Can South Africa Come Out Of Its Quagmire? Kgalema Mothlanthe


By Joburg Post

It is a pleasure and an honour for me to be invited to address you on the topic:

Whither South Africa-Prospects and Opportunities for the Politics of Development - Can South Africa come out of its quagmire? 

But, before we begin, it would be amiss of me not to acknowledge that this dinner takes place as we mark and celebrate the Silver Jubilee of our democracy and as we prepare for the impending general election in South Africa.  Milestones impel us to take stock, celebrate success, evaluate problems encountered, learn from mistakes and measure distance traversed.   

There are 48 parties registered to contest the elections.  This election takes place in the backdrop of service delivery protests and feelings of discontent from sections of the population regarding the low growth in our economy, which results in job cut-backs, unemployment, poverty and high inequality. 

This is even more frustrating for the citizens when it takes place amidst revelations of looting and corruption in the state owned entities which is at times aided and facilitated by private sector institutions.

The Commissions on State Capture, PIC, and SARS have laid bare how patronage networks have been used to drain resources from state owned companies through irregular expenditure of fiscal funds.  This has led to the grave debt burden faced by Eskom amongst others. 

Eskom, through its role as the generator, transmitter and distributor of power has a central function to place in our economy.  Power is not just the lubricant, but a basic requirement to operate and grow the economy.  

Beyond the general weaknesses and problems of heavy debt, poor maintenance, corruption, depletion of experienced artisans, we have yet to receive a comprehensive report on what is exactly going wrong at Eskom, yet we are now told that Eskom is about to be unbundled into three separate entities; power generation, transmission and distribution.  What informs such a proposal?  It would appear as if the cart has been placed before the horse. 

This is particularly important because the problems we are facing will not be solved by budget reprioritization and reallocations alone; given the shrinking tax base and deficits in revenue collection from SARS.

In relative terms South Africa has one of the most developed infrastructure on the African continent with highways, rail and telecommunications.  Our financial system is one of the most sophisticated in the world and we have an independent judiciary that is based on international best practice. 

What this infrastructure does is to create a base upon which citizens can build a life, establish a business, create employment and attract both foreign and domestic investment. 

The latest Open Budget Index prepared by the International Budget Partnership ranks South Africa top among the countries surveyed.

Having said that, it is an open secret that South Africa is in a low economic growth trap at the moment. 

According to the World Bank, the South African economy grew by 1.3% in 2017 and 0.8% in 2018. There are projections that the economy will grow at 1.3% in 2019 and 1.7% in 2020.
 
This presents a problem because, given our population growth, gross domestic product (GDP) per capita growth has been close to zero since 2014, leaving little room to reduce poverty.  Consequently, inequality has widened between the haves and the have nots.  

South Africa remains a dual economy with one of the highest inequality rates in the world, with a consumption expenditure Gini coefficient of 0.63 in 2015. Inequality has been persistent, having increased from 0.61 in 1996. High inequality is perpetuated by a legacy of exclusion and the nature of economic growth, which has not been generating sufficient jobs. Inequality in wealth is even higher: the richest 10 percent of the population held around 71% of net wealth in 2015, while the bottom 60 percent held 7% of net wealth.

There is a need to strengthen investment, including foreign direct investment, in order to propel growth and create jobs, which will go a long way towards reducing inequality.

As a major importer of minerals and an importer of oil, our economy remains vulnerable to currency fluctuations and changes in the price of commodities. This in itself indicates an overreliance still on the primary activities of mining and agriculture.
 
The path to long term growth in the economies that have managed to transition from third world to first world in one generation such as Singapore, has been one that is paved by investments not in infrastructure alone, but also the education system of the country.

This is so that young people are capacitated with the knowledge and skills in order to be absorbed into the economy or to start enterprises that create jobs.  There is a need to re-invest in technical schools that offered artisanal training, because artisans are the backbone of the manufacturing sector.

In the absence of investment in education and skills training, South Africa will never be able to reap the benefits of its ‘Youth Dividend’. Instead the ever expanding threat of an uprising of unemployed youth looms as a reality.

Ladies and gentlemen, thus far I have a painted a picture that holds a mirror to our society without hiding our blemishes. This may lead you to then ask the logical question of whether or not it is possible for South Africa to come out of this quagmire.  Before we answer that question, let us first look at the scenarios that we researched and presented under the auspices of Mapungubwe Institute for Strategic Reflection (MISTRA) that studied the prospects of South Africa towards 2030.

