After the many failures of the ANC government, will it be…
The ANC’s position is that South Africa has a ‘mixed’ economy in which the government runs some parts of the economy while the private sector runs others.
Over the past few months, there have been strong indications that the balance in this debate is shifting towards a greater role for the private sector. While there may still be major shifts in how this debate unfolds, it’s possible that this is indeed the start of a longer-term shift. This is due to the ANC’s own internal dynamics and the fact that the state has failed in its delivery and no longer has the capacity to continue to deliver services through state-owned enterprises (SOEs).
The ANC is in an alliance with the South African Communist Party, which believes that the “dominant heights” of the economy should be nationalized. At the same time, within the ANC itself, there have always been tensions on this issue.
Considering that, as ANC President Gwede Mantashe once said, “economics is the essence of politics”, it is not surprising that a political party in government would want to control so much the state as possible.
Moreover, given our history and the way the apartheid government used its political power to control the economy, there was and still is a need to transform the economy. The greatest agent available to do this is the state and the resources it commands.
And so, until now, this has been a major element of the economic policy of the ANC. It was said that the government, through state-owned enterprises and other agencies such as the Public Investment Corporation, should help transform the economy and deracialize it properly.
However, in recent months there have been strong indications of a change in this policy.
First, the decision taken by the Minister of Public Enterprises Pravin Gordhan to sell the majority of shares in SAA.
Although the final details are still not public (and neither is the SAA information). financial results in recent years), the Takatso Consortium is expected to own 51% of what remains of the airline. This is after the South African government spent almost R50 billion supporting the airline since 2007.
Secondly, the announcement, confirmed again this week in a new white paper, that private operators will be able to use public railways. Technically, these railways are a national asset.
But now Transnet will lease time on the lines to the private sector. The hope is that it will bring more investment and some semblance of service to the people of this country.
These developments are concrete examples of what the ANC now formally proposes. Although the final versions of his discussion papers have yet to be released, some leaks have suggested that they are moving a lot in that direction.
Bloomberg reported that the documents indicate that the SOE model is “dead”.
Other reports have suggested that the documents, when finally published, may well indicate a move toward privatization, or at least a greater role for the private sector.
There is much to consider here about why the debate may shift to a privatization model.
The first is the simple SAA lesson.
Nearly R50 billion was paid to the struggling airline, with no benefit to anyone. It’s not just that SAA was looted around the time of the state capture. It is that despite all this state support, there is nothing left. From what is known of the Takatso agreement, the government will still have to pay the bill for its remaining debts.
And this despite the moral problems that emerge from a system in which the government of the liberation movement of the most unequal country on Earth subsidized an airline that only the rich and middle class could use.
But SAA is far from an isolated example.
Transnet has big problems to operate its railway systems. The pandemic, associated infrastructure theft, and other miscellaneous issues have resulted in the need for as much capital as possible.
In the supply of electricity, President Cyril Ramaphosa himself has said that there is a serious risk of relying on only one entity, Eskom, for electricity production.
For those in favor of privatization, the failure of Eskom, partly because of the ANC’s own mistakes and partly because of people like Brian Molefe, Anoj Singh and Matshela Koko at the time of the capture of the state, is an important example of how an entire critical enterprise can collapse.
Many would also agree that allowing the private sector to generate electricity and sell it to the grid is the only way to ensure that there is enough electricity and that the national grid allows the rich to subsidize the poor. And to ensure that we are not condemned to a future in which the economy collapses for lack of a reliable power supply and where only golf islands have light while the poor languish in the dark.
They would argue that only the private sector can save these entities and provide proper services to people, businesses and the economy.
In short, if private sector money can ensure that trains run properly on the Transnet railways, then Exxaro will no longer be able to lose so much money because it cannot export coal during a commodity boom.
The same can be said for SAA and so many others; it’s hard to argue for government ownership when all the organizations he leads have failed and most of them pose a systemic risk to our country.
However, there are also important pitfalls that should be avoided. And those who oppose privatization have valid points to make.
First, it may be important to ensure that government assets are not sold, given away, or stolen through corruption. The hollowing out of the Russian state in the 1990s and the oligarchs created during Yeltsin’s era are clear examples of what to avoid.
Furthermore, those able to invest in what was previously state-owned could reap the rewards for many years and possibly overexploit the opportunity. This risks re-entrenching inequality in South Africa, which will lead to greater problems.
To ensure that this does not happen, very careful decisions must be made.
For example, the new policy allowing private sector operators to use public railways may be correct, as it allows access but does not just sell the asset to the highest bidder. And it must be possible to quickly cancel or modify contracts if necessary.
Also, allowing private sector investment in our power sector, but not changing the ownership of Eskom itself, may also be correct, for the same reason.
It is important to note what has changed in our national debate in this regard.
In 2010, 2011 and to some extent in 2012, the ANC seriously discussed the nationalization of private mines. Then, at Nasrec in 2017, the debate turned to the expropriation of land without compensation.
The nationalization of mines argument ended when Julius Malema was expelled from the party. The land expropriation resolution was eventually passed, but the ANC appears to have abandoned attempts to amend the Constitution on the issue.
Now it seems that what may be the most contentious issue at an ANC conference concerns privatization or a greater role for the private sector.
This signals a complete shift in direction from moving left to moving in a business-friendly direction.
While some will only blame Ramaphosa for this, it’s certainly not the first time. Like from 2014under President Jacob Zuma there was strong evidence that the ANC was moving to the right.
However, instead of real policy changes, Zuma had other, narrowly personal ambitions.
This time the right turn could be more meaningful and change our country in fundamental ways. DM