15 February 2017

South Africa: The Odd Meaning of 'Radical Economic Transformation' in South Africa

analysis

Johannesburg — The only thing radical about South Africa's ruling party's understanding of "radical economic transformation", a commentator once suggested, is its use of the word 'radical'. The comment was made a few years ago, when the African National Congress (ANC) was in the habit of using the slogan to describe very modest change. Now it's back.

In his 2017 state of the nation address South Africa's President Jacob Zuma brought back the phrase "radical economic transformation" causing nationwide debate. Other senior ANC politicians have done the same.

Have the ANC's intentions changed?

To answer that, we need to understand why "radical economic transformation" is back on the ANC's agenda. As with much of what happens in the ANC today, factional politics is a crucial part of the story.

One slogan, two agendas

The ANC has believed for decades that change is needed to speed up black people's access to the economy. It has emphasised this over the past few years as it became clearer that economic exclusion remains a stubborn reality despite two decades of political change.

Translating this into reality is difficult. The country's racial divisions ensure that government and business do not share the common goals which, for example, produced change and growth in Asia.

At the time of negotiating and assuming power, the ANC recognised that it could not impose change since this would scare away capital. And it did not develop an effective strategy for negotiating with power holders in the private economy. The result was a gap between rhetoric and detail.

More than five years ago the ANC began talking about a "second phase of the transition" to address social and economic change. Since then its documents and statements have tended to combine radical phrases with plans which simply tweaked what already exists.

And over the past few months, "radical" economic change has become a growing ANC preoccupation. This is not because its policymakers decided this. Rather it's because its patronage politicians seized on the slow pace of change to justify their continued quest - in partnership with their private allies - to control public resources.

Triggered by the need of the Gupta family, which has been accused of "capturing" the state to protect their interests, they ratcheted up a campaign to paint patronage as a contribution to freedom.

A familiar tale

The story they tell has become familiar. "State capture" is actually the reverse: an attempt to take back a state already under the control of private interests. "White monopoly capital", this lobby insisted, controls the state and is determined to prevent a challenge by using claims of "state capture" to defame the forces of economic freedom.

As many commentators have pointed out, this is not about building an economy which includes more people but about justifying why some connected people should get their hands on the public purse.

But ANC politicians who reject this ploy cannot simply dismiss it. The patronage group is trying to exploit the idea of economic change because just about everyone in the ANC - and many people outside it - agree that it is not credible to claim that the economy is now nonracial and inclusive. Their opponents must, therefore, acknowledge that change is needed. But they must try to ensure that it is about including people, not enriching a few.

The stress on "radical economic transformation" - and more militant statements on the economy by ANC politicians such as secretary-general Gwede Mantashe and parliamentary finance committee chair Yunus Carrim - are part of this attempt to develop a programme for change which is not about giving a free pass to the connected.

This does not necessarily mean that there is always a neat divide between the two change agendas - some policy documents might mix proposals from the both sides. But the attempt to justify patronage has triggered enhanced ANC interest in change.

More serious than before

Given this background, the latest version of "radical economic transformation" should be taken more seriously than previous editions.

The patronage group's opponents need to show that it is possible to achieve economic change which fixes the problem rather than using it as an excuse. So they can't simply talk about change - they must make it happen.

But are there any signs of attempts to ensure radical change?

The details spelled out in recent ANC statements provide an answer. They include plans to boost business opportunities in townships and rural areas, and by using "the Constitution, legislation and regulations, licensing, transformation charters, the national budget and procurement, state-owned companies and development finance institutions, as well as government programmes" which, of course, is fairly vague.

The State of the Nation Address, which can presumably be taken as a statement of the government's intent, ignored the township business proposals and concentrated on tougher competition legislation and a state-owned mining company (a possible gain for the patronage group).

It also emphasised land distribution and using a variety of measures to boost black business: public procurement, legislation to boost black property practitioners, and the black industrialists programme.

How radical these ideas are depends on the beholder. To some lobbies any attempt to interfere with the market is a threat to its survival. But, for those with a greater grasp of reality, the theme seems to be change which goes beyond tinkering with current ways of doing things, but does not seek to tear up the fundamentals which have underpinned policy since 1994. It also seems likely that the proposals are designed for negotiation and are not final decisions.

The patronage lobby's ideas would, of course, change those fundamentals dramatically. It would tear up many of the controls which protect public money, from rules which award tenders to the cheapest bidder, through to controls on money laundering to the Treasury's spending safeguards.

Their opponents propose a programme which leaves all of that in place but seeks to nudge the economy in a more inclusive direction.

The land proposals, for example, may use expropriation - which will allow courts to set the price of the land - but, according to land reform minister Gugile Nkwinti will mainly rely on the Valuer-General, a recently created government office which sets the prices of land earmarked for reform. New competition laws may trample on some toes but are hardly radical in a market economy.

This year's version of "radical economic transformation", therefore, has more substance than the previous editions. But it is hardly a recipe for a dramatic economic shift.

And, while the content of government proposals has shifted, there are no signs yet that the lack of a strategy to achieve them has been addressed. All of these plans will remain on the drawing board unless ways are found of ensuring that investment not only continues but also grows. That will require a coherent plan to win the support - or at least the compliance - of economic power holders. Until that emerges, "radical economic transformation" will remain the stuff of policy documents rather than concrete action.

Disclosure statement

Steven Friedman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

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