The Indlulamithi Scenarios were conceived in Johannesburg on 19th August 2017 and comprise three visions of South Africa’s future, each typified by a popular dance.



They are iSbhujwa, Nayi le Walk and Gwara Gwara.

“ISBHUJWA is an enclave bourgeois nation that epitomises a loose-limbed, jumpy nation with a frenetic edge.  Isbhujwa is a South Africa torn by deepening social divides, daily protests and cynical self-interest.

NAYI LE WALK is a nation in step with itself. In a precise sequence of steps, this scenario choreographs a vision of a South Africa where growing social cohesion, economic expansion, and a renewed spirit of constitutionalism get the nation going.

GWARA GWARA is a floundering false dawn, where the nation is torn between immobility and restless energy.  Gwara Gwara embodies a demoralised land of disorder and decay.”

Now that we have set the context and outlined the scenarios, we are now in a position to then ask ourselves the question:  Is it possible for South Africa to come out of this quagmire?

The answer depends on an examination of where we are as a nation and what we are capable of.  For instance, are we in a false dawn or are we genuinely positioned to witness the rising of the Sun?
If so, what kind of leadership do we require, bearing in mind the scenarios we have outlined.  None of us can predict the outcome of the elections, but we can agree that the kind of leadership we elect needs to be one that is astute enough to respond to the challenges we have outlined. 

For South Africa to emerge from the quagmire, we need a new consensus on inclusive growth that is job creating and reduces inequality.  For this to take place, we need more than foreign and domestic investment.  What we require is new capital that stimulates manufacturing and acts as a catalyst for growth in the services and technological sectors. 

For this to work, government  ̶  in partnership with the private sector, labour unions and society at large  ̶  needs to formulate contingency plans that respond to the six global megatrends that were identified in the Indlulamithi Scenarios.

These are: 
Demographic Change, Environmental Change, Geo-political Shifts, Cyber-Physical Systems, Rising Sovereign and Consumer Debt as well as Migration and Competition for Resources.
Severe shifts in global climate patterns that have taken place due to decades of air pollution and ozone depletion have led to long term increases in the global temperature that threaten the ecosystems of the world with tropical cyclones, floods, mudslides and sinking of the coastline. 

The recent devastation we witnessed this week in KwaZulu Natal testifies strongly that we can no longer afford to leave carbon emissions to continue unrestricted.  We need to migrate faster to an energy regime that embraces solar, wind and other forms of clean energy, so we can shift from fossil fuels towards low carbon emissions. 

The exponential advance in computer processing power driven by advances in telecommunications infrastructure have led to rapid changes in the way we live and conduct business around the world.  The fourth industrial revolution is now at a pace where it is re-defining how we work both now and in the future. South Africa cannot afford to be left in the dark in this regard.

All of this is taking place in the midst of seismic geo-political and demographic shifts and re-alignment of coalitions as economic power shifts from its current citadel to a new location or center.  It is predicted that as early as 2020, the Chinese economy will eclipse the United State of America as the largest economy in the world.

As a member of BRICS, South Africa has an opportunity to build a relationship with China, India, Brazil and other fast growing African economies such as Ethiopia based on a foundation of mutual respect and joint benefit.

As a start, the initiative to have One Passport for One Africa is one that has begun to bring to the fore the limitations of our internal boundaries in Africa.

Combined regional development initiatives can facilitate easier movement of people, money, resources and information.  All of this will make it easier for us, as African States, to conducts business amongst ourselves. 

How South Africa responds to these trends, depends on whom we hand over the reins to in these elections and how strong we are, as citizens, who are the thoroughbreds that steer the country forward.

This speaks directly to the Capability of the State to Govern.  To change the destiny of our nation, we need to first restore the Rule of Law and make South Africa safe from all manner of crime and criminal activity.  This is necessary because Political Stability is a precondition for Economic Development and Progress.

It is also common cause that the Cabinet is likely to be rightsized, which means a reduction in numbers that necessitates the realignment of functions.

Let me conclude by reassuring you that there are positive prospects and opportunities in South Africa, but they are a function of the extent to which the collective leadership of the country can create a stable environment in which the most talented South Africans can be inspired to make a contribution.

I thank you.

This was a speech by Former President Kgalema Motlanthe at the D Group Corporate Forum Dinner.
 
-JP

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