A fibbery index for South Africa - Politicsweb, 13 July 2017
By John Kane-Berman
Fibbery, fantasy, transformation, and growth
One of the things I did when I ran the South African Institute of Race Relations was launch a monthly publication called Fast Facts. It was a supplement to our annual South Africa Survey, enabling us to provide a monthly update of key statistics. Over the years we devised more than 200 one-line indicators presented in the form of one or another index - an inflation index, a confidence index, a business index, a socio-economic index, and so on.
The publication was launched in 1991, and a few days ago I was paging through issue number 310. To my consternation, I realised that I had neglected to devise the most important index of all. If you will excuse the phrase, this would have been a bullshit index. Judging by the content of many current political speeches and commentaries, the country is drowning in the stuff. There is no other word for it. However, mindful of the fact that my audience tonight consists of thoroughly respectable people, and also of pending legislation that defines hate speech so broadly as to include almost anything, I will from now on refer to my "fibbery index".
This would monitor all the lies in public discourse. Is the monthly total going up or down? What proportion are little fibs and what proportion real whoppers? Who is telling the most – politicians, journalists, Eskom, the cops, "clever blacks", or "monopoly capitalists", white or otherwise? What proportion of lies are being found out?
As Abraham Lincoln once said, "You can't fool all the people all the time." To which one of his successors coined the rejoinder as he launched his election campaign, "Yes, but you can fool some of the people all the time, and those are the ones we are going to target."
The index would need to be quite sophisticated. It would have to keep track of lies that we pretend to believe even when we know they are not true. This would include the most pervasive of all current South African lies, which is that black economic empowerment (BEE) actually empowers black people. If ever there were an emperor without any clothes, this is he, or indeed she. But nobody wants to say so.
It is all a terrible deceit. BEE tells black people that there is a short cut to economic success, courtesy of white business and the state. White businesses can get contracts from the government if they do things for blacks. The policy is supposedly based on what the Afrikaners did, using the state to compel English business to create Afrikaans capitalists. But the success of Anton Rupert was built on his own entrepreneurship. And Sanlam and Volkskas were created by mobilising contributions and deposits from tens of thousands of Afrikaans households. So why cannot some black entrepreneur similarly mobilise the savings of black people to create a black bank? Why cannot a black insurance giant also be created? Or a black retail chain?
Barriers to market entry are of course a problem for all would-be entrepreneurs, everywhere. The problem, in this country, however, is that BEE leaves entrepreneurship out of the equation, because policy is focused on race and redress. The priority is to change the racial structure of existing businesses, not stimulate new ones. The white monopoly capitalists –
banks, manufacturers, law and accounting firms, or whoever – scoop up as much black talent as they can to secure their empowerment and employment equity scores. The financial press produces tables of companies ranked by their empowerment scores.
Where have all the potential black entrepreneurs gone? Well, a good many of them are earning good money by adorning the letterheads of the white monopoly capitalists.
The empowerment narrative has become so dominant that it has even caused history to be rewritten. Recently a senior journalist wrote that BEE had been "pioneered by people like Richard Maponya." If I were Mr Maponya, I would sue for defamation. As my recent memoirs, entitled Between Two Fires, record, I visited Mr Maponya at his home in Soweto in the 1970s to write a profile for the Financial Mail. He was already rich. And he got rich despite all the restrictions the then government inflicted upon him. We illustrated these on the cover of the FM with a drawing of a black businessman tied down by a network of ropes like Gulliver. Richard Maponya, Constance Ntshona, Herman Mashaba, and others like them, fought themselves free of these ropes. Nor did any white companies get any "empowerment" points for helping them.
Talking of entrepreneurs, I spent a fascinating two days at the annual conference of the African Farmers Association of South Africa a couple of years ago. There I heard speeches by ministers and government officials about land ceilings, land reform, and so on. The black farmers were not impressed. They wanted to know why the government blathered on about these things while failing to fix roads so that they could get their pigs to the abattoir and their potatoes to the market. They also wanted to know why the government was obsessed with creating new black farmers, but neglecting those small black farmers who had already established themselves.
The government is busy peddling a real whopper to the black population by telling them that farm land is the key to economic success and the way out of poverty. But something that most whites and most blacks have in common is that they do not actually own any farm land. Nor do they need any. They rely on jobs outside agriculture. Land reform is in any event a confidence trick, because land transferred from white to black goes not to individual black owners but to the state, the individual black farmer becoming a tenant of the state. This is not economic empowerment of any kind. It is government empowerment.
Many white organisations have played into the BEE narrative. One can understand why. Apartheid so disfigured this country, so destroyed livelihoods and opportunities, that it seems only fair and logical that the state should impose a major programme of redress. Even those white organisations who disagree feel guilt about the past, so they keep silent. Or they just go with the flow. Or they are scared of being branded as racists. Or they endorse BEE as a form of what the British magazine The Spectator describes as "virtue signalling".
