It is Time to Go Back to Fundamentals

South Africa is in a crisis. It has been in a crisis for several years, with successive administrations chasing their unproven or disproven ideologies, conducting experiments designed to prove that they are right and everyone else is wrong, and structuring the State to facilitate fraud on a large scale. Even before the Coronavid-19 crisis struck, the country was in a parlous state, with unemployment at record levels and increasing steadily, school performance among the worst in the advanced world, the country’s ranking for economic performance among its peers in the developing world at record lows and declining, the finances of the country in the worst state for decades, and no reprieve in sight. The pandemic struck a country that was in the worst possible condition.

In a way, the pandemic, although hugely destructive in many ways, may present South Africa an opportunity to hit the Reset button, and grab at an opportunity to retake the place it held in the civilized world before lunatic policies and governing Party-institutionalised corruption dealt it such devastating blows. Tito Mboweni has recognised the need, stating that the Treasury should develop a Budget based on a zero-base process. He is fully aware that tweaking the existing Budget will not correct the many problems he, and the country, face. This would be an exercise in futility, a repositioning of the deck chairs on the ship of State as it sails at full power into the iceberg.

The first step in correcting any problem situation is to recognise what the real problems are, and where the country would like to be. A roadmap is useless until you know where you are on it, and where you want to go. This should be done in a dispassionate, non-accusatory way, so that the participants in the exercise are not compelled to defend their territory. The process of coming to a statement of where we are now must include theoretical and practical economists, businesspersons from large, medium and small businesses and people who are affected by the conditions, such as housewives, teachers, students and taxpayers, both active and retired. It is vitally important to have a balance of views. Nothing could be more destructive to the process than to have a preponderance of radical views, as is almost always the case when a committee of politicians and political advisors is convened. If you need to be convinced of the truth of this, look at the state of the South African economy! One cannot imagine that the ANC would be so delusional as to believe that it could benefit from the imposition of policies that would be certain to destroy the economy.

Once we know, realistically, where we are, we need to define where we want to go. At this point it will be almost impossible to avoid the political rhetoric and electioneering slogans, but a factual statement of the basics may help to define our desires. We could, for example, say that we desire to reach a state of 3% unemployment within ten years. The question then arises: employment in what? Let us say that we want the economy, in terms of GDP representation, to be 5% mining, 20% agriculture, 30% services and 45% industry. We can then break these desires down in terms of categories, and from these derive the growth needs to reach the targets. These, in turn, will generate the requirements, the absolute necessities, in terms of investment, education and training, infrastructure, labour conditions and so on. It will be a complex exercise, made more so by the need to avoid expressing the desires in terms of political aspirations and existing policies, but the exercise will be a valuable one, highlighting the actual needs, as opposed to what preconceived and often wish-list policies dictate.

When this work is complete, and not before, we can start formulating the wish-list, the configurations of the economy that we would like to have in the desired state, in accordance with the Constitution, and disregarding any other existing policy and legal imperatives and structures. We could, for example, desire an open economy, attractive to foreign investment, with equal opportunity to all its citizens and as much of the work as possible being done by private enterprise. It will be essential at this stage to ignore the past policies, because many people will see these as the only possible way, while others will view them as anathema. This wish-list will then be applied to the desired state and an assessment be made of how feasible it will be to achieve both the desired outcome and the desired form. Revisions and re-evaluations will ensue, until the majority accept that the statement is both comprehensive and realistic in terms of the South African scene and the world economy.

