Finding a developmental consensus in an era of radical economic transformation

Panelists Christopher Wood, Dr Mzukisi Qobo and Professor Simon Roberts debate radical economic structural reform. (Photo: Daylin Paul)

Panelists Christopher Wood, Dr Mzukisi Qobo and Professor Simon Roberts debate radical economic structural reform. (Photo: Daylin Paul)

A group of independent academics said that radical economic transformation is desperately needed, but is unlikely to happen for generations to come. They were addressing a discussion at a Critical Thinking Forum on the issue of finding a developmental consensus in an era of radical economic transformation at the University of Johannesburg on Tuesday June 27. The discussion was organised by Institute for Justice and Reconciliation.

The panel consisted of Dr Mzukisi Qobo, associate professor and deputy director of the National Research Foundation; Christopher Wood, economist at the Trade and Industrial Policy Strategies think-tank; Professor Simon Roberts, executive director of the Centre for Competition, Regulation and Economic Development. It was moderated by Sithembile Mbete, lecturer at the University of Pretoria and associate fellow at the Centre for the Study of Governance Innovation.

The panel argued in favour of structural reforms as per the 2016 Transformation Audit report. The report, used as a reference to unpack the discussion, is divided into two parts. It firstly focuses on the current global economic context and then unpacks specific problems South Africa faces today. It notes that the current social compact, which is institutionalised in the form of the National Economic Development and Labour Council (Nedlac), needs to be significantly revamped. It also delves into the fractured relationship between government, business and labour on various levels, which includes a lack of trust and general dissatisfaction in society.

Thirdly, business is deeply fragmented along racial lines — so much so that it has become defensive about its role in society regarding helping to provide workable solutions. Lastly, the report notes that confidence-building measures between government, business and key sectors of society are needed. It questions the current political elite, and whether or not it is suited to help resolve the crisis and re-imagine what is possible for the future of the country.

Change is not expected to happen any time soon. The lack of a framework has resulted in a political, social and economic crisis as well as institutional deficiencies in the current political arrangement, with a lot at stake, including social stability and the status of future generations.

Qobo said: “We are living in extraordinary times in South Africa. It’s not clear where the country is headed with respect to its social and economic future, and we believe that the existing tools and mechanisms that were meant to help manage transition as well as economic dialogue, for instance Nedlac, are wholly inadequate for the challenges the country faces. The country faces multiple crises. Our observation, which goes back to when we entered the democratic dispensation, is that there have been inadequate tools to complement the political transition with a credible, well thought-out socioeconomic transformation framework.”

Wood supported the notion that South Africa had a deficient socioeconomic framework for the transition from apartheid. “A meaningful, unifying framework is needed which people can rally around. We need to tie the level of transformation to a specific vision of how development works and how people are actually transformed in the real world,” he says.

A skewed image of generational change currently exists — that change happens in a single generation.  Wood noted: “This image ignores the fundamental structural problems that make it hard for people coming from poor backgrounds to really achieve that over a single lifetime.

“By looking at the history of development around the world, universally, the way development happens is over multiple generations; it takes at least 50 years and at least three generations for poor people to enter into the middle class. In South Africa, a system established for around 50 to 100 years focused on advancing a fraction of the white minority as fast as possible. Even that took 50 years, with policies like allowing preferential access to working class jobs, preferential access to the city, preferential access to education, for this change to happen.”

This therefore poses a serious problem for South Africa’s social compact as a state, he argued. “If we say it takes multiple generations for change to happen, that’s not an acceptable status quo for the people in South Africa. Because of the institutional injustices of the past, it’s unacceptable that it will take 50 years before your grandchildren can get a decent situation.”

Roberts noted that the issue of generational wealth adds to one’s inherent advantage, as the assets and endowments passed on are often intergenerational. “It’s difficult to compete with what little you’ve got because wealth is intergenerational.” He said there’s a need to focus on creating wealth rather than income.

“How do we deal with the fact that it is going to take a long time for transformation to happen, and how do we adjust our economic policies to make sure that transformation happens as fast as possible? These are some questions many seek answers to.”

Wood said that it is becoming more evident that more job creation opportunities are needed to curb unemployment. Added to that, a fair distribution of jobs across income categories is required to allow the next generation access to middle-class jobs and higher-class jobs. Thinking beyond job creation as the only way to solve South Africa’s problems is also needed, creating levels of wealth to propel job creation instead.

The manufacturing sector cannot be the only answer for job creation, as deskilling due to technological advancements is the reality of the day. “42% of South African jobs as it stands are at high risk of being displaced by technology within the next 30 years. Manufacturing is hard when you don’t have a solid base to build from that gives people access to a level of skills, and a level of social stability that facilitates manufacturing development,” said Wood.

Socioeconomic foundations sorely neglected

Mbete added: “A country’s functioning systems are not built on political institutions, they are built on socioeconomic foundations, an area of our lives that has been sorely neglected over the last 23 years.” She added that there is resentment growing among individuals due to government’s ineptitude and institutional decay.

The assumption out there is that the effects of transformation will provide short-term solutions to our social and economic problems. The report says that as South Africa transitioned into democracy “we built a halfway house of democratisation that lacked economic foundations” as Mbete noted.

Roberts responded: “We need to be clear about whether we’re talking about changing the rules or breaking the rules of a market economy. Business thought there was a socioeconomic part of the negotiated settlement; there was no halfway house. The rules have been put in place, and those are the rules of a market economy. Business did comply by opening up, sweeping away apartheid regulations, and allowing gateways such as the Competition Commission to solve and regulate.”

Regarding the current agricultural and food system, an affirmative system of support is needed to compete. Barriers to entry currently sit on the ability to access resources, which requires much patience from financial systems and developmental institutions, as failure is inevitable along the journey of trial and error. Roberts noted that a mindset shift is needed. “The conversation is not so much about the issue of land as an asset as much as it is about what you do with that land and earn from it.”

South Africa’s best hope is that three generations from now, the country will have no choice but to take the conversation around economic transformation seriously. It seems South Africa has to wait a long time due to the current inequalities and lack of unifying framework from which to proceed. It is evident that with the social compact comes a lot of sacrificing for long-term gain. Creating a narrative, building understanding and shifting opinion on how to implement change for the benefit of all South Africans has still not solidified. After 23 years of discussions, many are left questioning what’s new other than the fact that we have once again changed the names of the problems. The struggle continues, aluta continua.