Clem Sunter

At the economic crossroads

2010-09-15 15:05

Dear Delegates,

I humbly submit this piece for discussion at next week’s national general council in Durban. I start with a chart prepared by the Anglo American scenario team in 1985:

You will see two stars – these were dream states at the time. Either we stayed in the “Old White SA” or we became like “Switzerland” (which interestingly tops the World Economic Forum national survey in 2010). Firstly, there was no going back and, secondly, South Africa would forge its own future. That was the reality.

Before you dismiss this as Anglo propaganda, look at the first fork. We said you had to negotiate with real political leaders rather than set up some tricameral parliament with co-opted members. We recommended the path of least influence and, like others, put our faith in the common sense of whatever leadership emerged from a truly democratic evolution to a new South Africa.

Our faith was not misplaced. Despite all the faults we know about such as corruption, lack of service delivery, crime and an underperforming education system, the country took the political “high road”. Our economic growth has improved though it is still below the stated goal of 7% per annum. We are the largest economic player on a continent whose prospects have undergone a dramatic re-evaluation for the better, given more pragmatic government in many countries and the fact that we are moving into a world of Malthusian resource scarcity where mineral riches and fertile land will really count. Our currency has remained strong, our stock market has done better that most others internationally and government finances have been handled immaculately. Our national debt to GDP ratio at 28% compares favourably with that of the US, Britain, Italy, Greece and Japan – all of whom are now well above the recommended ceiling of 60%.

However, in one crucial area we have failed miserably – lowering the unemployment rate and the Gini coefficient which measures income inequality and generally creating a more inclusive and participative economy than was the case before 1994. Herein lies the prophetic aspect of the chart which indicates a second fork with the dotted line. If we took the wrong turn there, all the good work done in the interim would come undone on account of a failure of economic growth.

We would enter a phase of alternating dictatorial and populist regimes with the chance of being spun off towards a waste land and diminishing odds with each loop of returning to the virtuous path across the top of the chart. That is exactly where we are today – at the second crossroads. The global hard times have even increased the probability of a downward trajectory in the event of badly thought-through policy decisions.

Two recent experiences I have had would indicate the issues that have to be considered very carefully at the forthcoming council. In April 2006, I was asked to attend an “informal conversation” on scenarios for China at the Central Party School in Beijing, which is the leading think tank of the Communist Party. It was common cause during the discussion that there were two reasons why China has excelled in its economic performance since 1978 – an acceptance of free market principles and a switch from a confrontational to a co-operative relationship with the bourgeoisie.

In January 2008, Chantell Ilbury and I were asked to facilitate a session on the future of Zimbabwe. Present were the country’s finance minister and other senior members of Zanu-PF as well as some influential businessmen. For me the most interesting insight was that Zimbabwe had a fantastic period of economic growth during the 1990s as the economy was liberalised. The first land invasion at the end of the decade changed everything. Zimbabwe did not slow down: it hit the wall.

So best of luck with the council's deliberations. I am writing this on a Sunday morning, having witnessed South Africa at its best. I went for a walk around my suburb and coming the other way were thousands of runners in a well organised road race – black, white, old, young, thin, fat but all with their personal goals and enjoying themselves. That is what life is about; everybody participating; everyone doing the best they can; everyone giving a morale boost to those around them and occasionally lending a helping hand. In other words, the development of an active citizenry should be the vision.

Yours faithfully,
Clem Sunter

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