Towards the latter part of its work, the inaugural National Planning Commission (NPC) grappled with how best to outline a comprehensive economic transformation agenda for South Africa. The Commission concluded its work amidst calls for radical economic transformation which were growing stronger; as it were, ideas about the nature of the transformation sought were not keeping pace with the development agenda as espoused by the National Development Plan (NDP).
A need therefore arose for a discussion on what a programme to accelerate economic transformation ought to look like. In reflecting back on the work the Commission covered when it produced the NDP, the humbling recognition is that it would be difficult to purposefully pursue a social compact without fully ‘centering’ redress which can be achieved through economic transformation. The Commission asked itself what models of this form of transformation it had not as yet interrogated. This prompted it to properly reflect on the varied components of what economic transformation effectively means.
In this reflection the most obvious sub-components of economic transformation included: a review of the macro-economic fundamentals pursued; industrialisation; the transformative policies of government and models of economic transformation in a developmental state. And it became apparent that our work would never be fully done were we not to properly flesh out the issues of economic transformation with a view of providing some useful commentary into the future.
The transformation that is envisaged by the inaugural NPC is one in which there is a fairer balance of outcomes – in ownership, production, distribution and consumption (with both racial and gender dimensions) – as well as of opportunities, leading to a more inclusive, participative and cohesive society.
In that respect, economic transformation, in its multi-dimensional character, should seek to address the following:
• Ownership of economic assets
• Access to economic opportunities
• Income and wealth distribution, as well as access to public goods
• The structure of the economy and polity:
– Away from extractive sectors and to more inclusive approaches towards more participative, skilled and innovative industries
– Away from extraction of super profits towards a more equitable distribution of income to meet human and social needs
– Away from low wage adversarial labour relations to a high wage, inclusive and participatory labour relations system
A useful start to arrive at a more comprehensive economic transformation programme may be to recognise that as much as ‘growth’ will be required to support investments in social and economic infrastructure, economic growth in and of itself is not the panacea.
Indeed growth is necessary to enable all citizens to achieve an acceptable standard of living. However, the form and nature of such growth needs to be premised upon less socially and environmentally damaging growth paths.
It is important to consider whether the current structure of the South African economy is conducive to the objectives set in the NDP and how this would address the more specific challenges of economic transformation.
The development of people and the creation of an environment in which there is an incentive to invest, is in the view of the inaugural Commission, what must underpin transformation.
There is a general recognition that on issues of deepening inequalities of society, there is little in the NDP that points to a different path for the SA economy. The Plan requires an average 5% growth which we have not yet been able to achieve consistently as a country.
The question is what kind of dislocation must happen to push us in a different direction? Does the small size of the economy not impact on the room we have to change the fundamental structure of the economy? The platform would also help us understand the type of political economy required.
Changing the structure of the economy would result in it being more inclusive, sustainable, achieving appropriate sectoral balance with opportunities for all, integrated value chains and less barriers to entry. That, in our view, would help propel us towards this more comprehensive economic transformation programme.
A new narrative required
Many years into our democracy, ownership of the economy is still terribly skewed in favour of the minority groups in South African society. If one were to look at the entire economic structure of the country, it still reflects the sad and unfortunate apartheid and colonial past.
Thus, everything in the current narrative of economic transformation is informed by that framework. When people talk about radical economic transformation, the Commission’s view is that they do so from a paradigm of the old framework – and there is a need to break that mould of the old framework and begin to consider a new narrative.
That need extends to looking at the factors that must be changed to qualify as radical actions. Otherwise as a country we do not have a chance to ever mobilise around social cohesion and best be able to stimulate and catalyse national conversations on appropriate redress measures.
The NDP contains a vision of a transformed society in which all South Africans would enjoy a decent life, live in a healthy environment and be included in activities of the broader society, with a variety of opportunities for all.
The challenge was always going to be the manner in which we define a broad path that can get the country there. This broad path needed to address the core objectives of unemployment, poverty and inequality.
