUW:  Yes, I do feel passionate about Labour – positively – very much.  People get us wrong.  We're challenging provisions in the Labour Relations Act in the Constitutional Court.  People assume that means we're against Labour.  On the contrary, we're in favour of Labour.  The problem with it is that it doesn't allow Labour to independently and freely form, operate, and negotiate agreements with employers, but has agreements entered into by a minority of employers and employees being imposed on the majority of labourers and small business, in particular.  We think that's wrong, so we want labour freedom.  We want labour to be free to negotiate its own deals and not be forced to fall under deals that it doesn't agree with.  We do therefore, feel strongly, and the Labour Relations Law generally, has plunged South Africa into more than double the highest unemployment ever reached during the Great Depression, and yet we don't call it a Great Depression.  We have, according to Dennis Dykes – an economist at Nedbank – the longest and highest enduring unemployment in the world, and we are in a Great Depression.  This is partly due to our Labour Law, which is anti-Labour and not pro-Labour.  This must be clearly understood.

ALEC HOGG:  We have our lovely blinkers on, because 'it's not in my backyard so it's all cool', but get back to the National Development Plan.  Could you give us your thoughts on how that's being implemented and indeed, whether this is going to be the rescue or the turnaround, for the economy as a whole?

LEON LOUW:  Well Alec, as you know we've had a multiplicity of plans, policies, and programs.  They seem to come one after another and this one, as with the others, was not implemented.  On the contrary, the core elements of the National Development Plan are being sabotaged.  For example, it says that the Eskom monopoly…probably the second-biggest tragedy in South Africa after Apartheid itself, is Eskom, and it has clearly failed.  It is calamitous in the extreme.  The economy is about – according to Dawie Roodt's team's calculations – over R360bn smaller than it would have been with sufficient electricity.  The NDP, quite correctly, says Eskom should be broken up, and we should have an independent grid and private competitors and the energy solution is to have competition in energy, as the rest of the world has.  We are sitting here with a dinosaur model of energy, created in the 1920's.  No one in the world does this anymore.  The NDP says we should end it and it's not being done.  On the contrary, a Bill consistent with the NDP – the Independent System and Market Operator Bill, ISMOBIL, was withdrawn from Parliament.  Instead of it being implemented, it's being abandoned, shelved, and going to collect dust like the others.  Other elements of it are the same.  For example, labour reform: we're wanting to bring about a small and critical piece of labour reform, and the government's opposing it.  We are trying to implement the NDP and the government is opposing us in the Constitutional Court.  The other one is that not only the NDP, but President Zuma and various State of the Nation talks, various ministers for example, Ebrahim Patel, Davis and others, have said that we will review and reduce red tape.  All we have is a deluge, a non-stop type of assault on the economy, day-after-day, a new law, or a new regulation.  One of the more extreme ones recently was the Financial Services Amendment Regulation Bill or whatever it was called.  There's another one now, the so-called Twin Peaks Legislation.  There's an assault on the economy by legislation, in conflict with the NDP, so the NDP is not being implemented.  No attempt is being made to implement it.  It's actually the opposite, which is happening.

ALEC HOGG:  Once again, its nice words but you have to walk the talk, and not just talk the talk.  That was Leon Louw, Executive Director of the Free Market Foundation.