ASGHAR ADELZADEH | SA needs to escape apartheid economics

The recent National Planning Commission (NPC) report on South Africa’s “monetary and financial architecture” is one of the most pointed diagnoses of why the country remains trapped in low growth, weak investment and extreme inequality.

Its key argument is that democratic South Africa has never fundamentally reconfigured the financial system it inherited. Instead, the architecture of apartheid-era capital allocation, which was highly concentrated, externally orientated and weakly co-ordinated, largely survived the transition. That basic insight is correct.

The report argues that South Africa’s financial ecosystem should be understood as a set of interconnected balance sheets of banks, direct foreign investments (DFIs), pension funds, insurers, state-owned enterprises (SOEs), the Reserve Bank, National Treasury and households. These balance sheets determine the flow of capital into or out of productive investment. Using historical snapshots from 1983 to 2024, the NPC identifies three systemic failures:

• Exclusion: many households remain structurally shut out of savings, credit and wealth-building channels;
• Poor co-ordination: public and private balance sheets do not work towards a shared investment strategy; and
• Weak discipline on capital: companies and pension funds increasingly invest offshore while domestic fixed investment collapses.

These failures have well-known consequences: stagnant GDP growth, structurally high unemployment, weak infrastructure, undercapitalised SOEs and rising dependence on social grants.

The NPC’s move to shift to a whole-system view is a major step forward. It underscores that South Africa’s financial system is excellent at regulation but poor at direction. It allocates capital efficiently according to short-term risk and return metrics, but not according to long-term development priorities.

The report shows:

• how balance sheets interact;
• pension fund offshore expansion;
• how direct foreign investments (DFI) lack scale relative to the investment gap; and
• how SOE deterioration feeds back into private investment decisions.

This is exactly the integrated perspective South Africa has been missing.

The report is blunt: South Africa has no macro-financial governance system capable of aligning the Reserve Bank, Treasury, DFIs, the Public Investment Corporation (PIC) and SOEs around a development strategy. Each institution acts rationally within its narrow mandate, but collectively they generate a suboptimal outcome: low public investment, weak industrialisation and declining productive capacity.

This is consistent with the broader assessment: South Africa has built a stabilising state, not a developmental one. It can manage inflation, debt and financial risk, but cannot direct capital nor co-ordinate long-term investment. These include:

• reforming the Government Employees Pension Fund (GEPF) and PIC mandate to support domestic investment;
• reconfiguring Regulation 28 to reduce offshore bias;
• expanding DFI balance sheets;
• rebuilding Eskom and Transnet as developmental infrastructure anchors; and
• establishing a macro-financial co-ordination body.

These are proposals that deserve to be taken seriously by policymakers.

Despite its strengths, the NPC report stops short of addressing the structural forces behind the system it wants to redesign.

Offshore investment and profit shifting are better understood as the strategies of a transnational corporate elite that increasingly earns its income in global markets. This class formation limits political support for a domestic industrialisation project. The NPC notes the offshore tilt but avoids naming the interests that benefit from it and will resist any meaningful reorientation of capital.

The NPC is right that South Africa cannot wait for a perfect developmental state. It underestimates how deeply current macroeconomic institutions are embedded in the existing structural order:

• The Treasury maintains a consolidation bias;
• the Reserve Bank focuses narrowly on price stability;
• DFIs lack the capital and mandate to drive structural change;
• SOEs are failing; and
• the PIC is benchmarked to global returns, not domestic development.

Reconfiguring the “plumbing” is necessary, but insufficient. Without a deliberate shift, the system will reproduce the same outcomes.

South Africa does not operate in a vacuum. Its dependence on portfolio flows, exposure to ratings agencies, sensitivity to exchange-rate swings, and rising profit outflows all constrain policy space. Treating these as peripheral risks underplays how central they are to the investment trap.

A bolder reform agenda must confront how global finance disciplines domestic policy. Without this, even the best-designed macro-financial governance framework will face strong external headwinds.

The NPC’s proposals to rewire South Africa’s monetary architecture are sensible, overdue and technically feasible. But implementation is not only a technical matter; it is political.

South Africa needs:

• a macroeconomic strategy that prioritises productive investment;
• a remandated PIC and GEPF aligned with domestic development;
• large-scale public infrastructure investment;
• SOEs that function as developmental platforms; and
• a state capable of co-ordinating capital, not just regulating it.

These changes require a broad coalition between government, labour, segments of business, and society, all committed to reorienting accumulation towards domestic reinvestment and the creation of employment.

The NPC has drawn the blueprint for the plumbing. The harder task now is to build the political economy capable of turning the taps.

• Adelzadeh is director at Applied Development Research Solutions and academic director at the Economic Modelling Academy at the Gordon Institute of Business Studies