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OPINION: Dlamini-Zuma’s fantasy economic policy unpacked – Wessels’ reality check

BIZ NEWS / 11 DECEMBER 2017 - 12.20 /JOHANNES WESSELS

JOHANNESBURG — Picking apart presidential hopeful, Dr Nkosazana Dlamini-Zuma’s (NDZ’s), public utterances around economic growth for South Africa, Johannes Wessels, Director of the Enterprise Observatory of SA, concludes that ideology trumps pragmatism every time. He’s in good company; Fitch Ratings agency says that under NDZ it’s hard to see economic recovery, even though it’s not as simple as Ramaphosa being the preferred option for business – he’d still have to deliver. Radical economic transformation is NDZ’s mantra; rather than pursuing growth and economic freedom, she punts racial and gender quotas. Reuters quoted her thus during her campaign: “If we have to choose between our people having a better life and investment, that’s not a choice.” Right there lies the fantasy.

That the former depends on the latter seems to escape her. It’s about as incongruous a picture as Wessels paints of her yodelling in the mountains to the strains of the Sound of Music. Except that we all know her infamous role while Health Minister in 1995 around EU HIV/AIDS funding for the musical Sarafina. She ducked, dived and misled with all the canniness of a modern-day Zuptoid. Demographically-driven economics is her forte. That poverty alleviation might include a radical revision of the labour regime or BEE or privatisation of State-owned Enterprises, is simply not up for discussion. – Chris Bateman

ANC elective contest leaderboard. More of Zapiro’s brilliant work available at www.zapiro.com.

When Nkosazana Dlamini-Zuma announced her Manifesto for Change, she reminded me somewhat of the stern Mother Abbess singing “Climb every Mountain” for Maria (Julie Andrews) in The Sound of Music.

Definitely not her voice, but her words… Dlamini-Zuma summoned support for Radical Economic Transformation(RET): “We must know which hills to tackle next. …(t)hese are the mountain of economic transformation, the highland of land redistribution and the summit that must see us educating and skilling our people. If not, the negatives will swallow the gains we have made.”

Mother Theresa

Marvellous libretto…

Analysing her Manifesto to see how she wants to approach this mountaineering challenge, she doesn’t seem to be an experienced Sherpa guide that knows the invisible abysses and other dangers of the snow-covered Himalayan peaks. She appears somewhat out of her depth, almost like a San hunter accustomed to stalking gemsbok in the Kalahari dunes who now needs to scale the mountain tops. (Dlamini-Zuma applies the same term that opponent Cyril Ramaphosa uses for his New Deal: Radical Economic Transformation. Just as in the case with her opponent the emphasis is more on racial transformation than on growth.

In several places Dlamini-Zuma talks about the need “to agree“, “to reach consensus” and to “reach a negotiated outcome“. When she suggests “We must agree on a macroeconomic policy environment”, it should not be taken as an open mind. It is rather a case that the dissenting voices that warned of a fiscal cliff (e.g. Nene and Gordhan) should become aligned with the majority view in Cabinet.

Johannes Wessels

That is clear when she states: “(G)overnment at national level must engage all South Africans in a genuine economic dialogue to develop this plan of radical economic transformation. It must be a democratic process, with sectoral and local dialogues, so that all South Africans… are part of the solutions.” The outcome is already decided: RET.

Johannes Wessels - Biznews.com

The dialogue is not about the best way to grow the economy. It is just a dialogue about how to implement RET and a very specific form of RET: demographic driven economics. There is no willingness to consider that the best route to poverty alleviation may include a radical revision of the labour regime or BEE or privatisation of State-owned Enterprises, or all three. She is closed to such alternatives. Her position is similar to that of Mosebenzi Zwane who had said the Chamber of Mines was not there to advise him on policy since he decides policy. The Chamber is merely there to advise him on how to implement his revised Mining Charter.

What is the core of RET? Not growth. Dlamini-Zuma is clear: “At the centre (of RET) must be job creation and economic opportunities for all… It must be deliberate in correcting the skewed racial and gender patterns of economic ownership and control.” She is not alone in this approach: Ramaphosa is also “hell-bent” on economic transformation..

Rather than pursuing growth and economic freedom, Dlamini-Zuma harbours racial and gender quotas. Demographic attributes (whether race, religion, language or gender) should neither be barriers to nor the base for economic opportunity. Demographic-driven economics can only be achieved by prescription and limiting freedom: it repeats the idiocy of job reservation under apartheid.

By implication the entrepreneur that detects an opportunity is less important for Dlamini-Zuma than corrective actions by Government to pursue the gender and racial demographic economy that the ANC pursues. She clearly has no grasp that investment and growth are prerequisites for improving the position of the poor. Reuters quoted her stating during her campaign: “If we have to choose between our people having a better life and investment, that’s not a choice.”

Presidential hopeful Nkosazana Dlamini-Zuma

Dlamini-Zuma has her roots in Black Consciousness. She is also an ideological conservative and would automatically back the ANC’s old supporters (e.g. Cuba). She is known to be very cold and brusque when dealing with Western governments (as Minister of Foreign Affairs under Mbeki, and during her term at the African Union). This underpins her embrace of statism and her aversion in economic freedom.

