Redistribution can’t be a substitute for growth – DA MP Toby Chance

JOHANNESBURG — The DA, of late, has been criticised for being an ANC-lite. But ‘not so’ says DA MP Toby Chance. In this piece, he explains how DA economic policy fundamentally differs from ANC policy in key ways, especially when it comes to the issue of redistribution. – Gareth van Zyl

By Toby Chance*

Toby Chance

Commentators often say there is no difference between ANC and DA policies, with the only differentiator being the latter’s track record of better implementation.

Recent statements by two senior ANC officials on the economy, however, expose the fallacy of this supposition.

In attempts to highlight what she stands for as a candidate at the ANC’s congress in December, Dr Nkosazana Dlamini-Zuma has gone on something of a communications drive. Finance Minister Malusi Gigaba, on the other hand, used the medium-term budget policy statement (MTBPS) to placate South Africans and market watchers expecting relief from SA’s prolonged economic malaise.

While delivering his budget speech, Gigaba referenced a quote from Oliver Tambo which illustrates how embedded the mantra of redistribution is in the ANC’s psyche: “the issues as to how the wealth of the country is redistributed for the benefit of all our people….are of prime importance and should find their solutions in the context of democracy.”

This is mimicked in the Freedom Charter, with the clarion call that “the people shall share in the country’s wealth.”

By contrast, the DA’s policy focuses on empowering individuals to take part in the economy to create wealth, specifically through the supply of an educated, motivated workforce and higher demand created by the formation and growth of new businesses and a focus on exports. In a nutshell, increasing the size of the pie generates increased tax revenues to fund improved government services.

ANC Policy Conference 2017: Tinkering with the party’s engine while the country’s wheels are coming off. More of Zapiro’s magic available at www.zapiro.com.

To some this distinction may seem like splitting hairs, but is in fact fundamental to the two parties’ diagnosis of South Africa’s problems and the solutions they offer. After 23 years of ANC rule, the distinction lies at the heart of why economic growth is flatlining, unemployment queues are lengthening, schools and hospitals are failing, and crime and social discontent are rising.

There are three principal reasons for this: the ANC is corrupt and promotes loyalty over competence; it has failed to develop our people, particularly the poorest and most marginalised; and it has strangled the economy, crippling the entrepreneurial incentive so vital to achieving growth.

The DA, by contrast, is firmly behind creating an “opportunity ladder”, providing the means for youngsters to invest in their talents with help from government, their families and communities.

In a DA-run South Africa, from early childhood through basic and tertiary education and on towards the world of work, young people will be able to pursue their dreams freed from politicised teachers unions which hinder educational opportunities, and freed from an over-regulated economy which makes it hard to find a job or start a business.

According to Stats SA, between 2008 and 2015 the number of formal small businesses in South Africa dropped from 707 000 to 670 000 while their contribution to employment dropped from 64% to 55%. This is completely the opposite of what the NDP expects to happen leading to 2030.

South Africa’s labour absorption rate of 40% compares to 60% in other upper-middle income countries. Our high unemployment rate and low labour absorption rate are inextricably linked. In South Africa, less than 20% of all formally employed people are self-employed or employers. The norm for upper middle income countries is 40%. It is clear, therefore, that rapid economic and employment growth will come on the back of a growing mass of small and medium-sized companies.

The idea of supporting small companies that take domestic market share from large domestic companies rests on the fallacy that this contributes to economic growth and employment. This reflects a profound inward-focused, isolationist outlook which leads to ongoing stagnation or worse. Hence government’s 30% procurement policy for small business will at best shift jobs not create new jobs.

Growth will come from big companies, with their scale economies, financial muscle and market access opportunities, collaborating with nimble, innovative small companies to penetrate niche export markets, creating sustainable new jobs and boosting our balance of payments. 

It will also come from incentivising more of the likes of Patrice Motsepe (ARM), Brian Joffe (Bidvest), Adrian Gore (Discovery), Sipho Nkosi (Exxaro) and Jannie Mouton (PSG Group) to start and up-scale world class businesses that acquire and spawn other businesses through innovation and competitive advantage.

In Zapiro’s eyes, more of a collision government. More magic available at www.zapiro.com.

For our economy to thrive, there is no alternative but to focus on export-led growth. No economy has experienced rapid growth without integrating into the global economy and South Africa has failed to do this.

The period of relatively rapid growth in the mid-noughties was driven by the resource super-cycle and debt-fuelled consumption. Today we are experiencing the hangover from this period of indulgence. Our problems are not cyclical, they are structural and political and will soon take us down the road to Venezuela and Zimbabwe if not reversed.

Far from the DA being ANC-lite, Deputy President Cyril Ramaphosa’s recent speech in Orlando shows he, at least, could finally be waking up to the DA’s values of freedom, fairness and opportunity.

The question now for commentators is: can the ANC implement what the DA has long been calling for or will we have to wait for a DA-led government to see real action?

  • Toby Chance is an MP and DA Shadow Minister of Small Business Development.
(Visited 1 times, 1 visits today)