The ability to both balance and advance the interests of South Africa’s disparate groups will elude us until we acknowledge that raising living standards requires ongoing productivity gains.
By also confronting the trade-off between social-justice-driven politics versus the competitiveness demanded by the global economy, solutions can emerge.
Raising productivity is central to raising living standards, but such progress — particularly for isolated countries with widespread poverty — has always been constrained by the need to limit consumption to fund investments.
Then, as transport and communication costs plummeted in recent decades, low-income, high-aspiration workers could transcend the limitations of their domestic economy by adding value to exports.
Whether termed “globalisation” or “the rise of Asia”, our policymakers reject this path despite its having caused global poverty, unemployment and inequality to plunge. Rather than seeking to compete globally, they have prioritised attracting investment flows mostly to fund capital-intensive projects which will generate few jobs.
While time is diminishing the legacies of South Africa’s pre-1994 systemic injustices, subsequent policy choices are entrenching a majority of South Africa’s young black adults in poverty. A country’s prospects today are foreshadowed by the portion of its young adults who add value to exports on commercially competitive terms. We score abysmally on this key metric.
South Africa’s youth unemployment crisis is so extreme that traditional measures understate the harms. We should be tracking the pace of young adults being permanently marginalised — in the sense that there are no plausible scenarios whereby they become sufficiently productive to sustain a stable household.
This probably exceeds 300,000 per year. Of the black South Africans who left school a decade ago, more are now permanently marginalised than formally employed. That is, far too few of them will ever experience an employer investing in their skills development.
It would be sensible to prioritise popular metrics like GDP growth and the pace of fixed capital formation if racial politics hadn’t been exploited to justify the patronage-inducing policies that undermine productivity gains and progress among our lower-income households.
South Africa’s world-beating income inequality is now as large among blacks as between blacks and whites. The redistribution-focused policies that achieved this odd form of progress are antithetical to job creation and poverty alleviation.
We want to believe that if global investors send enough cash, that South Africa’s growth will quicken and that then, with some service delivery upgrades, everything will work out. Yet our policies are hostile to the most crucial economic development building block, rising productivity and this era’s most profound growth catalyst, competing aggressively to carve out niches in the global economy.
Having the most industrialised economy in Africa is an empty boast. Our deindustrialisation trajectory is well established, and this is partially explained by unrealistic expectations around the potential to create jobs by selling manufactured goods across the continent. The rise of Asia would have been vastly slower had low-income Asian markets been targeted.
The 1990s’ political transition was to have led to broadly shared economic gains. Yet today, more than half of South Africa’s black households are deeply entrenched in poverty. We should certainly accelerate capital mobilisation, improve service delivery and abolish racial preferences; yet progress in these areas won’t unleash adequate job creation or noticeable poverty alleviation.
South Africa’s industrialisation was not spurred by racial discrimination but rather by being separated from industrial powers due to commercial shipping being attacked during World War 2. Such separateness was further incentivised by anti-apartheid sanctions. Today’s race-based quotas and ownership requirements continue to isolate South Africa, and young black workers and families continue to be those most adversely impacted.
To hold our politicians accountable, our national discourse must objectively scrutinise how our racially framed politics are hostile to economic development basics and how this era’s global growth relies on intercontinental trade.
Until we prioritise worker productivity and global competitiveness, a majority of black South Africans will go through life poor — and opportunistic politicians will continue to exploit this.
• Hagedorn is an independent strategy adviser.
Business Day