The net result is that we all continue to dance as the empowerment music keeps playing. This is what the head of Citibank, Chuck Prince, said some years ago about the packaging and repackaging, and slicing and dicing, of financial instruments that led to the great recession. As long as the music is playing, you have to keep dancing.
The man who drew up the blueprint for BEE was Cyril Ramaphosa, who chaired a commission set up in May 1998. Since then unemployment among Africans has risen from five million to almost eight million. Mr Ramaphosa is nevertheless still committed to BEE, so that his policy is almost a serial annual winner of the "emperor without any clothes" award.
A serious contender, this year, however, is Rob Davies, our minister of trade and industry. He recently reiterated that the government planned to "create" 100 black industrialists. Seriously. How does a government department "create" an industrialist?
It can give him lots of money, protection against competition, and a leg up with government contracts. Does this actually turn him into an industrialist?
A third emperor without any clothes – one who has got away with his nakedness for several years now – is the National Development Plan (NDP). It contains lots of useful information, plus some good ideas and some desirable targets. But, in the end, it is a dog's breakfast of half-baked notions, implausible assumptions, and self-contradictory objectives, as well as some rather bad proposals. Yet it is still touted as a panacea for all our economic woes.
Without citing evidence, and indeed ignoring evidence to the contrary, the NDP urges accelerated land reform to "unlock the potential for an employment-creating agricultural sector". It advocates the strengthening of the bargaining council system, even though these cartels price people out of jobs. It pushes for stricter enforcement of minimum wages, even though these too price people out of jobs. It wants "more robust" monitoring of racial legislation. It favours an interventionist state, even though this is more of a problem than a solution. Unfortunately the press has swallowed the NDP fantasy hook, line, and sinker.
Newspapers, along with business representatives, complain that the government is not implementing the NDP. This is a half truth. Aspects, such as fixing state-owned enterprises, or promoting small business, have indeed been ignored. But tougher enforcement of racial legislation is already on the statute book. A national minimum wage comes in next year. And the state, oblivious of its own incompetence, becomes more interventionist by the day.
The press did a magnificent job exposing apartheid. It helped to ensure that South Africa remained an open society. Today we face a paradox. Our newspapers have constitutional protections that did not exist in the apartheid era, but they are far less critical of fundamentals of government policy today than was the case then.
Don't get me wrong. The media are doing a wonderful job exposing skulduggery, at increasing personal risk. My book said that if Alan Paton were alive today he would be able to write a best-seller called Loot the Beloved Country. But the press has all along turned a blind eye to the ideological thrust of the policies to which the African National Congress, the South African Communist Party, and the Congress of South African Trade Unions were committed even before they came to power in 1994.
Commentators will tell you that the ANC has forfeited all moral authority, and that its "glory" days are over. This is true, but it misunderstands the nature of the beast. The ANC has not just slipped off the moral high ground. Rather, it is shedding some of its disguises. One of its achievements was to convince the world that it was a non-racial organisation. The thrust of key legislation since it came to power, amplified by the anti-white rhetoric now emanating ever more shamelessly from President Jacob Zuma down, shows this all along to have been sheer fibbery.
As for economic policy, that was set out long ago in the strategy to bring about a national democratic revolution. This has now been rebranded as "radical economic transformation".
There is one difference, however. A key component of the national democratic revolution has always been to use cadre deployment to capture all centres of power. This is now played down, possibly because most of them have already been captured, but perhaps also because state capture does not play too well with all the comrades these days.
The other three key components of the national democratic revolution are radical redistribution of income and assets, racial preferencing, and winning the battle of ideas against neo-liberalism and ultra-leftism. In all three the ANC has been rather successful. Redistributive and racial legislation have both gone pretty far. Given an extra push by the crusade against inequality launched a few years ago by Thomas Piketty, and largely endorsed by the intelligentsia in this country and abroad, the ANC has notched up some important successes in the battle of ideas against neo-liberalism.
Redistribution and racial preferencing, we are told, are "business imperatives". Both imply a more intrusive state. There is criticism here and there, but by and large the ANC's revolutionary policies enjoy substantial buy-in from business, the media, and civil society. Nearly 30 years after the collapse of the Berlin Wall, this is an extraordinary achievement for a policy originating in Lenin's theory of imperialism.
Yet it is all fibbery. Shareholders have been forced to spend hundreds of billions on BEE deals. For that amount of money the country should be knee-deep in black industrialists. Yet Dr Davies is only now getting around to "creating" them. When the labour minister threatens to delist companies that have failed to meet employment equity targets, the daily edition of the Sunday Times all but says "right on!"