The presidential candidate’s centrist approach is also evident when she stated: “(We need) to build a developmental state, ensure a responsive public service and state-owned enterprises that are at the centre of transformation and fulfil their mandates.” Dlamini-Zuma displayed herewith that she is far removed from reality: the state is incapable of getting Grade 4 learners to read and runs a Police Service that the World Economic Forumconsiders as one of the worst in the world, whilst State-owned Enterprises are stumbling blocks for growth and job creation. In Afrikaans we could formulate it as follows: Die staat is nie in staat om so rol te vervul nie.

In a few instances, she ventures specific proposals:

  • Beneficiation: “We (need to) prioritise an entrepreneurial industrial policy and plan, by adding value and beneficiating mineral resources”

  • “We must in the process tackle the festering sore of the land question… so that we change the apartheid geography and allow SA to become a player in the regional and global food and agricultural sector.”

  • “Invest in the South African people. Countries that successfully pulled themselves out of poverty in a single generation are those that invested in their people, in addition to radical transformation of their economies.”

  • “(RET) requires us to strengthen and invest in sectors such as the green economy, tourism, the cultural and creative sector, petrochemicals, the blue oceans economy, infrastructure development, food and beverages, mining, agriculture, transport and logistics, the financial sector and manufacturing.”

Realistic and economically sound?

The beneficiation efforts since 1994 had limited effect (except in ferrochrome). Minerals (and semi-processed ones) are not in short supply in the world. Many industrial and industrialising countries buying raw commodities since they have the infrastructure for intermediate processing as well. They may just turn to a raw commodity supplier once SA commences to insist on supplying processed commodities. If beneficiation doesn’t result in internationally recognised brands (therefore differentiated end-products and not mere processed commodities) for which there is a demand, it will not yield much. Poor productivity, costly and delayed port procedures as well as expensive transport due to SA’s location, may render these beneficiated commodities unmarketable.

The land question is indeed a festering sore in South Africa. Dlamini-Zuma’s suggestion that apartheid geography is the barrier to SA becoming a global player in agricultural production, doesn’t hold. The Western Cape and Lower Orange River region of the Norther Cape are renowned for export of wine, table grapes, fresh and dried fruit. SA remains a serious maize and wool producer and is the leader in mohair production.

Rather than assessing the reasons for success in these agricultural sub-sectors fields and how these could be enhanced to improve exports and therefore growth, she focuses on the skin colour of the farmers. The success in export of agricultural production could be substantially enhanced when the issue of unproductive communal land in the chieftain areas is resolved. Dlamini-Zuma is silent on how these unproductive land holdings ensure poverty continuation…

On investing in people Dlamini-Zuma’s word choice suggests RET is something separate (“in addition”) from skills development, education and training. The successful transformation of the economies of Singapore, Taiwan, Korea and Chile were based on a systematic improvement of skills to ensure products and services with an international demand. Decoupling transformation from such skills did happen in Zimbabwe.

The work of Ricardo Hausman as chair of the International Panel on Accelerated and Shared Growth commissioned by Thabo Mbeki, emphasised the importance of skills retention (stop white flight) and skills acquisition (make it attractive for highly skilled people to immigrate to SA and ensure quality of education outputs) for achieving growth and poverty alleviation.

Government was not successful with that and the ANC flatly ignored those recommendations. They did succeed in ensuring Grade 4 learners cannot read. SA will slip even further back and poverty will become more entrenched unless a dedicated program is implemented to retain skilled people and to lure skilled people. That requires as Hausman has said a change in BEE.

Dlamini-Zuma’s listing of sectors conveys no strategy: it reads like a flip chart filled with ideas during a brain storming session. Some sectors listed (e.g. the Green Economy and the Blue Oceans Economy) are not economic sectors, but cross-cutting approaches covering a range of sectors.

-Zuma calls for more investment to achieve demographic driven outcomes but fails to spell out how that will be achieved. Unmentioned, but implied, it can only be reached by more Government incentives for BEE deals or new black owned enterprises as well as prescriptive procurement.

Underpinning this conviction is the premise that “what we can produce” is more important than assessing which gaps and opportunities are opening up through trade regime developments and technical progress (e.g. robotics) to develop incentives for SA firms that can exploit such export opportunities. Dlamini-Zuma’s Manifesto for Change is low on substance for achieving economic growth. It remains cemented in the doctrine of central planning, control and state-engineering.

Nkosazana Dlamini-Zuma - Biznews.com

Her demographic based economics are far removed from the inspirational song by the Mother Abbess: it is closer to the nursery song of the Grand Old Duke of York who marched his men to the top of the hill and down again… “And when they were up they were up… and when they were down they were down… And when they were only halfway up they were neither up nor down.”

PS. Dlamini-Zuma was the first post 94 Cabinet Minister with a tender scandal in 1995 about a musical: Sarafina. The Public Protector then found the information she gave to Parliament and through press statements was often false or misleading. The EU that funded the HIV/AIDS programme made it clear that her response of EU funding for Sarafina was false. No harm came to her since Mandela protected her. Dlamini-Zuma therefore paved the way for the Executive misleading and trampling Parliament as has happened since with Nkandla, State Capture, answers without substance by the President and Cabinet ministers often not pitching at Parliamentary standing committees…. Pioneering this approach is part of her legacy.

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