Mcebisi Jonas | 30 June 2023
We have to ensure that elected leaders are ethical and accountable — not just to their parties, but to society.
SA is at a crossroads. We have many challenges and opportunities, but we also have many conundrums that we need to resolve if we are to move forward as a nation. These are not easy issues, but they are essential for building consensus and changing course towards a better future. I will highlight seven of these conundrums and suggest some ways to address them.
The growth conundrum
This is not something that only affects SA. The global economy is registering tepid growth amid a high inflation cycle — triggered by war in Ukraine — with low growth, especially in traditional trading partners (the EU, the West). There is an emerging phenomenon of “friend-shoring” where trade and investment follow political allegiance and the weaponisation of trade agreements (Agoa). SA is in a difficult space — dependent on the West to maintain current trade and investment relationships while pushing non-alignment (really multi-alignment). I am sure there is a diversity of views in this room on this issue.
But national interest must drive what we do. This is perhaps where we are weak — in determining and acting in the national interest.
SA’s growth is highly tied to global commodities demand — which has caused a low growth trajectory since 2012. Consistent low growth has diminished state revenue and resulted in a growing fiscal deficit (debt servicing is the fastest-growing budget item). Low growth has seen repercussions, among those being lower levels of entrepreneurship than our peers, and higher start-up failure rate.
More than just the need for growth, there is not shared understanding of how growth is achieved — that private-sector investment is a requirement for growth and that there are minimum conditionalities for attracting and retaining investment (well-maintained infrastructure and utilities provision, well-priced and efficient logistics, skills and capabilities, low crime levels, policy certainty etc.) Capital is mobile and even SA capital will be attracted to economies where these conditions are met.
We clearly need all role players to agree on a minimum growth agenda, and then get on with it.
The environmental conundrum
This is a conundrum in the true sense of the word, given our fossil fuel resource base, and the opportunities to pivot on a new growth path built around green industrialisation. The energy transition is a reality, but whether it further disadvantages the developing world is a legitimate concern. Meanwhile load-shedding continues to undermine our prospects of recovery.
How we got here is not rocket science. We’ve added 35-million people to the grid since 1994 and the economy has more or less doubled, but we’ve added very little new generating capacity outside Medupi and Kusile, which have brought their own problems. We’ve forced our coal-fired stations to run on empty, with little to no maintenance, and with declining technical capacity in Eskom to manage them. We need to add 20,000MW of generating capacity over the next 10 years, which is both a nightmare (given our project management record) and a tremendous opportunity to pivot towards green industrialisation. We need a clear, long-term strategy and how it is to be financed. And we should not forget about the losers of the energy transition — the coal-mining workers and communities.
The inequality conundrum
The third conundrum we need to address is our inequality dilemma. Besides being morally unacceptable, high inequality constrains growth and causes political instability. SA was reported by the World Bank to be the most unequal of 164 countries that were benchmarked.
This is the 20th year of the BEE Act. We have to face the reality that the black share of income in SA has increased with a growing black middle class. But the black share of wealth has not changed significantly. This has to do with SA’s high levels of market concentration and barriers to entry, which constrain economic participation.
Our “cappuccino economy” — white on top and black underneath — is unsustainable and creates political and social cleavages that can be exploited by populist forces. Our attempts to address this through positive discrimination policies — affirmative action, B-BBEE, preferential procurement, set-asides etc — have been corrupted, with rents being directed to the politically connected. We placed the state as the centre of black wealth creation, which made it susceptible to clientelism and ultimately destroyed state capacity.
We need to rethink our models for inequality reduction. Obviously social protection and increased investment in human capability expanding programmes need to be at the centre, but we also need to do far more with regard to economic inclusion. We need to grow a new stratum of entrepreneurs who grow wealth through innovation and productivity, rather than political patronage. Financial inclusion, access to markets and more enabling support for start-ups are key, especially for youth start-ups given that the labour market simply cannot absorb the tens of thousands of school-leavers each year. There needs to be a co-ordinated effort to build and sustain an enabling ecosystem for innovation-led growth.
The state capacity conundrum
Given our extreme service backlogs in 1994, and the high levels of market concentration, we needed the state to step up to correct market failures and level the playing fields. In spite of our best intentions to build this developmental state, many of the state building gains have been reversed.
The low growth cycle has been exacerbated by structural weaknesses and state capture — hollowed out state capacity, evident in poor levels of service delivery, inadequate energy supply, poor logistics, rising crime and extortion, and municipal dysfunction.
We must also acknowledge that we have been too slow in reversing the damage of state capture to basic state functionality, especially at local government level. Looking at new partnership models for service delivery — to make up for state deficits — and new ways to ensure accountability should be at the top of our agenda.
The political conundrum
We need to be mindful of what is happening globally, with geopolitical shifts and the rising politics of self-expression, of identity and of polarisation. This is fast replacing the old politics of compromise and consensus. At home it is clear we have a damaged national psyche, which is the perfect feedstock for populist mobilisation, quite possibly along race, class and other social cleavages. Demographic anxiety is now a very real political phenomenon across the world and influencing — and undermining — democratic systems.
We cannot ignore the fact that disillusionment and voter apathy is manifest in SA and that voter turnout has been hugely affected. In the 2019 national elections, only 17-million out of 26-million registered people voted. In the 2021 local elections, only 12-million people voted — which means 15-million registered voters stayed away. When you consider that more than 13-million people who can vote have not even registered, this paints an extremely worrying picture of the political environment. Electoral reform might go some way to engaging more people in the democratic project, but we all know that the political problem is much deeper. We must not assume that new political entrants, while important, will solve this problem.
The civil society conundrum
Civil society today is a shadow of its former self in the 1980s, both in organisational and financial terms. Much of its leadership was absorbed into the state, and nongovernmental organisations (NGOs) turned into service delivery agencies as donor monies dried up. The state capture period saw a real and concerted resuscitation of civil society, but I feel that the foot was since taken off the pedal. Civil society needs to step up to resume a robust role and business needs to provide support to organisations preserving democracy and ensuring accountability. We need to rethink the idea of a national vision and new forms of accountability. We have to ensure that elected leaders are ethical and accountable — not just to their parties — but to society.
The leadership conundrum
As I round up, let me pose a question. Who represents and speaks for South Africans? This is on a variety of fronts, including business. Are the organisations at the forefront reflective of the broad business spectrum and business interests?
It is no secret that our country has a serious leadership problem across all sectors — political, economic and social.
Another dilemma is the participation of the greater population in the big national conversations. We find increasingly that a small group of us are talking to ourselves — a situation accentuated by the media and social media creating echo chambers and political ghettos with the same people exchanging opinions among themselves.
This links to the issue raised earlier about declining electoral participation. We must ask whether the people and organisations leading the national conversation are still connected to their constituent base.
We should bear in mind that it is difficult to sustain democracy without trust. I do not have to emphasise that there is a serious trust and credibility deficit in our society, aggravated by a litany of corruption scandals that have severely eroded faith in the political system and leadership.
This potentially undermines the legitimacy of the state.
There is no quick fix, no magic bullet for all these questions. Protecting democracy, staying the course on reform, halting a capital and brain drain, tackling inequality and addressing the livelihoods crisis will take exceptional leadership. Now is not the time to lament that we don’t have the right leadership. We urgently need a national conversation to develop and get behind a common agenda.
• Jonas is a former deputy finance minister and current chair of MTN Group. This is the edited version of his speech at a conference hosted by the Black Business Council.
‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.