Organised agriculture says it favours more expeditious land reform. But it knows this is a formula for more failure. Half the students on our campuses are not qualified to be there, yet we are building two more universities. Mr Ramaphosa recently made a speech lavishing praise upon the South African Democratic Teachers Union (Sadtu), although he must know that it harms millions of schoolchildren. Many business organisations confess to not having done enough for "transformation". They ignore the simple truth that you cannot build a successful economy on rent-seeking, cronyism, entitlement, victimhood, and dependency. And of course they give the government the excuse to toughen up on transformation demands, as it is doing with the mining charter. Then they complain.
Business is part of the fibbery problem. Business confidence is down to its lowest levels in eight years, which tells you what business really thinks. But then organised business tells the government we have "great policies but poor implementation". Is a new national minimum wage in the context of 36% unemployment a great policy? Are prison sentences for "fronting" a great policy that has unfortunately not yet put enough chief executives into prison? When I hear business talking policy I wonder whether the ANC 's reaction is not to shrug it off as "white monopoly capitalist speak with forked tongue".
Messrs Ramaphosa and the finance minister, Malusi Gigaba, are telling us that radical economic transformation is the same as "inclusive growth". Eleven years ago Thabo Mbeki had the same idea, except that he called it Asgisa – "the accelerated and shared growth initiative of South Africa".
Since then, jobs among Africans have grown by 24% but unemployment on the expanded definition by 44%. Between 2008 and 2014, GDP per head in South Africa grew at an annual average rate of 1.1%. Germany and Mexico clocked up 1.3% each, Uganda, Russia, and Brazil each 2%, Poland 3.1%, Chile 3.5%, Indonesia 4.6%, Vietnam 4.9%, India 5.7%, Ghana 6.7%, and China 8.2%. Our government blames our poor growth on the great global recession. Perhaps it should brush up on how all these other countries managed to do so much better during the same recession.
Nothing the ANC has said suggests that the new policy of "inclusive growth" will be any more successful than the old one of "shared growth".
Reversing our decline means not tweaks but a fundamentally different approach. Business traipses off with one or another finance minister to tell foreign investors that "structural reform" is on the way. Of course, one of the beauties of "structural reform" is that you can endorse it while tiptoeing around any definition lest you step on a land mine. For this reason, labour market liberalisation – a key component of structural reform elsewhere – is seldom mentioned. Business craves what they call "policy certainty". But when you ask what they mean, they retreat into vagueness.
I will therefore take the plunge of spelling out what needs to be done. As a backroom boy in a think tank rather than a politician, I am mindful of what the American Confederate general Robert E Lee once said when he was lambasted by the press over some or other military disaster, "Why is it that all the best American generals are not on the battlefield behind rifles but sitting in newspaper offices behind typewriters?"
A fair point, of course – except that the trouble with a great many real generals is that they feel most comfortable when they are fighting the last war. And, as I have suggested, that is exactly the trouble with current policy: it is focused on race rather than our twin evils of low growth and high unemployment.
The strategy set out in my book to combat these two evils has several components. There is no time to repeat them all this evening so I will highlight only three: property rights, privatisation, and free trade. Just doing those three – creating new incentives – would start to change everything. We would get floods of investment, a more efficient economy, lower inflation, booming exports, more new businesses, more jobs, and less poverty.
First, property rights. They are the foundation of freedom for rich and poor alike. They are the foundation for growth, innovation, and wealth creation. Unless they are put beyond dispute, we will get no serious levels of foreign or even local investment. No investment, no jobs. Guarantees of course include all the ancillary things: sanctity of contract, the rule of law, and an independent judiciary.
Second, privatisation. It was the most important British policy export of the post-war era, thanks to Margaret Thatcher. More than 100 countries followed her lead, and by 2015 some $3.3 trillion worth of assets had been privatised. Provided that privatisation was accompanied by competition, the result was productivity gains and lower prices. To avoid cronyism, the process would have to be honest and transparent. The potential gains are enormous: better services, transfer of risk from taxpayers to investors, and plenty of foreign investment. And anyone wanting to capture Eskom or SAA would have to buy their shares on the JSE, same as anyone else.
Third, free trade. Both theory and experience point to its advantages. More competition, lower prices, and rising living standards. In the last 40 or 50 years export-led growth has done more to lift people out of poverty than anything else. Even Oxfam has admitted this!
By free trade I mean elimination of tariffs as well as cutting red tape and all the other impediments. I also mean doing so unilaterally. If other countries want to subsidise their exports, why should we not gratefully accept these cheaper goods? Cheap Chinese steel is a blessing, not a curse. It would lower the production costs of thousands of factories across the country who use steel. It would therefore lower the price of finished or intermediate goods we wished to export. Over time, the resulting increase in exports would more than compensate for the loss of jobs in major steel producers. Yet Dr Davies is protecting foreign "monopoly capitalists" like ArcelorMittal at the expense of thousands of South African small businesses – among them no doubt his own would-be black industrialists.
