Ramaphosa has to go for growth

Shawn Hagedorn says external pressure needed for ANC president to overcome internal opposition

SA's necessary grand compromise

What do you do if you suddenly become the head of an evangelical church built on teachings which benefit the church’s elites at the expense of the congregation? The teachings must change. But for Cyril Ramaphosa to sell a new catechism, he is going to need much help from leaders outside his political church.

What unites the ANC’s diverse factions is their shared devotion to redistribution. This triggers an unaffordable isolationist bias. Conversely, the world economy gushes prosperity through global integration marrying specialisation with interdepence.

Ramaphosa must invent a path to unite his party while aligning SA with 21st century wealth creating basics. Yet popular and powerful institutions are good at resisting change in the absence of direct external challenges - even then, shifts can come very slowly. Martin Luther launched Protestantism 500 years ago while Catholics only abandoned celebrating Mass in a dead language, Latin, 450 years later.

That the ANC faithful chant the merits of redistribution, and its isolationist biases, is far more understandable than the rest of civil society singing along. The shift in the ANC’s leadership must now provoke truly robust responses from CEO’s as well as SA’s think tanks and commentators.

There is very little to be gained by lifting consumer and investor confidence. SA’s fixed investment is generally in equilibrium with the economy’s growth prospects - which are dismal. The domestic economy cannot produce momentum as consumers and government are over indebted. Worse still, the economy is structurally misaligned with the forces which propel global growth.

SA can only achieve broad prosperity by surging value-added exports. Such a policy pivot is not difficult to design or implement. It is mostly about dispensations for exporters from regulations which undermine competitiveness. The blockages are ideological, factional, and reckless.

Despite being factionally debilitated, the ANC could accommodate such a transformation. It is not however realistic to think that a few heretics high within the ANC church can provoke such a shift from within if leading voices outside of the party remain isolationist minded. As some would say, the environmental preconditions for a large institutional shift have not been met.

High among the list of external actors is the yield-starved investor community which, with a few important exceptions regarding governance issues, has mostly reacted, thus far, to deteriorating fundamentals by simply demanding higher yields. SA’s junk credit ratings, despite a modest debt load, foretells how the nation’s dismal growth prospects will provoke increasingly hectic tensions between servicing debt and funding social programmes.

While leading global experts within the IMF, World Bank, OECD, and the credit agencies have long called for broad structural reforms, SA’s unhelpful post elective conference policy debates centre around land expropriation and free tuition. Even amid an IMF-led bailout, foreign institutions would not be able to dictate that SA’s leading factions, or its public commentators, develop a realistic appreciation of how the world works.

That SA’s national dialogue suffers from a compounding set of deficiencies traces firstly to social justice issues dominating the intersection of SA’s politics and economics. Secondly, the ANC under Mbeki and Zuma has been intolerant of its social justice policies being challenged. Conversely, Ramaphosa’s agenda requires such external challenges.

That the country will soon complete a decade of no growth in per capita income almost certainly links more to lack of global integration than corruption. That this is so rarely considered is symptomatic of the national dialogue being full of holes. Ditto the conspicuous absence of a workable growth model. Explanations further trace to most influential voices having accepted, if not adopted, the ANC’s isolationist, and thus defeatist, perspective.

During prolonged stagnation, an economy’s capacity to accommodate redistribution plummets. There is no choice but to then shift the policy emphasis toward growth. Otherwise, sustaining adequate growth and poverty alleviation become ever more elusive. Welcome to SA 2018.

When Zuma goes, Ramaphosa will, under all likely scenarios, become state president for many years. Thus his life-defining risk is presiding over the ANC and SA as both erode at an accelerating pace. While he must want to push through the necessary policy pivots, if he isn’t under pressure from outside the ANC, internal pressures will almost certainly lead to years of too-little, too-late policy disappointments.

Big business was bullied into acquiescence on economic policy making under Mbeki and Zuma. They must now urgently find their voices not simply as critics but as active advocates for growth policies which are both workable and inclusive. Their excessively domestic focus is not credible.

Ramaphosa’s situation is radically different from Mbeki’s and Zuma’s. He must persuade his party to accept the realities that its factions stridently reject. He can’t be expected to do this promptly if other national leaders sit back. Complacency suffocates urgency.

SA’s isolationist policies fly in the face of the economic integration which propels global prosperity. It is not mathematically plausible that SA’s domestic consumption can fuel a poverty alleviation pace for SA to achieve today’s global poverty prevalence norms within the next three generations. Does the national dialogue comprehend this central reality?

The implications of Ramaphosa ascension for the opposition parties are also profound and immediate. They have little choice but to exploit the ANC’s factional paralysis by offering realistic solutions. If the ANC then rebrands the best ideas as their own, this could prove to be win-win progress.

The Ramaphosa team must generate substantial economic momentum to revive the ANC brand. This won’t happen before the 2019 elections. Perhaps voters can be fooled by rebranding of other party’s ideas, but the ANC alliance partners will neither be fooled nor amused. Yet their lust for ever greater redistribution has become unbearably destructive.

Once Zuma is no longer state president, Ramaphosa will need to aggressively advance growth policies including calling the bluff of alliance partners that threaten to withhold their support in the 2019 poll. He will have the freedom of movement to do this as he will almost certainly lead the next government whether the ANC wins an outright majority or not.

Once Zuma and most of his patronage network are purged, it will make no sense for the pragmatic Ramaphosa to, in pursuit of workable policies, sacrifice support from communists, unionist, and populists to then become beholden to an EFF that remains enamored with Hugo Chavez as Venezuela collapses and SA teeters. If Ramaphosa can’t pivot policies to surge growth, he will fail quite spectacularly.

Chief among his primary success blockages is that SA’s leading voices aren’t advocating for a potent global integration strategy. Without such external clamoring, it will be prohibitively risky for Ramaphosa to aggressively push a policy pivot which is so contentious within his party.

Many of SA’s leaders outside of the ANC have longed pinned their hopes on Ramaphosa setting the country on the right path. For that to happen, such people must now assertively advocate for policy shifts attuned to 21st century growth opportunities.

Shawn Hagedorn is an independent strategy adviser