Put education first to transform economy - News24, 04 June 2017

By Gwen Ngwenya 

The continuing debate on radical economic transformation tends to focus on what we do not know, but there is in fact a key tenet regarding which there can be near certainty. Across factional lines in the governing party, almost all who speak about radical economic transformation make reference first and foremost to the demographic ownership of assets. Radical economic transformation makes the case that the structure of ownership and wealth in the economy continues to be determined along racial lines. As a result, policy and implementation must focus on accelerating the pace of structural realignment (correcting the racial skew), particularly in capital markets, business ownership and land ownership.

Radical economic transformation as currently conceived will falter for precisely the same reason as affirmative action policies: a focus on outputs (land, procurement deals) instead of inputs (education) resulting in a low number of beneficiaries. Radical economic transformation will further fail at mass transformation because millions of South Africans are fighting for their basic survival, and failing to meet their daily living needs. As a result, policy which places capital accumulation at the forefront before income security is destined to fall short of needs and expectations.

A fighting chance

Supporting the income versus ownership theory of public dissatisfaction is the tendency to accept financial compensation as opposed to land. In the 2017 state of the nation address, President Jacob Zuma pleaded with land claimants to take the land as opposed to financial compensation. More than 90% of land claimants accept financial compensation instead of land. This staggering figure flies in the face of “land hunger”. There is a hunger, but it is primarily for stable livelihoods. There are two aspects to wealth: income and capital. Focusing on capital accumulation before people even have an income to support basic needs is putting the cart before the horse.

The idea of a universal basic income grant is a near constant part of discussions of how the social welfare system needs to be configured. There is a growing global movement and research for various configurations of how to make such a system feasible. The concern is not only to safeguard the right to life but to safeguard choice; grinding deprivation makes a mockery of choice. You cannot expect those with no options to make choices. Such ideas are sometimes and inappropriately associated with the left and paternalism, but I see no version of liberalism which is of value if it does not value protection against economic hardship, the latter being a chokehold on freedom.

With concern then to both life and freedom, we must afford people the tools conducive to success. The gerrymandering of racial outcomes without due concern for the inputs that give rise to more equal outcomes is futile. In the absence of a basic income grant, we might then wish to provide other means for people to have a fighting chance at a life independent from government support. Inarguably in South Africa one of the most important inputs to future income and economic independence is education. There is, for the most part, a positive relationship between years in education and level of income, and in particular a gap in the earning potential of those who have a matric qualification and those who do not. The ANC’s policy discussion document on economic transformation makes cursory mention of education. Granted it is an economic document, but education should be highlighted as a central concern for the economic agenda.

About 50% of pupils who enrol in Grade 1 will drop out before reaching Grade 12, which represents a large flow of unskilled people into the labour force. It is possible to design programmes to give greater opportunities to black university graduates and the politically connected elite, but the real bleed comes from the masses unequipped for the world of work.

Transformation

The private sector, or “white monopoly capital”, under radical economic transformation is communicated as an obstacle to transformation. Aside from investor-hostile policies, it is the education backlog which is the most threatening barrier to transformation. However, according to senior governing party officials, it is a lack of will to transform that has prevented redistribution of wealth and ownership. The SA Institute of Race Relations has previously reported that educational outcomes in South Africa place a ceiling on transformation in the workplace and to broader economic opportunity.

The proportion of people with a degree who are also black closely matches the proportion of professional employees who are black. Transformation in the workplace is keeping pace with transformation in educational outcomes. The great disparity is between black people as a proportion of the total population (80.7%) and black people as a proportion of professional employees (50.35%), but a large part of that reflects the gap between black South Africans who have a qualification and those who do not. Until South Africa can address the disparities in educational attainment among race groups, there will continue to be a gulf between the demography of the population and the demography of opportunity and wealth.

Despite the education backlog, R23bn has been allocated for the creation of 100 black industrialists over three years by the department of trade and industry (the dti). In addition the National Empowerment Fund (NEF), a subsidiary of the dti and the only developmental funding institution exclusively mandated to grow broad-based black economic empowerment, will require recapitalisation of R2bn annually. The high cost of redistributive programmes relative to the target number of beneficiaries is a critical weakness to achieving broad-based empowerment, and supports the perception that empowerment projects are vehicles for the enrichment of a wealthy, politically connected black minority. Radical economic transformation focused on capital accumulation is geared to deliver only to a small black elite.

Aside from a universal basic income, a sound way to safeguard a basic level of income for the greatest number of people is to ensure they can be productive participants in the economy by ensuring access to quality education to a minimum level of completion.

*Ngwenya is chief operating officer at the SA Institute of Race Relations, a think-tank that promotes political and economic freedom. 

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