At the moment our policy is import substitution and localisation. This contradicts our competition policy. But if we are serious about competition why not allow importers to join the fray? "The more the merrier", surely?
If we promote localisation, and so restrict competition from importers, we promote higher prices and complacency. We also remove the incentive to invest in new technology. Whatever gains there might be for local businesses in the short term are undermined by the inefficiencies which are baked into the economy. South America fell behind East Asia for that reason. We are repeating the mistake.
My proposed set of policies is more conducive to growth than what the ANC, the media, most of civil society, and business mean by transformation. What they mean often boils down to changing the colour of people in boardrooms, company hierarchies, and on share registers, so that whites, coloured people, and Indians are down to single digits. That will not promote growth. You might just as well repaint the deckchairs on the Titanic.
Some people denigrate growth. But when our economy grew at nearly 5% a year between 2004 and 2008, unemployment dropped by nearly 1.9 million.
Let us take a closer look at unemployment, now running at almost nine million among all races. This is a number, but each digit represents an individual human being with responsibilities, and hopes, and wants, and needs. Of these nine million individuals, 2.5 million are classified as "discouraged" – which means that they have given up looking for work. Of Africans under the age of 24, almost 72% are unemployed. A third of our children are living in households in which none of the adults has a job. Many of our so-called "born frees" are being born into a lifetime of unemployment. This is a waste of productive human resources and a denial of opportunity. It is a tragedy. It is also a betrayal and a disgrace.
South Africa needs to set its sights on getting unemployment down to 5%. A study conducted for the government some years ago reached a striking conclusion. If we reduced our unemployment rate to those of other countries at our stage of development we would have six million more people in jobs. Achieving that should be our overriding objective.
How do we get there? At the moment, as I have already said, South Africa is still trapped inside the box of racial thinking. In the foreseeable future we might get a change of president. We might even see the citizenship of certain recently naturalised persons revoked. All this, however, would merely be the end of the beginning, as Winston Churchill said after the battle of Alamein.
Shifting the policy focus from race to growth, from socialism to liberalism, will be tough.
Pressure for such a shift currently comes from only a handful of think tanks. No surprise then that the ANC sticks to policies enjoying support beyond its own members. As with the National Party, as with political parties elsewhere, it will abandon these policies only when pressure to do so outweighs pressure to retain them. That is a question of political physics.
One essential point is simply to conceive that things can be different. This may sound utopian, but it is vital. Mrs Thatcher decided that Britain's post-war decline could be reversed, although both the Labour Party and the Conservatives had acquiesced in it. Ronald Reagan conceived that the Russian "evil empire" could be beaten, even though Henry Kissinger was content with mere "containment". Churchill inspired millions around the world with the idea that Hitler could be destroyed. All three of these leaders defied conventional wisdom. In modern jargon, they "thought outside the box". So did FW de Klerk.
They had power. I have only ideas. However, the Thatcher revolution started not in Downing Street but in a think tank called the Institute for Economic Affairs. At the other end of the spectrum, Labour governments implemented policies that originated with the Fabians, another think-tank.
Anyone who doubts the power of ideas needs only to look at how governments around the world are shaping policy under the influence of Thomas Piketty and climate change lobbyists. Between them they have given Marxism and the intrusive state a whole new lease of life.
Is there a market for the ideas I am putting forward? Perhaps they will not get enough traction until the unemployed make their presence felt other than in statistics. But we may be sure that we will not get any changes of policy unless we do our policy homework in the meantime. We must inject alternatives into the public domain and into the thinking of people in the ruling party. For all we know, some of these may already be looking for alternatives as the failures of the current approach become ever more apparent. You must have the faith to sow the seeds, and to keep on doing so, confident that some at least will fall upon fertile ground. The Institute's history proves that point, as my book shows.
Let me emphasise in conclusion that we must not set our sights too low. Ratings agencies may be satisfied with a return to growth of 1% or 2%. That's like our education system, in which 30% is called a pass. Business will heave a sigh of relief if public debt is reduced. We will all celebrate if sanity and honesty are restored to state-owned enterprises. But Wayde van Niekerk would not have won gold last year by aiming for a time that would have won him bronze. If we do not aim at 7% or 8% growth we will not achieve it. And that is not bullshit, but simple logic.
*John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom. His memoirs, Between Two Fires - Holding the Liberal Centre in South African Politics, were recently published. This article is the text of the speech he delivered recently in Johannesburg.
Read column on Politicsweb here