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17 June 2022 - South Africa needs a more ‘activist’ state, President Ramaphosa told a media briefing last week.

Citing a single major success while ignoring context can only fool some of the people some of the time. So it is with President Ramaphosa citing the State’s backing of Nelson Mandela Bay’s automotive industry as a prime example of SA’s “Developmental State” that bears emulation. There’s one problem. Other developmental states like Taiwan, Japan and South Korea all had functional governments, built, brick by brick, institution by institution, and sustained and rejuvenated over time. They displayed accountable leadership, sound policies, skilled managers and workers, clear lines of accountability, appropriate systems and consistent and fair application of rules. As IRR project manager, Terence Corrigan, opines in the Daily Friend, just look at Nelson Mandela Bay’s water crisis – Day Zero has arrived and any municipal planning and capacity has come to naught. A full 84% of SA’s municipalities fail financial audits. A pragmatic realisation of what SA is capable of is a better starting place than trumpeting idealistic aspirations guaranteed to disappoint. – Chris Bateman

Terence Corrigan

South Africa needs a more ‘activist’ state, President Ramaphosa told a media briefing last week.

State support had provided the country with one of its economic “crown jewels,” Ramaphosa said. This was the automotive industry, which attracted billions of rands in foreign investment – the real fixed thing, not merely portfolio flows – providing skilled and well-paying jobs, and exporting ‘Made in South Africa’ products to foreign markets.

An excellent achievement, it would seem, and testimony to what a committed state can achieve. “The auto sector came to be what it is because it was supported and attracted many original equipment manufacturers from all over the world, largely on the back of the support the government has given to that sector,” the president said.

This, he added, was a model that could be applied elsewhere.

Observers of South Africa’s governance will recognise in this an echo of the long-running back-and-forth about the role of the state in the economy. Too often, this has been framed in stark, binary terms, with opponents often caricaturing one another: one is committed to an unregulated capitalist hellscape, the other to a rigid North Korean communist dystopia.

This is a pity, as it’s an important issue. The state is a constant feature in modern social life, and its posture on the economy matters. 

A key idea here is the so called developmental state. This concept was advanced to explain the rapid growth of countries such as Japan, Taiwan, and South Korea. It was important that scholarly interest in this had grown intensely during the 1980s, as South Africa’s crisis pushed the country towards its transition. For many in the liberation movement, the idea that state power could be leveraged to effect a fundamental economic transition – redistributive as well as growth-oriented – made this model an attractive one. It also offered an alternative to the socialist agenda which the collapse of the Soviet Union had made impracticable.

The term ‘developmental state’ was coined by the American political scientist Chalmers Johnson in reference to Japan. His argument was, broadly, that Japan had achieved its post-war economic ‘miracle’ through its Ministry of International Trade and Industry (MITI). In his account, technocrats in this institution set the priorities and issued guidance to Japanese industry, pushing growth in the economy and society as a whole. It was a fulcrum of sorts around which mutually beneficial relationships and national teamwork could be organised – such as, for example, ensuring the adoption of technology, the identification of key industrial sectors, policies around internal markets and the promotion of exports. 

Similar approaches
Similar approaches have been identified in such contexts as South Korea, Taiwan and Singapore. Latterly, the idea has been applied to China and some other economies in the region, such as Malaysia and Thailand. Beyond Asia, particular analysts have applied the term to Botswana, Ethiopia, and Rwanda.

The African National Congress and its allies – and with them, the South African government – have meanwhile declared their intention to create just such an apparatus in the country. Official documents declare the ‘developmental’ aspirations of strategies and institutions. The National Development Plan devoted a chapter to ‘Building a Capable and Developmental State’. It’s worth restating the latter’s reflections:

A developmental state tackles the root causes of poverty and inequality. A South African developmental state will intervene to support and guide development so that benefits accrue across society (especially to the poor) and build consensus so that long-term national interest trumps short-term, sectional concerns.

A developmental state needs to be capable, but a capable state does not materialise by decree, nor can it be legislated or waived into existence by declarations. It has to be built, brick by brick, institution by institution, and sustained and rejuvenated over time. It requires leadership, sound policies, skilled managers and workers, clear lines of accountability, appropriate systems, and consistent and fair application of rules.

Therein lies the problem. The NDP set out an aspiration for what the state should be, and this is implicitly the framework for the President’s suggestion. But the document also makes it clear that getting the state to that point is a process of institution-building. 

Unfortunately – and it is deeply unfortunate – the state as it exists in South Africa is simply not able to act in this manner.

Consider this: as the President was making his remarks, the Nelson Mandela Bay Municipality – a centre of auto manufacturing – was in the throes of a water crisis, with the arrival of its dreaded Day Zero on the horizon. The provision of a reliable water supply is not only a necessity for industry, but for community life. It’s the most basic of requirements for any society, and here, in one of the country’s metros, this is failing.

