29/06/2017 08:05 SAST | Updated 29/06/2017 08:05 SAST

Inside The ANC's 'Radical' Economic Transformation Strategy

How does the ANC plan a reversal of fortunes for SA's economy?


Bar the urgency of organisational renewal and achieving unity amid factional battles, agreeing on a clear programme for radical economic transformation will be at the centre of the ANC's policy discussions in the coming days.

Concerned about declining support in light of protracted political and economic issues, the ANC is now at pains to hit the brakes on the country's downward economic spiral. Plunging business confidence, declining levels of employment, ratings downgrades and the threat of prolonged recession are facts policy discussants will have to confront.

If factional battles in the ANC can be kept at bay, the ability to agree on a workable plan to overhaul an ailing, inequitable economy may determine whether the conference bears fruit or yields to divisive battles for the party's top spot.

So, how does the ANC plan the economy's reversal of fortunes?

The Economic Transformation Discussion Document released on 8 March 2017 opens with a guiding resolution on transformation from the elective conference at Mangaung in 2012:

"We are boldly entering the second phase of the transition from apartheid colonialism to a national democratic society. This phase will be characterised by decisive action to effect economic transformation and democratic consolidation..."53rd ANC National Conference resolution

For all the rhetoric and repetition about the ANC's new radical plan, this discussion document suggests more policy continuity than change, albeit with newer and highly marketable slogans.

A bigger role for the state with a strong hand in development
Since the creation of the National Development Plan in 2009, the ANC has been clear about the need for an emboldened role for the state in restructuring and building South Africa's economy. This discussion document reaffirms this outlook.

It says a South African 'democratic developmental state' -- one in which the state guides development and harnesses the strengths of the private sector -- must do the following:

  • Re-industrialise South Africa's economy to create mass employment. This means upgrading the economy from an "exploitative exporter of raw materials to one based on beneficiation and manufacturing".
  • "Fully empower state-owned companies" to drive large-scale infrastructure investment.
  • Play an active role in "returning the land to our people", increasing black-ownership of the economy, activating small businesses and co-operatives while also raising levels of investment.

The 'radical' in this plan for economic transformation, according to the ANC's official line, means "fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy... especially in favour of the poor who are majority African and female".

The rhetorical focus on 'radical change', however, gives way to a potentially more 'investor-friendly' call for 'inclusive growth' in policy prescriptions. Among other things, this requires prioritising black ownership in emerging new (as well as old) sectors in the economy, enforcing revised BEE codes, providing tax breaks for small businesses and massively increasing youth access to vocational training.

More closely reflecting the radical orientation of prevailing rhetoric, the document is clear about "dismantling monopoly practices" including price-fixing and anticompetitive behaviour. This will require, it says, amending the Competition Act to "de-concentrate the high levels of ownership and control we see in many sectors". It will also demand a "detailed investigation into the underlying structure of the economy... to dismantle monopolistic and oligopolistic structures."

Finding a middle ground
While the ANC is resolute on the need for an expanded role for the state in development, it maintains that the public and private sector must create a "synergistic and mutually reinforcing relationship" to drive economic growth, albeit with the state at the wheel.

It claims this "superior political and economic logic of the ANC's vision", however, has come under attack from different ideological corners. The document lambasts "right wing" opponents who resist state intervention, including BEE, while also chastising "populist voices" who claim the ANC is still not radical enough. The ANC's clear rejection of wholesale nationalisation of mines in 2012 is listed as a case in point.

Populists are also criticised for seeking to "totally reject paying for services such as road upgrades, municipal services and university fees, despite the fact... these are based on the logic of cross-subsidisation from the rich to the poor".

The ANC warns the approaches of populist and right wing forces -- despite coming from "different starting points" -- would result in the "diminution and privatisation of public infrastructure and services".

Ramped-up rhetoric meets arduous reality
Ensuring policy certainty is reiterated in the document as key to raising investment. The necessity of good governance in state-owned enterprises is also stressed. Multiple paragraphs also call for society to mobilise around "confidence-building measures to maintain the country's investment grade rating and prevent future downgrades.

While the discussion document was written even before President Jacob Zuma's late-night cabinet reshuffle in March, it mostly avoids confronting the politics (in no small measure) behind current uncertainty which ratings agencies, by contrast, have been at pains to argue was in large part responsible for recent downgrades.

In mining, for example, the ANC says in addition to pushing for deeper transformation of ownership in the sector, it needs to ensure that "minerals legislation provides a predictable, stable, competitive and certain regulatory environment for increased mining activity and investment".

The recent release of an amended Mining Charter -- amid claims by the Chamber of Mines it wasn't properly consulted -- achieved the opposite. The Chamber rejected the charter saying it was illegal and could destroy the entire industry while simultaneously undermining attempts at transformation. A legal battle is now expected to ensue as an increasingly fraught relationship between government and the sector deepens.

A major challenge for the ANC in the discussions ahead, months after the documents were formulated, will be the need to account for controversies across multiple sectors of the economy (driven by politcs) where the state is an active stakeholder - most notably state-owned companies including SAA, Eskom and Transnet.

If the governing party cannot resolve already-existing crises in some parts of the economy where the state has a heavy hand, it may find itself unable to increase business confidence and investment with the state in the driving seat of development.

The ANC's 5th National Policy Conference will commence on Friday at the Nasrec Expo Centre in Johannesburg. Over 3 000 delegates are expected to attend.