One of the most prominent contributors to South African economic policy over the past decade is a charismatic, mellifluous social activist with a passion for illuminating his craft: economics.
“To me economics does not make sense unless it is in a social setting,” says Standard Bank director and chief economist Iraj Abedian from his office in downtown Johannesburg.
Banks, as social institutions, have a duty to engage in economic policy in a way that is much broader than just maximising returns for clients or their profits. So when the rand crashed in December 2001, he studied financial crises of the preceding decade in emerging economies and their impact on the stock exchange, inflation, interest rates and trade deficits. He suggested that the country would need two years to recover and that there was no need for panic.
By December last year inflation had peaked, interest rates had gone up and down, and the rand had recovered beyond the wildest expectations of the market.
Abedian has built his career analysing how economics touches people’s lives. He came to South Africa in 1980 from his native Iran to study for a master’s in economics at the University of Cape Town (UCT), turning down opportunities to study at the London School of Economics and at Yale.
As a follower of the Baha’i faith, he was “fascinated to learn about other cultures” and South Africa, at the height of racial segregation, appealed to him, much to the dismay of family and friends. “I wanted to go to a place where I could contribute something,” he says.
He describes his first 10 years as being devoted “to trying to understand how people live”. Which is why, after a year at UCT, he accepted a lecturing post at the University of Transkei offered by Professor Wiseman Nkuhlu, now presidential economics adviser.
That allowed him to tour parts of the Eastern Cape: Thembu, Pondo-land and Tsolo, observing subsistence farming and how rural economic systems work. But subsistence farming was nothing new to him. His father was a marginal farmer and his mother a carpet knitter when he grew up in Khasan, 420km south of Tehran. “Up until my last two years of high school, I studied by candlelight,” he says, “so I could relate to a lot of what I saw in these villages.”
His entry into economics was by accident. He applied through a centralised university admission body to study electronic engineering, but was disqualified on a technicality because he had chosen an institution that did not offer the course. Economics was his second choice. “I had regrets initially,” he recalls, “but after a few months, I became fascinated.”
In late 1989 he moved on to Simon Fraser University in Canada, cramming a two-and-a-half-year degree into 17 months. He politely declined a job offer from the university and came back to a South Africa in the grip of uncertainty and turmoil. “It made perfect sense for me to come back,” he says. It was time to contribute meaningfully.
He literally flew back into action, meeting Nkuhlu at the airport who told him “I have been looking for you.”
This time it was to help research and devise policies to alleviate drought. This presented another chance to go to villages, this time in Venda, to meet communities and assess their needs.
Along the way, he established the African Fiscal Research Centre (Afrec), of which he is still a director.
His consulting stints have made a significant difference to the South African economy, whether contributing to the Reconstruction and Development Programme White Paper or to the controversial growth, employment and redistribution (Gear) policy.
What disturbs him — his passion suggests it hurts — about criticism of Gear is that people “do not discuss it in the context of 1995” of high inflation and choking debt-servicing costs. “If the economy was a patient in an emergency,” he says, “then Gear was to stabilise the patient. After that we can talk about healthy eating and exercise to help the patient lead a healthy life.”
He was also instrumental in the formulation of fiscal reforms like the Medium Term Expenditure Framework. Abedian is endowed with the three gifts that British economist John Kay believes makes a great economist: analytic rigour, flair for exposition and a sense that economics is an applied subject.
He is critical of banks and of business in general. South African banks were formed to look after mining- houses’ surpluses and were thus not encouraged, possibly not allowed, to take risks — hence, he notes, their risk-averse mentality.
And business — which he frequently identifies as the main beneficiary of economic policy, does not impress him with its claims of a rigid labour market. “We cannot accept slave wages and not talk about why capital expects returns of 25%, when the global average — if you are lucky — is 7%.”
He sees much better prospects for South Africa than for the country of his birth, where theocracy stifles individual enterprise. He visits Iran frequently, however, though he now finds it less restrictive to host his three siblings and extended family.
While they have empathy with the squatter camps he takes them to, they are “shocked” by the developed infrastructure that they travel on to see various parts of the country.
That is because Tehran is creaking with infrastructure intended for three million people in a country teeming with 14-million. “If you think Lagos, Cairo or São Paulo are bad,” he says, “go to Tehran.”
Which is why, for the foreseeable future, life for this amiable 48-year-old is here, with his two children and his wife, the Afrikaner sculptor and mixed-media artist Karen Steyn.
“I met her in the new South Africa,” Abedian says of Steyn, “[and] I like her because she is progressive.”
She presumably helps him to refine the art of his economics.