“You mean the women are still prepared to go on?” Mandela asked.
“Yes,” I said.
“Then my patronage stands. Give them my best wishes.”
The policy legacies of his 111-year-old African National Congress (ANC) have, sadly, been neither as decisive nor noble. In a May 1990 address to the Consultative Business Movement, four years before taking office, Mandela sketched the broad strategic political and economic views of the ANC, emphasising the importance of full employment, maximum productivity, social consciousness, partnership between state and business, the growth of small businesses and of land reform. Although predictably heavy on old-style dirigisme, he insisted that nationalisation and redistribution weren’t the only words in the ANC vocabulary. “It is important that we should stop propagating the gloomy picture of South Africa that, as it is said, will inevitably sink into the economic crisis that afflicts many African countries,” he said.
How has that worked out for South Africa, after nearly 30 years of ANC rule? The party to which Mandela belonged now faces its Venezuela moment after ignoring for decades the catastrophic impact of its administrative, ideological and race-based preferment policies. The Government’s recent Medium Term Budget Statement (MTBPS) illustrates this in a nutshell. In the first six months of the financial year, the main budget deficit has grown by more than 50% to a chasmic R53 billion (£2.2 billion). On this trajectory, South Africa will have to repay R242.5 billion (£10.2 billion) a year in finance charges.
To blame are runaway spending on benefits (45% of South Africans receive social grants) and public service salaries (on average nearly twice as much as in the private sector), matched by a huge drop in taxes due to industries crippled by power interruptions (forfeiting 5% of GDP) and collapsing port facilities (another 4.9%). Economic growth has stalled at 0.1% and unemployment is at 32%, its highest ever, while a recent World Bank Report claims 10% of GDP is being robbed through crime. About 36% of water in most municipalities is lost through broken pipes and nearly one fifth of the electricity sold by the national energy provider to municipalities is stolen through illegal connections in informal settlements.
Meanwhile, vast amounts of state resources have been ploughed into stimulating micro and small businesses and rural co-operatives in line with Mandela’s vision. This has been overwhelmingly wasted through incompetence, corruption or indifference at both donor and recipient level. The latest, a mega-farm project for the Khutso-Naketsi Community Property Association, has collapsed through state tardiness and corruption by the trustees. Elsewhere, a lodestar job-creation programme is stalled due to a corruption probe, while KwaZulu Natal’s largest development agency, the 60-year-old Ithala, is poised to have its core functions closed by the prudential authorities because it has failed to report for two years. Its target customers are black youth and women.
Compared with middle-income countries, South Africa has a depressingly low number of black-owned micro, small and medium businesses. It is understandable: why bother starting your own business when the state will extort somebody else’s equity in an existing one on your behalf or, better still, grant you huge government subsidies that hardly hit the company accounts before ending up as a deposit on a SUV?
Mandela’s optimism was thus grievously wrong. And here lies the tragedy: inheriting a battered apartheid economy, Mandela and to a lesser extent his successor, Thabo Mbeki, appointed excellent finance ministers who pursued disciplined and productive spending in close co-operation with the business sector. That boosted growth and employment, bought significant benefits to the previously marginalised, and, at one point in the early 2000s, even wiped out the deficit and paid down apartheid-era loans. A still-competent state and parastatal network, capable of massive scaling to meet the new demands, was in place. Deep capital markets and an enviable skills base were available. The Australia (or Singapore) of Africa was ostensibly aborning.
But that promise was never fulfilled. The failure was largely the result of the ANC’s policy of racial preference in employment, investment, scholarships, tendering and trading. Under the guise of being a development project, black economic empowerment, or its buzzword, “transformation”, has been perverted into a multi-tentacled succubus, draining the economic life of the country and supporting a one-way flow of state sanctioned, expropriated wealth into the hands of a monstrously hungry and unproductive new business and public service elite comprising slightly more than 1% of the population. Exactly what Mandela did not want.
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