Wednesday, 11 May 2011

Apartheid – What is it’s Legacy?


Listening to radio talk shows in South Africa is an interesting occupation.  Many of the items of ‘fact’ known to those who phone in, as well as to the moderators, are, at least, questionable.  The largest of these is the legacy of Apartheid.  Apartheid was, and is, without question abhorrent to modern thinkers.  It was based on a belief that there are differences between the races that would be best accommodated by separating the races.  There is nothing new in this, either in history or in geography.  People have always tended to stay with those they consider to be like them.  This is clear in India, where the caste system continues to dominate, based on an accident of birth; in Germany, where a person with German ancestry, even if three generations in the past, is entitled to citizenship while a person with Turkish ancestry, even three generations earlier, is not; in Switzerland, where a French-speaking Swiss treats a German-speaking Swiss with contempt, even though the Swiss Federation has existed for nearly eight hundred years; in Zimbabwe, where membership of one tribe entitles one to benefits that are denied the members of another tribe; in Nigeria, where religion plays a similar role; in Britain, where noble birth separates a man from his equally competent peers.  Examples of Apartheid in its various guises are legion.  They can be found throughout the world and throughout history.  They are inherently wrong, but they exist.
The problem in South Africa today is that it is an article of faith that Apartheid is the reason for everything that is not working properly today, seventeen years after Black majority Government came into effect. 
The education system is a disaster ‘because of the legacy of Apartheid.’  Perhaps the real reason is that the new Government dismantled all that was good, together with the bad, of the education system it inherited, a system that worked better then, in terms of the products it delivered, than it does now.  Ask anyone who gained a degree in Apartheid days if he or she considers the current crop of degrees comparable in quality.  The verdict has been handed down by the international business community.  A pre-Apartheid degree is accepted as a quality statement, a post-Apartheid degree is viewed with suspicion.  Even the Law degree, the Ll B, is now treated with some disdain, as is evidenced by a recent statement by the Law Society that new Ll B graduates are unable to use language effectively.  This in a degree that is reliant on the effective use of language more than most degrees!
The Local Government administration is in disarray, ‘because of the legacy of Apartheid’.  Local Government under Apartheid worked well, because the people running it were professionals.  It was not inspiring, but it worked.  After the new Government came into power, the experienced and competent managers of Local Government were replaced by people who were incompetent, corrupt or, most likely, not sufficiently experienced to recognise a problem and find a solution to it.  That skill takes many years to develop.  It is no accident that a young person joining an organisation could not expect to reach a senior level without having undergone years of training, exposure, mentoring and experience-building.  The new Government decided that this was subsidiary to its goal of ensuring that the management of the economy would pass quickly into the hands of the majority.  Laudable certainly, but unrealistic.  That cannot be ascribed to the ‘legacy of Apartheid’.
Central Government has suffered equally.  MPs claim to work hard, and, in many cases, they do.  However, any competent Management Consultant will tell you that the secret of success in any enterprise is to work smart, not hard.  Again, a question of experience, compounded in many cases by a question of honesty and integrity.  Do MPs strive to attain the position of trust in order to serve their fellow man, or in order to ensure the maximum benefit for themselves?  In many cases, the answer is clear.  Is this the ‘legacy of Apartheid’, or the result of a system that has been fostered by corrupt politicians who seek to draw others into their net?
The training of nurses and teachers, both now recognised as key functions of Government, was undertaken by specialist Colleges, which turned out graduates of such high quality that they were poached by many other countries.  A qualification from one of these institutions was recognised as an entry ticket to Australia, Britain, Canada and many other First World countries.  These ‘legacies of Apartheid’ were dismantled under the new Government, and are now being rebuilt, at great cost.  The same applies to the Atomic Energy Corporation, which, at its peak under the Apartheid Government, was recognised worldwide as a centre of excellence in its field.  It was dismantled, losing the millions of man-years of knowledge and experience and is now being rebuilt. 
