POLITICS

Sona: Radical Economic Transformation Is On The Cards, But It Might Not Be The Answer To SA Problems

The EFF's populism seems to have swayed President Jacob Zuma.

08/02/2017 16:02 SAST | Updated 09/02/2017 08:05 SAST

"They can try to implement a form of 'radical economic transformation', sure, but it will be destructive." – Dr. Iraj Abedian, chief economist, Pan-African Investment and Research.

"Radical interventions in economies have been attempted elsewhere, but never successfully." – Professor Jannie Rossouw, head: school of economic and business sciences, University of the Witwatersrand.

"Radical economic transformation in this country is urgently needed, but it isn't government's job to do it, in fact, government is standing in its way." – Dawie Roodt, chief economist, Efficient Group.

"It is with great anticipation therefore that we commend to President Zuma and our government the people's aspiration for Radical Economic Transformation NOW." – Statement by the African National Congress.

ANALYSIS

Jacob Zuma's ANC has never quite been able to reach consensus about the economy and policies needed to drive growth.

Shortly after Zuma's hodgepodge coalition evicted the so-called 1996 Class Project, with its macro-economics and tight rein on government spend, cartoonist Zapiro published a cartoon with Zuma standing over a truck (South Africa Inc) with two driver's seats looking in opposite directions, Pravin Gordhan (minister of finance) and Ebrahim Patel (minister of economic development) each behind a wheel.

"Hit it!" the president told his two economic ministers, from opposite ends of the scale of economic theory. Never the twain shall meet. And it never did.

Zuma's state of the nation address on Thursday will be heavy on rhetoric about radical economic transformation –- #RET as its doing the rounds on social media –- but light on detail.

The leader of the governing party seems to have cracked the whip during the ANC's economic policy lekgotla recently, sending the economic transformation subcommittee away to come back with stronger transformation proposals than they initially put forward.

It is, however, still a murky concept.

Radical economic transformation might however refer to the other three interrelated points: institutions and patterns of ownership and control. Effectively, ownership.

In a lengthy statement on Sunday, the ANC broadly said it wants the radical transformation of the country's economic structure, economic systems, institutions and patterns of ownership and control. It also laid out 12 urgent tasks to which it is presumably binding not only Zuma, but also Minister of Finance Pravin Gordhan, who by now has all but finalised his budget to be delivered in less than 14 days.

For the ANC to change the country's economic structure -– market-led, with a profit motive and based on commodities, manufacturing and services -– is impossible. To change its systems –- with regulations and legislation which create an enabling environment –- is difficult but not impossible.

Radical economic transformation might however refer to the other three interrelated points: institutions and patterns of ownership and control. Effectively, ownership.

The ANC has been bleeding support over the last couple of years, with the jarring losses at last year's municipal elections sending a shock through the body politic.

They have two options: either admit to their own faults about slow and poor delivery, or direct focus and anger to non-state actors like the private sector. That's what nationalists in Europe have done.Iraj Abedian, chief economist, Pan-African Investment and Research

"Radical economic transformation is borrowed from the EFF, it's their slogan that Zuma is now using," says Abedian, who adds Zuma and the ANC's use of the phrase is a way of deflecting criticism from their own failures.

"They have two options: either admit to their own faults about slow and poor delivery, or direct focus and anger to non-state actors like the private sector. That's what nationalists in Europe have done, which for example has led to Brexit," Abedian says.

Both Rossouw and Roodt agree, with the latter saying the president is in political trouble: "His party is losing support and he has to do something, something 'radical'."

In South Africa the subtext to radial economic transformation is ownership of land, mines and the financial sector.

"Zuma will focus on this in his speech, but he will also have to face up to certain inescapable realities. Any radical changes that any government wants to implement rest on a state which is clean, competent and capable. Without that you can have the best or most radical policies in the world, it will never work," says Abedian.

"You can destroy Rome in one night, but it takes much longer to build it."

We shouldn't merely be transferring ownership from one group, via the state, to another group. We should be making and building and creating more things and more stuff. Dawie Roodt, chief economist, Efficient Group

Roodt agrees, adding that the Zuma government is too incompetent and belaboured to effect whatever policy changes it will propose.

There is agreement among economists that the wealth gap is too big and that social and political instability looms if it isn't closed, and closed fast. But is radical economic transformation –- in whatever form -– the answer?

"Look, you can take land, yes, or banks or the mines. But what then? If you take land without compensation, as has happened elsewhere, it will satisfy on the short term, but in the end everybody loses. It takes years to develop an aspirant farmer into a competent farmer. By the same token it takes years, even decades, to become a competent banker," says Abedian.

The reason why millions of South Africans have not benefited from the economy is the state's fault, he says: "The machinery it uses to distribute economic surplus – the state – has deteriorated. It is unable to transfer these surpluses and turn it into housing, education and infrastructure. The state has to build its own capacity."

Zuma will tell you the economy doesn't work, while Ramaphosa might believe the polar opposite. It is dangerous to try and convert political rhetoric into practice. Professor Jannie Rossouw, head: school of economic and business sciences, Wits

Roodt says government itself is in the way of radical economic transformation: "We shouldn't merely be transferring ownership from one group, via the state, to another group. We should be making and building and creating more things and more stuff so that there is more to go around."

Rossouw says there isn't agreement in the ANC about radical economic transformation and that it's a divided house. "Zuma will tell you the economy doesn't work, while Ramaphosa might believe the polar opposite. It is dangerous to try and convert political rhetoric into practice. We've seen this happen elsewhere in Africa and its caused a lot of damage."

We'll hear at 19:00 on Thursday evening what Zuma's thoughts are.