Call for clarity: MPC urged to prioritise privatisation, end BEE ahead of elections – Katzenellenbogen

In the upcoming South African elections, the Multi-Party Charter (MPC), comprising eight parties, including the Democratic Alliance and ActionSA, lacks substantive policies beyond generic goals. Advocates argue the campaign should prioritise issues like privatisation and ending black economic empowerment (BEE), differentiating the MPC from the ruling ANC. The mismanagement of state-owned enterprises remains a major impediment to economic growth, while BEE hinders investor interest. Addressing these challenges, rather than generic promises, is crucial for a genuine turnaround from ANC mismanagement and economic recovery.

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Making privatisation and ending BEE key to the election

By Jonathan Katzenellenbogen*

At the launch of his political party, ‘Change Starts Now’, last year, Roger Jardine said he would soon be asking the public for policy suggestions.

‘Please inspire us with your thoughts and ideas,’ he said at the launch.

Clearly the launch of Change StartsNow has come before any deep consideration of ideas, apart from that of defeating the ANC.

The Multi-Party Charter (MPC), the pre-election arrangement that now brings together eight parties including the Democratic Alliance, (DA), ActionSA, the Inkatha Freedom Party, (IFP), the Freedom Front Plus, (FF+), and others, has put forward a generic list of goals, rather than policies. These include growing the economy, creating jobs, energy security, and combating crime. That is all pretty much motherhood and apple pie stuff. Besides, the ANC can also promise to do these things.

The election, which will probably be held in April or May this year, will to a large extent be a referendum on ANC rule. Sprouting banal generic stuff as part of the campaign rather than specific policies cannot bring much traction.

There seems to be a dangerous aversion on the part of the MPC and Change Starts Now togiving their support to clear policies. The DA favours privatisation, and that would also probably be favoured by ActionSA and FF+, as would be the scrapping of black economic empowerment (BEE).

Support for privatisation and ending BEE, as well as a number of other policies, should be the litmus test of whether a party really does support a real turnaround from ANC mismanagement. Instead of motherhood issues, the MPC should bring privatisation and ending BEE to the fore in this campaign. This is what should separate the ANC and Economic Freedom Fighters on the one hand, from the MPC on the other. The other issues that should differentiate the MPC from the ANC and EFF are the broad deregulation of economic activity and making the government far more accountable and a lot smaller.

Putting these policies front and centre in the campaign would say to the country, ‘We have a plan and, if by some chance we won, we would have a clear mandate’. The position of parties on these issues should be the criteria on which membership of the MPC is decided.

The importance of privatisation and an end to BEE is that they are necessary, albeit not sufficient, conditions for turning around the economy.

The mismanagement and distress of virtually all state-owned enterprises are a massive drag on economic growth. Frequent power cuts due to breakdowns at Eskom deter investment and have undermined manufacturing and many export industries. Transnet’s breakdown has throttled exports and crucial imports and raised the cost of transport. The decline of Eskom and Transnet has undermined the key competitive advantages of cheap power and the well-functioning infrastructure that we once had.

Promises by the ANC to turn around state enterprises have repeatedly been broken, while the repeated bailouts have increased the government budget deficit. The failure of state enterprises is the largest reason for the decline in South African productivity, says the International Monetary Fund.

The ANC has failed to turn around state-owned enterprises because these are pots of gold for its supporters: the unions and its senior cadres, who have found easy access to key management posts, jobs and contracts. As a result of a combination of ideology and political opportunism, the ANC is now hamstrung in any efforts to turn them around, all while the economy suffers.

There is no real reason why the state should control “strategic sectors of the economy” if the private sector can run them. Back in the 1990s, much of the rest of the world sold off state assets, as it was clear that an incentivised private sector could run these far better. The effectiveness has been proven in much of Europe and in Eastern Europe, where many of the former centrally-planned economies have thrived.

Promises by the ANC to deal with problems at state enterprises have consistently failed. Nearly two years ago, the ANC said it intended to conduct a study to determine the state of Eskom stations and would then concession them off for private contractors to run. But nothing has happened. Even though private generation is growing fast, we still need the large coal power stations.

BEE is another economic drag. It is a deterrent to investor interest, as any mid-sized firm must comply with empowerment regulations. And all firms reliant on state business or in certain sectors are obliged to follow BEE requirements. Some firms have a policy of not giving away equity stakes and want freedom to choose their own suppliers.

Starlink, the satellite internet service that Elon Musk owns through SpaceX, has been rolled out in eight African countries, but not South Africa. As a telecommunications provider, SpaceX would have to find an empowerment partner to operate in South Africa. The signs are that it refuses to do business that way. That is a loss for the growth of the sector and the country, and for the poor in remote areas. Greater competition among network operators could mean that data prices would fall.

Then there is the issue of having to purchase from empowered suppliers. Rather than buying directly from an original equipment manufacturer, firms are obliged to make their purchases through an empowerment middleman. That often drives up the price of the goods that are supplied, as an extra layer is introduced.

As the Free Market Foundation has pointed out, black economic empowerment is really a misnomer, it is more about the enrichment of a small elite who have access to government contracts. While criticism of empowerment is viewed by the ANC as an attack on transformation, it is only a small section of the population who have benefited. That is hardly a transformation. Faster economic growth and quality education are the largest drivers to enable transformation.

There are other key issues, which should form the new dividing line in South African politics. Government departments are insufficiently accountable for their standards of service. Excessive demands for form-filling and regulation are a problem. The MPC should be calling for a revamp of government and regulation.

Labour regulations and bargaining councils, which in effect allow wages to be set at the level that large firms can pay, all work against job creation.

If Jardine wants to be parachuted into the MPC as leader, he should support privatisation and an end to BEE. A big test for him is whether or not he wants to end BEE, having taken the leap from cadre deployment in government to becoming the Chair of one of the country’s largest financial groups.

These issues are about taking on vested interests and are the terrain on which the future of the country will be fought, if we are to recover from ANC misrule.

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Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist. 

This article was first published by Daily Friend and is republished with permission

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