Lessons from 25 years of freedom in south africa | thearticle

Cyril Ramaphosa’s South Africa faces economic stagnation, the climate crisis, a hunger crisis in neighbouring Zimbabwe and the rising influence of Russia and China. Meanwhile, the

Western-dominated world order is unravelling under the populist distractions of Donald Trump and Brexit. The African continent is in the early stages of an expected population explosion,

especially north of the equator. Increasing terrorism outbreaks are a risk, and American soldiers and Russian mercenaries are expanding their footprint southward. Russian mercenaries are as

close to South Africa as Mozambique. Facebook has concluded that “entities associated with” the Russian oligarch known as Putin’s chef, who provides catering services to the Russian

government, Yevgeny Prigorzhin, interfered in the domestic politics of eight African countries: Mozambique, Madagascar, Central African Republic, Democratic Republic of Congo, Ivory Coast,

Cameroon, Sudan and Libya. In the 25 years of South African freedom, the world saw the biggest uplift of poor people into the middle class, in history. The countries where it happened

include South Africa’s partners in the so-called BRICS nations — Brazil, Russia, India and China. In the last 10 years, growth rates in a few African countries have been among the top 10 in

the world. That is mostly resource exploitation, but some have adopted effective growth plans. Why did South Africa never match the other BRICS countries’ economic growth, job-creation and

uplift of the poor? Why are we beaten by African countries with fewer advantages than we have? Even in our best times, the policies of President Thabo Mbeki did not produce job-creating,

rapid growth. Mbeki’s economic policies created the necessary conditions of growth, but rapid growth requires more. South Africa missed two great global economic trends during these 25

years: the information boom of the 1990s, and the resources boom driven by China in the 2000s. Our political parties need a new toolbox. They need to listen to experts to develop a new

vision. There is a temptation to look for rescue from somewhere else, like China. But the solutions are at home. There are lessons to be learnt from the Asian tiger economies, even though

South Africa will not be able to move into low-wage manufacturing as they did, because our wage structure is higher. Asia has lessons about the way the state led the economy, in tandem with

business, towards new growth sectors. Our problem is that the South African state has been repurposed to serve a few families and cronies. Now politicians argue over the role of the state.

One side argues that the state is the problem and privatisation the solution; the other that state-owned enterprises could create jobs simply by hiring and procurement. Both solve very

little. The South African state needs to be repurposed, but this time to deliver job-creating rapid, inclusive growth. To do this the state needs to understand the next drivers of growth. We

cannot take any more intellectual short cuts. Every country that pulled most of its citizens out of poverty into the middle class did so in the same way — by rejecting the simple formula,

popular in the 1990s, that fiscal restraint, free trade and a bit of privatisation would do the job. This formula can produce stability and slow growth, but never the rapid growth achieved

by the Asian tigers. Each of these was willing to use tariffs or subsidies to protect embryonic industries, and in each, the government tried hard to understand the sectors that would

produce the best growth and backed them fervently. The state is often poor at choosing winning companies, but its far more important and enduring role is to pick sectors. In the first 25

years of freedom, growth and job creation peaked at around five per cent. At that time, Brazil, Russia, India and China did better by several percentage points and they did this by choosing

sectors most appropriate to the right kind of growth. They answered the question: what will be the growth drivers of each economy? South Africa has missed two major growth drivers in these

past 25 years. First, it missed most of the benefits of the information boom of the 1990s. Then it went on to miss most of the benefits of the China-driven resource boom of the noughties. If

South Africa had handled both well, it would have been on a far stronger trajectory of high growth. That is in the past and we have to look to the future. Just as the information and

resource booms produced good results for those that embraced them, the government has to discover the sectors that will produce job-creating rapid growth. Here’s a hint: the Fourth

Industrial Revolution is not the panacea Davos Man says it is. The emphasis should be on manufacturing and on cities, because that is where income-enhancing growth takes place. Fixing the

information economy still needs to be a priority. Multiple studies show its potential for job-creating growth remains significant. Delays come from political interference in regulation and

the failure to develop robust and independent regulators. A second priority needs to be the green economy. South Africa has signed international treaties promising carbon reduction, but

these are not aligned with industrial policy — they are in different departments. Aligning them offers huge potential. Currently, Russia is signing up nuclear energy deals across the

continent, while China is cornering the African market in renewables. Again, multiple studies indicate African renewable energy is in the early stages of a major trend. Elected

representatives and Cabinet members who are determined to fix the jobs crisis could profitably start there. In the long run, it’s job-creating growth that will save us. Government must

support the sectors that will deliver this growth, but without trying to capture them. _This is an excerpt from John Matisonn’s latest book, Cyril’s Choices, published by Missing Ink._