The present Local Governments battle to provide services to a massive influx of people from the land, South African as well as foreign.  An interesting news item recently reported that the Police had been stoned by a mob of ‘land invaders’ demanding the provision of services.  Influx control, one of the hated systems of the Apartheid years, was introduced in an attempt to prevent this exact problem, one that the Apartheid Government feared, as it knew that it would be impossible to provide adequate services to the millions who would otherwise flock to the cities.  Even so, the Apartheid Government provided four-room houses to the rapidly-growing Black population, in contrast to the tiny RDP houses, that are now being renovated at a cost of about R100 000 a piece, and the cardboard and plastic shanties of the squatter camps that now surround almost every town in the country.  Another ‘legacy of Apartheid’?  At the same time, the farmers, who produced sufficient food to make South Africa a consistent net exporter of food, even under the sanctions imposed by other countries at the behest of the ANC, are being driven off the land by a wave of farm killings, or simply by the policy of land redistribution of productive farms to people who have a history of subsistence agriculture, and who have managed, in most cases, to destroy the highly-productive agricultural ventures they were handed.  This has removed the employment of millions of agricultural workers, driving them to the cities to find employment, and made South Africa a net importer of food.  Another ‘legacy of Apartheid’?
The subject of ‘hate speech’, of attacks by people against gays and lesbians, including ‘corrective rape’, has recently been described as a ‘legacy of Apartheid’.  This ignores the fact that similar events take place regularly in Zimbabwe, in Uganda and in numerous other African countries.  It seems to be a characteristic of Black countries, or possibly of underdeveloped countries, as the same phenomenon does not seem to be as widespread in Europe or other European dominated countries.  Surely this cannot be a ‘legacy of Apartheid’?
Apartheid was a system that was accepted, if not supported, by Whites who saw the examples of other African countries that became independent of their ‘colonial masters’.  With only Botswana as an exception, these countries fell into decay, bringing death and misery to millions, and incredible wealth to the few corrupt leaders of the countries.  The problems in those countries seem to have related to exactly the phenomena that have been identified here.  Strong, corrupt leaders took control of Government, maintaining their power by violence and corruption, lying to their electorate and rigging the system where lying did not appear likely to achieve the objective of prolongation of political control indefinitely.  They applied policies learned by their tutors in Communist Russia, Communist Cuba and Communist East Germany, all countries which are marvellous examples of the benefits of socialism, all countries which have proved conclusively that these policies do not work in the real world.  They have conglomerated small, viable social units to form large Local Governments which fail their electorates on a large scale while increasing the payoff to corruption, they have applied policies to advance the strength of the Trade Unions, concentrating economic power in the hands of allies of the governing Party at the cost of economic growth and millions of jobs.  Unemployment has grown from 1 600 000 in 1994 to over 4 500 000 presently.  Is this the ‘legacy of Apartheid’ working against us after 17 years of these policies?
One is reminded of a television interview of Joe Slovo, then the leader of the South African Communist Party, in 1995.  The interviewer asked a question.  “Mr Slovo, you are advocating the application of Communist principles in South Africa, a Capitalist country.  It has been shown throughout the world that Communism simply does not work.  Every country that has espoused Communism has failed miserably.  What makes you believe that Communism will work in South Africa?”  “Well,” replied Mr Slovo, “You must understand that any economic system, even Communism, requires capital to work.  In Russia, in East Germany and in Cuba, that capital has been exhausted.  That is why those countries failed.  South Africa has a very large capital, that will, ensure that Communism works here!”  “But, Mr Slovo, what will happen when that capital has been exhausted here?”  “Then we will try another system!” replied Mr Slovo.
Perhaps South Africa will soon be reaching the point where it will be necessary to discard the excuse of the ‘legacy of Apartheid’ as a reason, and start looking for some real reasons that can be resolved.  In this search, it may be wise to look at the Apartheid times, and extract the many elements that were good, while we continue to reject the elements that were bad.

