The choice between economic growth and transformation is a false one, Cyril Ramaphosa tells us in his presidential newsletter. But if the president has it all figured out, why is his transformation agenda not delivering growth? Where is the fixed investment? Why are people with money and skills not building businesses, factories, warehouses and head offices in South Africa, and employing and training young people who are desperate for work?
In the first quarter of this year, South Africa lost 291,000 jobs, increasing the unemployment rate to 32.2%. Those frozen out of the economy are overwhelmingly young and black. In the meantime, money and skills are leaving the country. Anglo American and Shell have disinvested. Nissan is on its way out, despite the apparent end to load-shedding. Much of this has been in process before Donald Trump’s presidency. The world has only become more difficult for a South African government that has set its face against policy and structural reform.
If the ANC’s transformation agenda was working, the president wouldn’t have to write newsletters to defend it. The middle class would be growing, along with the tax base. But it isn’t. In the absence of growth and greater economic mobility, the finance minister resorts to tax increases. The funding of health care, education, policing, pensions and child grants increasingly depends on an ageing economically active population. Our welfare state is beyond vulnerable.
In 2023 Ramaphosa had been president of the republic for five years, the leader of a majority government under a constitution that gives him considerable powers. By then the country’s per capita GDP was lower than it had been in 2008. In the intervening time South Africa had been overtaken by Thailand, Peru and Botswana. In the aftermath of the financial crash, these countries were able meet the developmental needs of their people. We weren’t.
Little wonder that in the 2024 general elections the ANC lost nearly a third of its electoral support. The government of national unity (GNU) gave Ramaphosa a second chance. He could have added together the votes of the ANC and the DA, and claimed a mandate for fundamental reform to unlock growth, draw investment and create jobs. While this is not the only condition for reversing the legacy of apartheid, it is by far the most important.
But against his own record of failure, Ramaphosa continues to insist that race-based employment and investment laws that give the state sweeping powers over private enterprise are perfectly compatible with high levels of investment (which isn’t coming) and growth (which isn’t happening).
Whether Ramaphosa believes his own rhetoric, or whether he is simply pandering to hardline ANC factions, the effect is the same. The government rejects the view that investors have of South Africa, including a few South Africans who are sitting on piles of cash which they aren’t investing. Without a clear electoral mandate to do so, Ramaphosa doubles down on the same failed agenda. But ideological recalcitrance doesn’t change the underlying economic reality. Investors, including entrepreneurs, seek to minimise risk.
The redistribution truck doesn’t reach the poor. The handling fee charged by the ANC’s political elite is so high that very little actual development takes place
One peculiar risk is upsetting the ruling elite, whether that was the National Party before 1994, or the ANC since. And so most business folk are exceedingly polite. They employ equally polite lobbyists, like Business Unity South Africa, to send a message to the government. If the message doesn’t land — and clearly it hasn’t — they minimise their risk by scaling down their operations and plans. Or they simply take their money elsewhere.
What would investors tell the president if they thought he would listen? They might not agree on everything. Each industry has its own risk profile and political vulnerability. But in essence it would be that the ANC’s transformation policies, and Ramaphosa’s kowtowing to the radicals in the ANC and the EFF, make the risk of investing in South Africa far too high because:
- BEE is a tax on investment, which is why we have to offer equity equivalents to companies like Starlink;
- The Employment Equity Amendment Act enables a cabinet minister to set peremptory racial employment targets for each sector of the economy, which has now been done. Those targets, enforceable through turnover fines, can in some instances only be met with race-based retrenchments;
- Preferential procurement narrows the market of goods and services available to the government, leading to price gouging and the failure of government contracts and infrastructure projects;
- NHI is a proposed state monopoly on health care which can only be funded by confiscatory levels of taxation; and
- The Expropriation Act establishes a new norm in our law, namely that the government will pay less than market value when it forces people to sell property to the state.
Transformation, as Ramaphosa and the ANC have framed it, is all redistribution and no growth. What is worse, the redistribution truck doesn’t reach the poor. The handling fee charged by the ANC’s political elite is so high that very little actual development takes place. Empowerment is limited to an already empowered elite. The South African people keep getting poorer — and the developmental capacity of the state continues to erode.
To draw investment, growth and employment, prerequisites for greater economic mobility, the government must derisk South Africa. Ramaphosa, in his final term as president, isn’t up for the job. He offers no compelling vision for the future, only a rehash of failed ANC policies based on a pitiful view of South Africa as a racial zero-sum game. If there is anything to learn from his time as president, it is what is not working for the vast majority of South Africans.
• Brink is the former executive mayor of Tshwane and DA leader in the council. He writes in his personal capacity
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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