Job creation impossible with the ANC’s redistributive obsession – Hagedorn

JOHANNESBURG — The noted cattle rancher, Cyril Ramaphosa, is caught on the horns of a dilemma. The long-standing and much-treasured ANC redistribution policies are battling against the economic reboot needed to catapult South African into the global economy. How he untangles himself from this conundrum will be critical in deciding the pace of South Africa’s redemption– and will require disruptive courage, says independent analyst Shawn Hagedorn. Hagedorn is under no illusions that Cyril will garner sufficient high-level support from within the party hierarchy. Instead, it will take a private sector, beaten into economic submission by successive Mbeki and Zuma regimes, to hop out of the fast-warming waters they’ve slowly become numbed to, like so many frogs unable to breed and multiply. Only by clamouring for change and convincing Ramaphosa that a policy U-turn is critical, can they start to twist the ANC’s hand-out arm, tempting the party instead with the fruits of joining a global economy and creating jobs. – Chris Bateman

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.

By Shawn Hagedorn*

Cyril Ramaphosa must invent a path to unite his party while aligning SA with 21st century wealth creating basics. Yet popular and powerful institutions are good at resisting change in the absence of direct external challenges.

What unites the ANC’s diverse factions is a shared belief in redistribution. This triggers an unaffordable isolationist bias. Conversely, the world economy gushes prosperity through global integration marrying specialisation with interdependence.

That the ANC faithful chant the merits of redistribution, and its isolationist biases, is far more understandable than the rest of civil society singing along. The shift in the ANC’s leadership must now provoke truly robust responses from CEO’s as well as SA’s think tanks and commentators.

SA
Shawn Hagedorn

There is little to be gained by lifting consumer and investor confidence. SA’s fixed investment is generally in equilibrium with the economy’s growth prospects – which are dismal. The domestic economy cannot produce adequate momentum as consumers and government are over indebted. Worse still, the economy is structurally misaligned with the forces which propel global growth.

SA can only achieve broad prosperity by surging value-added exports. Such a policy pivot is not difficult to design or implement. It is mostly about dispensations for exporters from regulations which undermine competitiveness. The blockages are ideological, factional, and reckless.

Despite being factionally debilitated, the ANC could accommodate such a transformation. It is not however realistic to think that a few pragmatic visionaries high within the ANC can provoke such a shift from within if leading voices outside of the party remain isolationist minded. As some would say, the environmental preconditions for a large institutional shift have not been met.

That SA’s national dialogue suffers from a compounding set of deficiencies traces firstly to social justice issues dominating the intersection of SA’s politics and economics. Secondly, the ANC under Mbeki and Zuma has been intolerant of its social justice hegemony being challenged. Conversely, Ramaphosa’s agenda requires such external challenges.

That the country will soon complete a decade of no growth in per capita income almost certainly links more to lack of global integration than corruption. That this is so rarely considered is symptomatic of the national dialogue being full of holes. Ditto the conspicuous absence of a workable growth model. Explanations further trace to most influential voices having accepted, if not adopted, the ANC’s isolationist, and thus defeatist, perspective.

Cyril Ramaphosa reacts during the 54th national conference of the ANC in Johannesburg. Photographer: Waldo Swiegers/Bloomberg

Stagnation devastates an economy’s capacity to accommodate redistribution. There is no choice but to then shift the policy emphasis toward growth. Otherwise, sustaining adequate growth and poverty alleviation become ever more elusive. Welcome to SA 2018.

When Zuma goes, Ramaphosa will, under all likely scenarios, become state president for many years. Thus his life-defining risk is presiding over the ANC and SA as both decline at an accelerating pace. While he must want to push through the necessary policy pivots, if he isn’t under pressure from outside the ANC, internal pressures will almost certainly lead to years of too-little, too-late policy disappointments.

Big business was bullied into acquiescence on economic policy making under Mbeki and Zuma. They must now urgently find their voices as active advocates for growth policies which are both workable and inclusive. Their excessively domestic focus is not credible.

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Ramaphosa’s situation is radically different from Mbeki’s and Zuma’s. He must quickly persuade his party to accept the realities that its factions stridently reject. He can’t be expected to do this promptly if other national leaders sit back. Complacency suffocates urgency.

SA’s ongoing national disaster is that its prevalence of extreme poverty is entrenched at over five times the global average. Meanwhile, the nation’s isolationist policies fly in the face of the economic integration which propels global prosperity. It is not mathematically plausible that SA’s domestic consumption can fuel a poverty reduction pace for SA to approach today’s global poverty prevalence norms within the next three generations. Does the national dialogue incorporate this central reality?

The implications of Ramaphosa ascension for the opposition parties are also profound and immediate. They now must expand upon corruption hounding to also exploit the ANC’s factional paralysis by offering realistic solutions. If the ANC then rebrands the best ideas as their own, this could prove to be win-win progress.

Tripartite Fright Night. More of Zapiro’s brilliant work available at www.zapiro.com.

The Ramaphosa team must generate substantial economic momentum to revive the ANC brand. This won’t happen before the 2019 elections. Perhaps voters can be fooled by rebranding of other party’s ideas, but the ANC alliance partners will neither be fooled nor amused. Yet their narrow emphasis on ever greater redistribution has become unbearably destructive.

Once Zuma is no longer state president, Ramaphosa will need to aggressively advance growth policies including calling the bluff of alliance partners that threaten to withhold their support in the 2019 poll. He will have the freedom of movement to do this as he will almost certainly lead the next government whether the ANC wins an outright majority or not.

qnOnce Zuma and most of his patronage network are purged, it will make no sense for the pragmatic Ramaphosa to, in pursuit of workable policies, sacrifice softening support from communists, unionist, and populists to then become beholden to an EFF that remains enamored with Hugo Chavez as Venezuela collapses and SA teeters.

Chief among his primary success blockages is that SA’s leading voices aren’t advocating for a potent global integration strategy. Without such external clamoring, it will be prohibitively risky for Ramaphosa to aggressively push a policy pivot which is so contentious within his party.

Many of SA’s leaders outside of the ANC have longed pinned their hopes on Ramaphosa setting the country on the right path. For that to happen, such people must now assertively advocate for policy shifts that align with 21st century growth paths.

  • Shawn Hagedorn is an independent strategy adviser.