Wednesday, 4 May 2011

World Economic Development


Anyone listening to the participants in the World Economic Forum, and the commentators on it, must come away with the feeling that there is an urgent need to shift from the capitalistic system that has been the mainstay of the Western World for many decades towards a system in which the ‘poorest of the poor’ play a dominant and decisive role.  While the sentiments behind this may, to a certain extent, be laudable, a realistic assessment of the winners and losers in the past decades must give rise to concerns in this strategy.
An undoubted winner in the past decade has been China, which has progressed from the stranglehold of Communism to a variant of capitalism.  In earlier years, China was backward and effective in the world largely through its massive population and its military muscle, brought about at the expense of the bulk of its population.  Then it changed its policies, driving industrial growth mainly by adopting capitalistic methods, and achieved economic wonders.  Those achievements continue to be at the cost of a large part of the population, the ‘poorest of the poor’.  It is generally accepted that, as the economic empowerment of the Chinese population progresses, greater heed will be paid to those poor, bringing them into the mainstream of the economy, and this will result in a slowdown of the economic growth of the country.
Let us digest the essence of this phenomenon.
Economic growth in China has been high at a time when the capital of the country was concentrated strongly in the hands of those whose interest was development.
In the United States, or Britain, in contrast, economic growth was similarly high at a time when the economic muscle of the country was concentrated mainly in the hands of the entrepreneurial class, whose interest was economic development.  However, that economic growth slowed, and even declined, as the policies of the Governments in power shifted to buying the votes of the ‘poorest of the poor’ by offering them increased handouts in the form of social benefits and improved working conditions.  There was a minor blip in this process when Maggie Thatcher faced down the Trade Unions and succeeded in moving the focus of the economy from support of the poor to support of the entrepreneurs who created the economic activity, and thereby the jobs.  However, over the past decades, economic growth has slowed, and a large part of the actual economic growth has not involved a large increase in employment.  The ‘plight’ of the poor has been alleviated to some extent, but an increasingly large number of middle class ex-workers has joined the ranks of the poor.
Let us digest this phenomenon.
Economic growth was high at a time when the capital of the country was concentrated strongly in the hands of those whose interest was development.  Economic growth slowed, or even went into reverse on a per capita basis when the wealth of the country was dissipated by the payment of social benefits to those who supported Governments that concentrated on spreading the wealth of the country.  It was said at the time that Harold Wilson, a Prime Minister who presided over the collapse of Britain as a world power, came to power with the desire to spread the wealth of the country amongst its population.  He found that he was unable to do so, and so settled for spreading the poverty amongst the entire population.
Do you recognise the moral of the stories?
The South African Government is facing an increasingly dissatisfied poor population.  These are people who are willing, even keen, to work, but who can’t find jobs.  This is the result of two main reasons, and several subsidiary causes.  The Government has worked assiduously to take wealth from those who create it, to satisfy the desires for increasing handouts by the non-working population.  A large number of the new jobs created have been in the Government sector, essentially a non-productive sector.  This diversion of wealth has decreased the ability of the entrepreneurs, the creators of wealth, to do their jobs effectively.  At the same time, the population has increased enormously in the nearly two decades of ANC rule, partly as a result of opening the country’s borders to foreign (African) immigration (remember that Thabo Mbeki stated that South Africa belonged to the Africans?), and partly as a result of the subsidisation of children, a factor largely concentrated in the poor, as the birth rate of the wealthier population has generally declined, and one which the Chinese recognised and countered with their ‘One Child per Family’ policy.  The lesson from the reunification of Germany is particularly relevant here.  West Germany, with 70 000 000 highly educated and productive citizens has battled since 1989 to upgrade the 15 000 000 relatively educated and industrially-competent citizens of East Germany.  South Africa is attempting to achieve the same result, with 3 000 000 economically active people supporting a total population, with low education and often very little industrial training, of over 50 000 000, and growing! 
A study covering several countries has shown that the average capital investment, in total, of creating a single new job in a developing country, amounts to about US$250 000!  The Government desires to create 5 000 000 new jobs over the forthcoming ten years.  That translates to a total investment of $US1 250 billion!  And that is where the industrialists are willing and able to co-operate, and are not faced with the numerous burocratic obstacles and labour market constraints that confound so many people of goodwill in South Africa.  And even if this goal succeeds, it will not meet the employment needs of the all new entrants to the job market in the first five years!
Subsidiary reasons include the high level of corruption present in the State, with many of the beneficiaries of corruption at the highest level of Government, resulting in many decisions being made to undertake projects which have the highest potential payoff to those in control, not necessarily those that are economically justifiable.  Numerous examples of this abound, ranging from a R54 billion splurge on unnecessary munitions, to a school building that costs nearly three times the cost that would normally be expected.  Another reason is that, in its drive to ‘africanise’ all State functions, a large pool of talent and experience was lost, and continues to be lost, as under-qualified and inexperienced Managers replace those who grew up through the ranks.  An interview of President Jacob Zuma after his State of the Nation address in 2011 highlighted this reason, as he explained that, after 16 years of ANC rule, the Government had now identified weaknesses in Government functions and policies in area after area, and was now introducing new policies to remedy these!  It did not seem to matter to him, or to the interviewer, that these weaknesses, which were known to most intelligent observers of the ANC bumbling, had cost many hundreds of millions and set the economy of the country back many years, or that the ‘new policies’ were very much untried and untested, and had as little likelihood of achieving their objective as had the policies now recognised as having failed! 
A further reason is that the ANC continues to experiment with public opinion by floating ideas such as the nationalisation of the mining industry or of agriculture through extremists such as Julius Malema, leading to considerable doubt amongst potential foreign investors regarding future policy direction, and, to a large extent, certainty amongst those foreign investors that the extremists in the ANC are destined to come to power, in many cases sooner rather than later.  If you were an investor in a new factory, where would you rather locate it?  Stable Brazil, or unstable South Africa?
Of course, this discussion is superficial.  Any discussion of economic questions needs diligent analysis by people with the mental equipment to understand the essence of the discussion, and with the inclination to deviate from their prejudices if this is warranted by the facts and the analysis.  For the purposes of this present discussion, several matters need to be recognised.
Economic development should be left to entrepreneurs with as little intervention by Government as possible.
The focus of development should be the development of business opportunities.  Creation of jobs and the economic development of the ‘poorest of the poor’ will follow.  Focusing on improving the state of the ‘poorest of the poor’ will inevitably lead the economy downhill.
The political leaders of the Government must be clean, and subject to rigorous scrutiny in all their dealings, both in the political sphere and in their private lives.  If they don’t want the scrutiny, it is probably an indication of their having a reason for this aversion, and they must leave politics.  If any dishonesty is found in any level of Government, it must be investigated by an independent body and guilty parties promptly and severely punished.
Potential investors, whether foreign or local, must be courted and treated with the respect that their scarcity and value to the economy deserves.