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2023-05-19 at 00:04 #405202Nat QuinnKeymaster
The Lady R’s youthful relevance
18 May 2023
Certainly ‘the thrill is gone’ when the response to cheating accusations is, ‘prove it.’ SA’s relationship with the US is now about staying together ‘for the sake of the children.’
What was, or wasn’t, loaded or off-loaded when the Lady R was in Simonstown is a minor consideration. The central issue is that if western governments and investors decide that the ANC can’t be trusted – to keep its word and to at least keep the lights flickering – it is the young who will suffer the brunt of the consequences.
ANC policies are condemning a majority of our young adults to life-long poverty and our children’s prospects are looking even worse. SA’s just-released youth unemployment rate is 62.1% and if discouraged workers are included, it is 71.2%. Yet these figures understate the depth of the crisis.
In normal countries with low unemployment, a person who has never been employed five years after leaving school faces tough yet manageable challenges. Most twentysomething South Africans have never been formally employed. The backlog is enormous and employers prefer older workers with experience or recent graduates.
In effect, the vast majority of our unemployed young adults are becoming, or have become, unemployable. Other countries, even the most authoritarian, go to great lengths to avoid persistently high youth unemployment as it encourages warlord-like actors to encroach on government domains.
President Ramaphosa has hinted that such rogue opportunists may be responsible for selling arms to Russia via the Lady R without his government’s knowledge. Whatever actually happened, Ramaphosa’s admission is alarming.
Alongside this week’s unemployment data was the release of an international comparison of literacy rates among 4th grade students. SA had the lowest average reading scores of the 57 countries surveyed.
This week’s news cycle also included an update that the SA SME Fund had attracted R600m in commitments from investors. These funds will then be invested in various venture capital funds which receive R90m of “first loss” protection from USAID, the US’s international aid agency, and the SA SME Fund.
These four reports describe routine indifference to the plight of our next generation. The USAID “first loss” protection programme has been around for a long time. Neither it nor the SME Fund is designed to address SA’s greatest economic threat, youth unemployment. This can only be meaningfully reduced by mimicking the many emerging nations that sustain high growth through value-added exporting.
Our obscene youth unemployment is routinely attributed to corruption, horrendous education outcomes and, more recently, loadshedding. However, such presumptions don’t withstand scrutiny as some of this era’s fastest growing economies have succeeded despite tremendous corruption; China comes to mind. Nor has achieving high growth been contingent upon strong academic performance, though, this frequently follows.
If Eskom and Transnet were suddenly well run, the economy would improve but the impact on employment would be trivial. The transmission mechanism between our economic growth and broad upliftment resembles a burnt out clutch.
Funding local entrepreneurs is a great idea if their companies are focused on hiring South Africans to add value to exports. Otherwise it is akin to overfilling the petrol tank in response to the oil indicator flashing.
The news report which hasn’t been written is that SA is clearly the world’s worst country at converting economic growth into upliftment gains. If this sounds like an aggressive claim, consider: SA has the world’s highest income inequality (race doesn’t feature as there are more high income blacks than whites) while no country has anything resembling our level of entrenched youth unemployment. SA’s approach to intergenerational wealth transfers is expressed by our having over ten million funeral policies.
Our massive backlog of youth unemployment relative to our meagre growth trajectory means that prospects for the majority of our children who are born into poor families are worse than they were for their parents – who didn’t escape poverty. It is very difficult to be worse at upliftment than SA under ANC rule.
Maybe the US ambassador became tetchy because he appreciates how SA coordinating with the US could be a true game changer for young South Africans. The blockages are less about the ANC’S patronage network being deeply corrupt and more about profoundly reckless economic stewardship – and their now losing influence over the crony catacombs they constructed.
The redistribution focused policies which fund the ANC’s insatiable patronage beast choke growth of our domestic economy while precluding sufficient competitiveness for SA’s workers to add value to exports. Our economy’s growth prospects are still excessively dependent on commodity exports. Such exports create relatively few jobs, directly or indirectly.
ANC leaders mix dodgy economic management with even dodgier ethics, but that doesn’t mean they aren’t intelligent. While they expect to remain in control after next year’s elections, my take is that they have recently surmised that the party is unlikely to be electorally competitive in 2029. Yet their risks of being prosecuted for graft mean they need the ANC to run SA “until Jesus returns” – or at least until they ‘meet their maker’. Why would they uphold the constitution to then lose office and face criminal charges?
The China-Russia challenges to the rules based global order have resulted in Venezuela being somewhat reaccepted by western powers despite its autocratic rulers having jettisoned its constitutional protections.
It would seem that ANC elites are betting western governments and investors will object to the constitution being ‘suspended’ – due to the social upheaval which, like in July 2021, will be very easy to manufacture – but that they will ultimately accept ANC authoritarian rule. The ANC’s fall back plan would be to shift SA’s trading relationships toward other authoritarian regimes – which would hobble the last remnants of youth employment momentum.
It is true that exporting commodities kept SA’s pre-1994 economy ticking over and it might be possible to borrow from BRICS-aligned lenders. Yet ultimately the ANC is betting that the West will remain supportive. That is a risky bet but not an entirely irrational one.
The only possible path for SA to sharply increase employment is through value-added exporting to large, affluent markets. While the US’s AGOA programme provides unfettered access to the world’s largest consumer market, the ANC’s anti-competitive policies have undermined the value of this made-to-order opportunity. It is unsurprising that Ambassador Brikety is miffed at the ANC’s willingness to further squander what is almost certainly SA’s best – or realistically speaking, only – path for large scale job creation.
ANC elites seem to admire Russia’s political-economy but they are in no position to knock together a successful replica. After visiting with his Russian counterpart in Moscow, then-president Zuma suddenly sought to create a hundred black industrialists in SA. It is through such a web of beholden oligarchs that Putin oversees a truly gigantic web of patronage. By comparison, the ANC’s patronage machine is rather randomly organised.
While Putin’s military is clearly not very effective, their SOEs are able to keep the lights on and their commodity export capacity is sufficient to help sustain a large middle class with modest unemployment. Our spectacular education and unemployment failures are a recipe for high volume crime and social unrest while our police seem more inept than Putin’s army.
Some will see us heading along a Zimbabwe-styled trajectory. Others will point to our economy being much larger and more sophisticated. But might that create the potential for a longer, larger landslide? Many contemplate the consequences of Eskom’s grid collapsing and hope to see much or all of the parastatal privatised. Opposite effects should also be considered, such as the banks being nationalised or a sudden haemorrhaging of critical skills.
SA’s evolution encouraged some to seek and obtain mastery at creating and managing innovative financial services companies. Perhaps this traces to our geographic isolation. Might such isolation, along with pre- and post-1994 government policies, explain our apparent disdain for this era’s major employment driver, value-added exporting?
Our imbalance between our impressive financial services creativity and our more modest expertise at value-added exporting seems to have contributed to an isolationist-minded belief that we can go our own way. This unusual risk factor is rarely flagged but it contributes materially to our youth unemployment crisis.
Responsible adults try to build a better future by partnering in good faith.
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