Zuma’s giant leap off the cliff

Zuma’s "giant leap" – off the cliff
The ANC’s policy conference in Midrand this week has
dispelled any lingering hope that the ANC can still rescue
South Africa from the consequences of 18 years of ANC
If the conference resolutions (couched in tired, old Marxist
jargon) are ever implemented, they will undoubtedly worsen
the crisis of poverty, unemployment and inequality the ANC
claims it wants to address.
The ANC acknowledges in its own discussion documents,
prepared for the conference, that the state is "impotent". It
acknowledges that there is a "crisis of
outcomes" (otherwise known as delivery failure). But its
plan to fix this is – more state control!
Despite the acknowledged failure of almost every state-
driven intervention – from land reform to education renewal
– President Zuma’s opening speech blamed the familiar
scapegoat: "white men" and the inherited disparities of
Instead of the "giant leap" forward Zuma promised, the
conference ended in a tenuous "holding operation"
endorsing the re-hashed policy proposals adopted at
Polokwane almost five years ago.
To be sure, it could have been worse. A large number of
delegates were pushing for more radical forms of state-led
populism, such as the wholesale nationalisation of the
mining industry (which reportedly led to a fist fight between
delegates behind closed doors) and the confiscation of land
without compensation. If this lobby had triumphed, it would
have been the death knell for further investment and
economic growth. It is important that these calls were
resisted (even if only by a narrow margin, in the case of the
"land-grab" protagonists).
But this does not represent progress. It means that
President Zuma will be even more compromised than he
was before the conference. Policy paralysis is the inevitable
outcome. Talk of the "developmental state" leading the
"second phase of South Africa’s transition" is hollow
rhetoric, bereft of content.
Even if some of the policy proposals are implemented, they
will make matters worse rather than better. Take the
resolutions on mining: they are designed to make conditions
more difficult for the mining industry, at a time when many
mines are battling to survive. The proposed 50% resource
rent tax on mining will inevitably lead to mine closures. The
increased revenue government is trying to gain will be
minimal compared to the economic and social impact of
thousands more unemployed people.
Instead, we should grow mining output by working to reduce
costs associated with poor transport infrastructure,
inadequate export facilities and rising electricity prices. To
grow jobs we need more down-stream industries in mining
and to achieve this we should focus on improving the
business and regulatory environment so that these
industries are attractive to investors. State coercion to force
mines to diversify by undertaking "beneficiation" will have
the opposite effect.
Then there is the issue of land reform. The conference
resolved that land should not be confiscated without
compensation unless it had been acquired illegally. And
while the concept of "willing-buyer, willing-seller" was
rejected, the conference accepted that constitutional
change was not needed. So the legal "status quo" remains:
if the state and a private owner cannot reach agreement on
compensation for land, a court must determine a
reasonable price.
But the state’s own central role in the failure of land reform
remained unexamined. Eighteen years into democracy, an
"audit" of land ownership in South Africa is still incomplete.
If there was any serious intent to drive land reform and
improve agricultural output, the ANC would start by focusing
on South Africa’s most fertile land along the country’s
eastern sea-board which is largely unproductive and held in
various forms of "traditional" communal ownership. The
state also owns vast tracts of land. But instead of using this
land to broaden ownership and enhance agricultural
production, the focus remains on punishing productive
farmers. This is incomprehensible given that, according to
the government’s own statistics, over 80% of land reform
ventures country-wide have failed.
Then there is the all-important area of investment,
economic growth and job creation. It is clear from the
discussion papers that the ANC still believes State Owned
Enterprises (SOEs) should be the core drivers of "economic
transformation" with a mandate to "advance the socio-
economic and political agenda of the developmental state".
This jargon is pure satire, given the combined records of
Transnet, Telkom, Eskom, South African Airways and the
SABC. Between 2008 and 2010, state-owned enterprises had
to be rescued by taxpayers to the tune of R243-billion. And
to add insult to injury, when their CEOs and senior staff
were "relieved" of their positions, it cost taxpayers R262-
million to let them go.
As if this is not enough, there are now plans for a new state-
owned mining company, a state-owned bank, a state-
owned construction company, and a state-controlled
"human resource planning entity". Each one of these is
destined for failure. If a state is so inept that it cannot even
deliver textbooks to schools, its attempt to control the
supply and demand of human resources throughout the
economy will certainly result in a "giant leap" – over the cliff
and into an abyss.
While seeking state intervention everywhere it shouldn’t, the
ANC continues to resist it where it should. In 2011, R5-
billion was budgeted to implement a Youth Wage Subsidy in
order to encourage employers to offer "first-time" jobs to
enable young work seekers to get a foothold on the first
rung of the economic ladder. It remains unspent. Under
pressure from COSATU, the ANC has shied away from
implementing one of the few interventions by the state that
would really boost productivity and opportunity, and
broaden the participation of young people in the economy.
Instead, the ANC has opted for precisely the opposite.
Although details are still sketchy, the conference mooted an
ill-defined "job-seekers grant" offering young people an
"allowance" while they look for work. This misdiagnoses the
failure in our labour market, where job search costs are a
limited contributor to unemployment. Accordingly, a grant
with such a narrow focus will be relatively ineffective,
increase dependence on the state, and do nothing to
encourage more job creation.
One of the defining features of South Africa’s
unsustainable-socio economic order is that grant recipients
outnumber personal taxpayers by more than 3:1. This new
"grant" will merely skew this situation further. It will not
enable more people to move into the productive economy
and up the ladder, eventually growing the number of
taxpayers. In fact, it will do precisely the opposite.
To really create jobs in South Africa the Youth Wage Subsidy
(that supports the demand-side of the labour market)
should be matched by a supply-side "Opportunity Voucher"
to give young people the choice of subsidised further
education or seed capital or business loan guarantees,
according to their individual needs.
As the ANC delegates argued (and came to blows) behind
closed doors, it was fitting that external developments
overshadowed their deliberations. These events, that
grabbed the headlines, told us much more about the "real
ANC" than the resolutions emanating from its own
As if to symbolise the discrepancy between the ANC’s
words and its deeds, the rhetoric of Midrand was
obliterated in the metaphorical pall of smoke that rose
from the state-sponsored burning and shredding of
undelivered textbooks a few hundred kilometres further
north (appropriately near Polokwane).
Towards the end of the conference, another story took
centre stage: the news that the state is finalising a R2-billion
deal to purchase a new private jet for Jacob Zuma – that is
bigger and better than Angela Merkel’s.
That tells you all you need to know about the ANC’s
"developmental state" and the farce that passed itself off
as a "pro-poor policy conference" in Midrand last week.
Sincerely yours,
Helen Zille



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