However, it was always going to be unlikely that simply addressing these objectives and prerequisites alone can satisfy the demand for ‘economic transformation’.
As bold as the NDP is in respect of articulating these objectives, the criticism that the inaugural NPC received is that it lacked the necessary boldness in tackling the facilitatory and nurturing interventions that are required to change the structure of the economy.
Where the country got stuck
As a country we have been so focused on micro-economics we missed the opportunity to have a fundamental debate on how the macro-economics shape the ability of the state. Economic transformation, as topical as it appears to be at the moment, does mean different things to different people.
Alignment of those different meanings presupposes that there has been deeper thinking on what we mean about economic transformation in all of its details.
This alignment some would consider a real test of whether South Africa would be able to promote a more radical and more effective process of economic transformation. There is an agreement on alignment but there is no mobilisation of society and this can only be done by quasi state institutions such as the Planning Commission.
The overall discussions around economic transformation, in our view, have fallen short in taking forward a much more nuanced discussion on the structure of the economy, the role of the state, macro-economic policy, de-industrialisation and what are perhaps the big issues of our times: financialisation, which refers to the growing integration of global financial markets. The kind of current macro-economic policy choices that have facilitated financialisation in the South African economy have indeed not been fleshed out to a great level of detail, either.
The relationship between financialisation and de-industrialisation has not been sufficiently teased out. Furthermore, macro-economic policy discussion in South Africa has been constrained and the analysis and solutions to central economic questions have invariably focused on micro issues.
For instance, when people talk about unemployment (i.e. problems of unemployment), they immediately start talking about education and skills and there is very little macro-economic analysis of unemployment. This, in the view of the inaugural Commission, does not mean micro economic issues are unimportant and we shouldn’t find solutions to them – but we should actually be looking at a broad range of macro-economic solutions to our problems as well and considering alternative macro-economic policies.
Arguably, a lot of decisions or macro-policy choices were, in the past, taken without adequately understanding the implication of choosing certain options. The choices of the macro policy sides were taken by government, prior to the global financial crisis, without teasing out what ideal macro-economic policy should shape our economic environment. For instance the lack of discussion around what financialisation of the South African economy means is part of not understanding adequately the implications of South Africa’s macro-economic choices.
A lot of the discussion was framed within this notion of a developmental state; the reality of the matter is that South Africa does not as yet have a fully evolved developmental state. This remains a work in progress.
The role of a developmental state is to restructure the economy to shape development to be in line with the aspirations of society. For economic transformation to be realised there is need for a developmental state and for this to happen we have to change the way we think about the nature of capitalism and the role of the state.
There is a need to change the relations in society not a transition to socialism, but to move from financialised predatory capitalism towards a social democratic welfare type of capitalism and so become a developmental state that directs industrial development. The state must always play an integral and entrepreneurial role in directing how the economy grows.
At the moment there is a somewhat unhealthy fixation on growth and how everything has to lead to economic growth; we need to start thinking about the type of growth we have, where in our economy growth is happening and whether in fact, that type of growth is good for South Africa and the ideals of transformation we have. In thinking about development, we must think about growth in productive assets and capabilities.
The inaugural NPC tried to interrogate the concept of growth and as we hand over the baton to the next Commission, we encourage the next Commission to interrogate economic growth more deeply.
The outgoing NPC knows where the growing demand is in South Africa and SADC and the question is how the NPC uses this information to support the right kind of enterprises and manage the performance of markets.
Manufacturing and industrialisation is not a silver bullet for development but is a key part. Thus, the country needs to have productive sectors but it must be explicitly backed up by an assessment on the character and nature of that industrialisation.
Economic transformation in a developmental state
South Africa has championed infrastructure development as its contribution to revitalising economic growth not only within the country but also in the region. Our view is that the National Plan should not only be seen as a blueprint but rather also as a tool to encourage a discourse on what next must be done, over and above the effort of government to encourage this further growth. This is important in a democracy.