We will now be in a position to formulate plans to achieve the desired state. A combination of the desired shape of the GDP with the gap in number of qualified potential employees will result in an education outcome, and from that we can formulate the plans for a change in the education and training system. Similar changes will result in practically every area of economic activity. This must be done ruthlessly. Changes will bring pain to the participants in the existing structures, but this must be viewed as inevitable if we are to achieve the desired state. Some pain results from every change, but changes are essential if we are to move forward. The pain that we identify can be mitigated by plans to retrain and redeploy those affected. For example, it is clear that the civil service is overstaffed, underqualified and inefficient. When we know the necessary minimum configuration of the civil service, a performance evaluation can be performed to determine who is both capable of doing a meaningful job in their position and is actually doing it at an acceptable level. Those identified as being good in their present jobs will be retained or transferred to a similar job elsewhere, where a need is shown. Those who do not perform adequately can be put on a ‘B List’, while those who perform acceptably but whose jobs are no longer required, will be put on an ‘A List’. The A List can be offered a total retrenchment package, for example, of a value equal to their retrenchment packages plus, say, 12% plus benefits for a year, which can be drawn down as the interest on a loan to be advanced by the government plus a monthly salary, and they can be given leave of absence for three months to put together a business before the arrangement comes into effect. They will be supported in their efforts by a team of qualified experts in their chosen field and provided with retraining they may need. In this way, they will be given an opportunity to establish a business that, for example, is able to tender for the activities that they previously undertook as employees, or any other business. Of course, any attempt at illegally influencing the granting of tenders would disqualify them from the scheme. In this way, a large number of small businesses will be able to be established. Those on the B List will simply be retrenched on the normal terms, although they could be introduced to the business establishment support teams, or to retraining programs.

The restructure of the economy will require considerable changes to existing laws, probably including the BEE laws, the labour laws restricting the employment of workers, the generalization of Union settlements to non-participating employers and the setting of minimum wages, the laws entrenching tribal kings and chiefs in a position of almost unfettered power over their ‘subjects’ at high cost to the fiscus and the economy, the laws establishing numerous inefficient and economically non-productive bodies, and many others, as well as the passing of new laws to ensure that the civil service does its designated work honestly, efficiently and at lowest cost. Included in the latter could be laws that increase the penalties for dishonesty by 50% in the case of a person in a position of trust, such as a Mayor taking a bribe to allocate a contract illegally, or a bank director defrauding the depositors. This would underline the need for adherence to the doctrine of trust, particularly in elected officials. Other similar laws would penalise attorneys who persist in defending unfairly any person known to them to have committed the criminal act, on the basis that attorneys are officers of the Court, and should be expected to uphold the law, to the extent that they may act only to ensure that the client is given a fair trial. In this context, ‘fair’ should be applied to the client as well as to the prosecutor and the Court.

It is fair to say that a majority of thinking people are dissatisfied with the status quo. This is reflected in condemnation of an unfair, ineffective and unduly slow legal system, by citizens advising foreigners and foreign-based fellow citizens not to return to the country and not to invest in it, in racial bias between groups which previously strived to achieve the miracle that Nelson Mandela stood up for. It is shown by the near-insane call by the EFF to allow White businesses to die, echoed by the ANC Mayor of Ekhureleni, at a time when the country needs every job it can manage, and every cent of tax revenue. It is proven by a de facto real unemployment rate of 50%, when 5% would be considered by any thinking politician as a disaster, by the fact that South Africa has dropped in the ranks of economically-successful nations every year for the past decade, and has not achieved anything near its potential in the past 25 years. The need for a major overhaul of the economy is highlighted by the flight of major mining and industrial companies, such as Anglo American and Gencor, to foreign fields, by the continuing withdrawal of foreign investment capital from what should be the major developing economy in the world, as well as by the dismal financial reports regarding the performance of the economy. South Africa cannot afford to wait the months or years that seem to be normal in ‘urgent’ actions by the government, such as can be seen in the lengthy inactivity in combatting gender-based violence and the prosecution of those whose criminal actions have been extensively documented in reports by investigative journalists and the Zondo Commission.

The time for action is now, before the situation as deteriorated so much further that no rescue plan will achieve a result within less than twenty years. A naïve expectation that the ANC government will take the necessary steps in time to prevent the disaster becoming a catastrophe, an expectation that Cyril Ramaphosa would do that shortly after his accession to power, and then again shortly after his election more than a year ago, has been shown to be an illusion born of hope, not a realistic extrapolation of past conduct, and will inevitably lead to the collapse that seems, in any realistic view, to be imminent.