POLITICS

Sona 2017: They're Coming For The Banks, Retail And The Media

President Jacob Zuma outlined his vision of what "radical economic transformation" entails ... and it's about another sexy catchphrase: "economic concentration".

10/02/2017 00:11 SAST | Updated 10/02/2017 09:02 SAST

ANALYSIS

They're coming for the financial sector. They're also gunning for retail, the media and construction sector. Mines are in their sights, as well as telecommunications. Construction, too.

These are all sectors with big money and few players. Prime targets for "deconcentration", in President Jacob Zuma's words.

Zuma and the African National Congress (ANC) government on Thursday night lifted the veil from the amoeba-like and amorphous phrase "radical economic transformation". He's now made it clear: government will decisively and assuredly deal with the dominance in certain sectors of the economy by a handful of players.

"We are now stepping up our actions to deal with the other challenge, namely economic concentration, where a small grouping controls the market," he said in his State of the Nation Address (Sona) on Thursday.

We need fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans . . .President Jacob Zuma

Zuma explained the lack of transformation in the economy means black South Africans have not benefited from political liberation attained in 1994. As a result there still is a massive difference in wealth between black households and white households.

A mere 10 percent of listed companies on the Johannesburg Stock Exchange is directly black-owned, he explained to the approximately 300 MPs who remained in the National Assembly after most of the opposition parties left. "We need fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans," Zuma said.

REUTERS/Nic Bothma/Pool
Leader of the Democratic Alliance Mmusi Maimane speaks with members of the media after leaving President Jacob Zuma's State of the Nation Address.

Talk about radical economic transformation — or #RET as it's been hashtagged on Twitter — has been ratcheted up over the last six weeks, with a flood of criticism levelled at the monopoly certain companies hold in some of the economy's sectors. It reached a crescendo after the leaking of the Public Protector's provisional report about the office's investigation into the so-called Absa/Bankorp lifeboat, culminating in a social debate about "white monopoly capital".

Cue something – anything – radical. And given the state capture/white monopoly capital narrative, the economy is a good a place as any to start.

Zuma is under extreme pressure within the ANC, while the ANC is under extreme pressure from the electorate. Events of last year and 2015, which spawned Nenegate, the Constitutional Court's Nkandla judgment and state capture are not only weighing the ANC down, they are sinking it. And the governing party and its leader need something to take back the initiative.

Cue something — anything — radical. And given the state capture/white monopoly capital narrative, the economy is as good a place as any to start.

REUTERS/Nic Bothma/Pool
Leader of the Economic Freedom Fighters (EFF) Julius Malema speaks to the media after being removed by security officials from President Jacob Zuma's State of the Nation Address.

The ANC signalled its intentions over the weekend, releasing a statement to serve as a rallying call for radical economic transformation. This statement was almost completely woven into Zuma's address.

Zuma told MPs the state will now take on a leading role to drive transformation by pulling on every strategic lever it has at its disposal, with government spend and legislation as the two most important.

"The state spends R500 billion a year buying goods and services. Added to this is the R900 billion infrastructure budget. Those budgets must be used to achieve economic transformation," he said.

The problem the ANC has, besides the reality of economics and access to capital, is the haphazard and very poorly drafted legislation it will table in Parliament to achieve its goals.

Given that the state sector comprises about 50 percent of the South African economy, that's a rather big stick to carry around. Money will be redirected from certain suppliers to other suppliers — and with government's drive to empower and to diversify, there is sure to be conflict with Treasury, that is focused on cost effectiveness and forcing down the price of procurement.

But it will be through regulation and legislation that it will seek to break up the dominance of some big players in the local market — in the media and financial sectors, for example.

GIANLUIGI GUERCIA/AFP/Getty Images
EFF members and supporters try to set fire to and tear apart an ANC T-shirt while protesting against President Jacob Zuma ahead of his State of the Nation address on February 9, 2017 in Cape Town. A violent brawl broke out in Parliament as guards exchanged punches with opposition lawmakers who shouted down Zuma as he tried to deliver his address. In chaotic scenes, about 30 guards dressed in white shirts forcibly ejected about 25 members from the radical leftist EFF who had prevented the president from speaking for about an hour.

Government will introduce new competition legislation to create "a more inclusive economy" and to "de-concentrate the high levels of ownership and control". This means it will now force those sectors that politicians ostensibly believe are controlled by cliques like the so-called "Stellenbosch mafia" to give up their empires.

Which will prove to be difficult.

The problem the ANC has, besides the reality of economics and access to capital, is the haphazard and very poorly drafted legislation it will table in Parliament to achieve its goals.

We seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation

Besides the "deconcentration of the economy", redistribution of land has been a large part of the ANC's populist and symbolic politicking in the recent past. Given the political urgency of the return of land to black South Africans and the scope afforded to government by the Constitution, one would have thought the ANC would have been good to go ages ago.

But Zuma admitted in his speech two crucial pieces of enabling legislation — the Expropriation Bill (in the works since 2011) and the Restitution of Land Rights Amendment Act from 2014 — has been sent back to Parliament because of constitutional shortcomings.

"In this way," Zuma said, "We seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation."

Batten down the hatches. We're about to be confronted — again — with the disconnect between ANC promises and populism and bureaucratic and economic reality.