The advantage of the Planning Commission is that the country was presented with an opportunity to think about what we mean by planning, what the model is and how this links to the various activities of departments within the spheres of government. To aspire to be a developmental state we accept that the one we are in is not yet there. By proclaiming to want to be a developmental state does not mean we are one.
There is an assumption made to the effect that the state is integral to development. We assume the state is functional. This assumption is dangerous – it is for that reason that the NDP makes the assertions it does and implores South Africa to build a state that is capable of playing a developmental and transformative role. It is by having the public service immersed in the development agenda that, as a country, we can begin to make the strides we so desire to achieve.
The pace with which we ensure that state-owned enterprises (SOEs) begin not only to understand their developmental mandate but ensure that there are clear lines of accountability and stable leadership – will indeed be what delivers results.
The state does have the key levers through which it can achieve redistributed ownership as it currently owns most of the ‘commanding heights’. The state does have the authority to use the very same key levers to ensure that even as some large tracts of land are privately owned – its owners contribute to addressing the creation of employment targets necessary for the development of SA.
Where there are opportunities for transfer of ownership through regulation, all that is required is a look at the circumstances through which it is more appropriate to transfer to public entities as opposed to private owners.
At present there has not been a national dialogue aimed at unpacking what we mean by economic transformation. Even more so, what is meant by radical economic transformation? Radical in South Africa usually means fast, although it can actually mean deep – changing the form of things and not just improving the old form.
We must understand the fundamentals of the current economy and create a new fundamental. It is important for the country to establish for itself what the fundamentals it wants to see in SA are, and what it would take to move in that direction.
On black economic empowerment and the transformative policies of government
Mining initially played a critical role in the development of the South African economy. And the restrictions on capital outflow resulted in the industry diversifying its investments into other industries. The state was able to use its rights and powers to drive the direction of the economy. The kind of economic policies which South Africa has are in favour of mining and finance corporate organisations.
There is a way in which BEE has also been structured by those corporations therefore the emerging black elite is limited in respect of how far it can expand to meaningfully exploit the opportunities that exist. The field of power decides what will be implemented and what will not; therefore issues of power must be confronted.
There is therefore a legitimate expectation that the state begins to take a serious look at the instruments it has, such as its transformative policies. The state is furthermore expected to not be neutral on the matter of economic transformation and the next NPC ought to encourage the state in this regard. The impatience is building up in our society and we cannot talk about economic transformation in romantic terms or by tweaking BEE legislation and scorecards.
Access to markets for entrepreneurs is key. Thus, if one were to look at most of the interventions over the years, most of them have been focused on the supply side though there has been little on the side of demand.
The view of the Commission is that government must facilitate and trigger the right kind of behaviour. When we talk of transformation, we are not referring to a nanny-state approach, but we are saying that government must play a bigger role as an enabler. In addition, economic transformation is not self-serving but an attempt to say that unless we do meaningful and different things, there will be high risk and we would as a country lament the time lost.
Critics of the NDP have said that BEE has not worked in the way in which it was originally conceptualised and that for us to achieve a fair measure of success, we must try harder to implement the original ideals.
The argument which is held by these critics is that current procurement regulations do not create a significant dent in meaningful empowerment. Secondly, pertaining to BEE scorecards, people and organisations are using scorecards as a compliance tool.
How do we get SA and corporate SA to see scorecards as more than compliance tools. The challenge remains on how best to deal with the momentum of transformation and the patience of society. The thesis that says economic transformation must be alienated from the need to deal with the triple challenges of unemployment, inequality and poverty, is a flawed one.
In terms of economic transformation, there is no doubt that there is great need for it. Not only did the inaugural NPC spend a great deal of time undertaking a process of finding an expanded definition that begins to articulate what the desired end state should be, it also made proposals on what the comprehensive programme should be and how economic transformation should inform and be central to the work that is pursued by the next Commission – if we are to fully realise the ideals of the national Vision 2030.