Economic Watch

Economic transformation is about building a prosperous SA

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The term 'radical economic transformation' has entered the South African lexicon over the last few months. It has become something of a rallying call within the ANC.

While there is some element of political expediency about its sudden rise to prominence, it would be a mistake to think that that means it can be ignored. A recent round table discussion hosted by the UCT Graduate School of Business made it clear that economic transformation in South Africa is an imperative that has to be properly debated and clarified.

The president of the Black Management Forum (BMF) Mncane Mthunzi said that as a starting point the country needs to appreciate the difference between reformation and transformation.

“For the past 23 years we've been fed reformation disguised as transformation,” Mthunzi said. “But these are two different things. Reformation is about improvement and betterment, but its not transformation. Transformation is a metamorphosis.”

He said that true transformation means that the environment must become something completely different to what it was before.

“Anything else is not transformation,” he said. “It has to be a complete change, and it cannot happen without pain.”

Mthunzi argued that South Africa has to meet the challenge of building a truly inclusive economy that will address the injustices of the past. Already the political rhetoric in the country and the growing militancy of the youth are signs of bigger problems that will emerge if this isn't addressed.

“We are facing the consequences of skirting around the need for social change,” he said. “We are sitting on a time bomb as a nation. Business and institutions have only adopted a minimalist approach. It has never been transformation.”

Dr Sean Gossel, senior lecturer at the GSB agreed that South Africa has failed to successfully deal with its economic challenges.

“What we are experiencing now is not surprising,” he said. “It's not a sudden explosion of discontent. It's the result of policy failure over many years.”

Gossel argued that any attempts to reform the country's economy since 1994 have only dealt with surface problems. The real issues, however, are the economy's inherited structural limitations.

“We have the cart before the horse,” he said. “We can't have radical economic transformation if we don't have radical economic growth. You can't redistribute what isn't there. So we have to deal with the structural limitations in our economy that are hampering economic growth.”

In addition, much of the focus of transformation has been on the urban middle class. However, where change is most badly needed is amongst the rural poor who remain completely excluded from economic activity.

“We can't have these levels of disparity continuing,” said Gossel. “No economy in history has had these levels of disparity and survived.”

This sentiment was echoed by United Democratic Movement chief whip Nqabayomzi Kwankwa, who said that South Africa has to have a “courageous conversation” about how we address the imbalances of the past. The alternative is growing anger and conflict.

He suggested that land ownership is one of the primary issues that has to be dealt with.

“The land question must be addressed, because it is indeed a ticking time bomb,” Kwankwa said. “But we must also ask ourselves why we are giving people RDP houses but we are not giving them the title deeds? Is it not counter productive to give someone a house but not entrust them with the ownership?”

He pointed out that many people end up selling their houses on the black market below their value or renting them out to generate some sort of income. However, this is not the most productive use of this asset.

He also questioned the way that the land redistribution programme has been handled.

“It takes land from a farmer, gives it to a claimant, but then fails to provide them with full settlement support,” Kwankwa said. “And what you find is that people don't have the skills, the capacity or the resources to work that land. Even where there is support, most of those programmes are underfunded.”

The result is that people struggle to make a living from the land and it again becomes an underperforming asset.

Ultimately, all of these issues have to be resolved in order to build an inclusive economy. Doing so is not in the interests of one particular group or another, but the country as a whole.

“We are one of the few countries in the world that has adopted policies to affirm the majority,” Kwankwa pointed out. “Usually its the opposite, with minorities needing protection. But whether we like it or not, whether you think black people are competent or incompetent, is a non issue. It is our collective responsibility to build a South Africa that will be prosperous tomorrow.”

(This article was published by Moneyweb Today. The original can be read here.)

by Patrick Cains

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