As bad, or worse
The situation in many smaller municipalities is as bad, or worse. On Monday, the Financial Mail’s Claire Bisseker wrote a piece entitled: ‘SA’s municipal crisis risks undoing all other economic gains’. The piece is worth reading in its entirety, but suffice it to say – as has been said many times before – that it shows the dysfunction afflicting local government is destabilising South Africa’s economic future. 

She asks: ‘One has to wonder how the situation has been allowed to build to the point where most municipalities are no longer financially sustainable, rendering service delivery dysfunctional in large parts of the country. Potholed roads, raw sewage spills and extensive water and electricity cuts are becoming the norm.’

In an answer of sorts, she refers to the ANC’s cadre deployment regime – the filling of places in the civil service with political appointees. This has had no minor role in preventing the emergence of a professional and meritocratic civil service.

If there is anything that makes a nonsense of South Africa being a ‘developmental state’, it is this. And note that it is not just a matter of incompetence. Cadre deployment also violates some of the key conceptual tenets of the developmental state.

In a seminal contribution to the topic, Peter Evans, Professor Emeritus of the University of California, argued that the institutions and incumbents in developmental states are sufficiently connected to constituencies across society to mobilise them for a national agenda, but also sufficiently independent of them to avoid succumbing to sectarian pressures. This was set out in his 1995 book, entitled appropriately Embedded Autonomy.

The ANC, by contrast, effectively captured the state, robbing it of any such autonomy, even if it had the skilled personnel to drive an ambitious agenda. And as the ANC fractured, so did whatever coherence the state might have had. Corruption, nepotism and incompetence are compounded by political infighting. Rather than having the state managing society, South Africa has factions of a political party using the carcass of the state to fight one another.

‘Subordinated to political objectives’
Chalmers Johnson wrote that “in the developmental state, economic interests are explicitly subordinated to political objectives”. The ANC has taken this to heart. But what Johnson had in mind was that economic development would be pursued so as to serve longer term goals – the economic and political are synthesised. In South Africa, political considerations have so overwhelmed the economic, that the latter become almost unattainable. Questions of actual governance are of secondary importance.

The failings of local governance are mirrored across the board: power, roads, ports, railways, and security. The riots that rocked parts of the country in July last year demonstrate the extent to which the state has lost the ability even to maintain physical control of the country when seriously challenged. (Incidentally, a News24 article on the water situation in the Nelson Mandela Metro reported that Gift of the Givers teams had been dispatched to Gqeberha to drill for water. It says a great deal that it is a private charity that is stepping in to mitigate a governance disaster.)

Indeed, even if one accepts the success of state ‘activism’ in supporting the automotive industry – and there have been criticisms of the policy – it is worth noting that South Africa currently lacks a policy on electric vehicles. This is despite electric vehicles having been recognised as an export opportunity for the country, and one that the South African industry will need to adapt to as environmental regulations abroad make its current offerings obsolete. (A Green Paper was published last year, and a policy is in development; bear in mind that it will take several years for the industry to adapt its production accordingly.)

And to the extent that policy on the automotive sector has been a success, there is little to suggest that it could be a template for others, at least not given the state that South Africa finds itself in. South Africa’s aspirations are a case of massive overreach – the country is simply not a ‘developmental’ state, nor a ‘capable’ one and attempting to be an ‘activist’ is to take on tasks for which it is manifestly unsuited. Successes in governance are becoming outliers.

Governance deficiencies 
Until South Africa is able to correct its governance deficiencies (and there seems to be little urgency, let alone capacity, to do so) it would do well to moderate its expectations.

What to do? Simply put, refocus energies on making the foundations of the state function. Before becoming a ‘developmental state’, South Africa will need a functional one. The operative idea here is not ‘activism’ but ‘satisficing’. This is defined by one online source in these words: “Satisficing is a strategy used in decision-making that seeks a result that is good enough to tackle a situation but is understood to not be the optimal solution. The strategy narrows down the scope of available options that have the possibility of achieving the desired outcomes. It then sets aside those options that will require intensive efforts to achieve the results. Satisficing helps management to make the best decision that will save on the resources, time, and energy.”

In political science, an equivalent term is ‘good-enough governance.’ In other words, seek out a response that is realistic, that addresses the most pressing issues, and creates an environment in which progress can be made.

For South African business to get by, ensure that water, power, and transport systems operate, that official documents can be accessed expeditiously, and that corruption is kept within limits, this is not even a particularly impressive bar to reach; it does not promise clean or morally upright governance, or even efficient administration – the country will be wrestling with that for another generation at a minimum. 

But a conscious recognition of the limits of the South African state and a prioritisation of the most basic tasks would give the country’s businesses and entrepreneurs – established and aspirant – some breathing space and a chance to survive and grow within the bounds of their own resources and imagination. This is not a normative argument against the role of the state in an economy, but a pragmatic realisation of what the state as it exists is capable of – or more accurately, what it might be capable of being. It may not be optimal, but it is what is available.

President Ramaphosa, meanwhile, should think very carefully about what he is proposing and where it is likely to lead.

Terence Corrigan is the project manager at the Institute of Race Relations, where he specialises in work on property rights, land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature.

This article was first published on the Daily Friend.