/ 1 June 2017

The state does have ways to radically transform SA

Bleak outlook: A spaza shop in Nkaneng
Bleak outlook: A spaza shop in Nkaneng

It is becoming clear that radical economic transformation is bigger than just inclusive growth. The government and the ANC, at least as far the rhetoric is concerned, are also making clear that what is at stake is not just economic transformation, as has largely been the case since 1994.

Arguably, inclusive growth — even inclusive development — is a component of socioeconomic transformation. Economic transformation is about structural changes in an economy to achieve sustainable economic growth and improve the standards of living of the people.

President Jacob Zuma has described radical economic transformation as “fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and women”.

ANC secretary general Gwede Mantashe says it is an effort to ensure that “the majority of South Africans must have access to ownership and control of the South African economy, and the state must facilitate that”.

The ANC, as outlined in its 2017 Strategy and Tactics discussion document, makes a point that “the campaign for radical economic transformation should encompass efforts to change the structure of the economy to advance manufacturing and beneficiation, investment of more resources in productive activities, and comprehensive broad-based economic empowerment”.

Seemingly, what is envisaged is something better than just economic participation — and it has to be more than just expanding ownership — for the previously disadvantaged.

As we examine radical economic transformation, it might be useful to start by revisiting what the ANC has said about creating and strengthening a capable developmental state. We must also revisit the National Development Plan, as imperfect as it might be, and the 2014 to 2019 Medium Term Strategic Framework.

Among other things, the plan says: “South Africa requires both a capable and developmental state, able to act to redress historical inequities and a vibrant and thriving private sector able to invest, employ people and penetrate global markets.” The ANC has been saying, since 2007, that it aims to “put in place [a system that] approximates a combination of the best elements of a developmental state and social democracy”.

To jog our memory, a democratic developmental state is one that pursues higher levels of socioeconomic development, in a participatory manner, guided by a robust long-term plan and that the state has requisite capacity, the elite is developmental in its approach and influenced by a developmental ideology, and the state is appropriately organised for predetermined goals.

What is entailed in radical socioeconomic transformation? Many are grappling with this question from different perspectives. For former deputy finance minister Mcebisi Jonas it means “we need to recast radical economic transformation as a genuine programme of inclusive growth around which society can be mobilised — embedded in a consensual vision”. Jonas also calls for an “economic charter”, probably similar to what some have called an “economic Codesa”.

This might be similar to the social pact on the economy that some of us have been supporting, because it seems that it is only through a social compact that any meaningful transformation in the economy can take place.

Given what the ANC is saying, as far as the structure of the economy is concerned, I think it is clear what needs to be done. But it could be difficult to do what must be done.

Besides the issue of sectoral distribution of output, the South African economy remains predominantly capital intensive and the mineral energy complex is a constraint on inclusive growth. Changing the structure of the economy must be coupled with radically transforming the linkages between minerals and energy sectors so that beneficiation happens and more players join those sectors. This is an obvious area for more robust antitrust policy and legislation.

The more complex part of radical socioeconomic transformation has to do with the deracialisation of the economy by transforming systems and institutions that frustrate the socioeconomic transformation agenda. This is where the scale, speed and depth of transformation have to be expedited and expanded. The systems and institutions must be transformed in such a way that redistribution can occur. Inevitably, social policy has an important role to play. It is surprising that there is no discussion about social policy in the documents for the forthcoming ANC policy conference.

For changing the patterns of ownership, management and control, over and above the obvious restructuring of the economy, the government can intervene in the economy to ensure that there is “access to ownership and control of the South African economy”, as Mantashe explains.

Government has been doing this to a large extent. But I would argue that government needs to focus on a few major interventions, alongside broad-based economic empowerment instruments. The one area that comes to mind for bringing about major changes in the ownership, management and control of the economy in South Africa is preferential procurement. The Preferential Procurement Policy Framework Act, just like the Insurance Management Bill, can be reformed in such a manner that more black entrepreneurs play a bigger role in the economy. Government would need to listen to those involved in these two areas.

Then there are policy reforms that should be pursued. For some policies, particularly macroeconomic ones, the issue is more about better co-ordination and policy clarity. For specific policies and legislation to do with taxation, state ownership, industrialisation and the labour market, a lot more thinking is necessary.

Taxation can be more progressive, state ownership can ensure that the state has control over strategic sectors and enterprises, industrial policy can assist in ensuring that the state picks the correct winners and labour market policy can prioritise active labour market interventions.

There are other much more complex policy issues such as those in relation to land and agrarian reform. These should be informed by a clearer sense of the kind of society we want. For instance, what kind of farming would be ideal for South Africa?

To gain traction, government needs to work with all the partners in the radical socioeconomic transformation programme, hence the call for a social compact around the economy. Government needs to lead and co-ordinate. This is where the challenge appears to be — the leadership question must be tackled.

Similarly, the issue of the approach to socioeconomic development must be tackled. The state must facilitate access to ownership and control of the economy for the majority of South Africans, according to Mantashe. This poses a question of whether, in the current economic system, the state can be effective in facilitating this access.

Vusi Gumede is a professor at Unisa and director of the Thabo Mbeki African Leadership Institute