Economic Crisis & Renewal: The paradox of government in South Africa

By Ivor Chipkin and Bongani Khumalo

The failure of South Africa to turn policy into practice is a stumbling block to economic recovery. And the continued failure to acknowledge various paradoxes within government is potentially disastrous, especially when there are calls to spend even more money through dysfunctional organisations.

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It was Karl Marx who applied a public administration principle to the study of the economy. The value of a commodity is not given simply in exchange, but in how it is produced. Political economy pays attention to the process of how things are made; the conditions in the factory, the working hours, the wages paid. Strangely, we do not apply the same thinking when it comes to policy-making in government.

There are numerous economic plans in circulation in South Africa today.

At the beginning of June, the Gauteng government released its ‘Covid-19 and Outlooks for South Africa’s Growth and Development 2020-2030’. Shortly afterwards, on 10 July, the ANC published ‘Reconstruction, Growth and Transformation: Building a New, Inclusive Economy’. The same day, one of the largest business associations, Business For SA, released its own plan, ‘A New Inclusive Economic Future for South Africa: Delivering an Accelerated Economic Recovery Strategy’.

These came in the wake of a document prepared by the National Treasury in August 2019: ‘Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa’. Elements of the National Treasury’s plan also found expression in the Minister of Finance’s emergency budget speech on 24 June, which painted a picture of an impending sovereign debt crisis.

If we restrict our analysis to what is to be done, we can readily agree with talented Business Day journalist Carol Paton that there is much in common between them.

If, however, we consider how these plans are to be implemented, the differences between them begin to emerge.

The ANC has interpreted the current crisis as one of continuing underdevelopment, which has “thrust onto the state a greater responsibility and role in the economy and society” (RGT, p.6). As a result “government must take on responsibilities well beyond those which are asserted by the neo-liberal agenda […]” (Ibid, p.7). The ANC does recognise that “due to subjective errors the capacity of South Africa’s democratic state has been weakened” (Ibid, p.6). Moreover, it notes that “poor cadreship has resulted in the weakening of state capacity which has been compounded by corruption”.

Yet these admissions do not figure in the ANC’s account of how it will realise its plans. The party merely states that they should be “overcome”, and the rest of the document proceeds as if they have been.

Business is deeply sceptical that government departments and SOEs can rise to the challenge. This is why it looks to the international financial community to impose discipline and coherence on planning and implementation in South Africa. There is a major emphasis in Business For South Africa’s document, that is, on improving South Africa’s position in various global rankings, including the World Bank’s Ease of Doing Business index and the World Economic Forum’s Global Competitiveness Report.

The ANC’s model of implementation in ‘Reconstruction, Growth and Transformation’ jars with its own assessment of its capacity. In a discussion document on organisational renewal from 2017, the party reflected:

“The political life of the organisation revolves around insidious internal strife and factional battles for power. […] The internal strife revolves around contestation for power and state resources, rather than differences on how to implement the policies of the movement” (ANC: 2017, section 134).

Why does it follow, however, that intra-party factionalism translates into factionalism in government? In principle, political parties and government administrations are distinct domains.

The reason lies in the porous boundary between the ANC as a political party and government by design. Originally deeply suspicious of former apartheid and Bantustan administrations to implement ANC policies, the ANC (especially under Thabo Mbeki) sought to bring the civil service under more direct political control. It did this a) by blocking moves to professionalise the appointment of officials on meritocratic grounds and b) by instituting measures to politicise the recruitment and promotion process of public servants.

Eskom is riddled with factionalism and political intrigue. It was allowed, during the 2000s, to grow to over 150,000 staff, many without a clear role. Senior staff aided and abetted the fraud and corruption of the State Capture years.

In many cases these problems are well known. The National Development Plan discusses many of them. The problem is, who will implement the necessary reforms? How can the South African government implement the (economic) policies it needs to achieve inclusive growth when the departments and agencies that it must count on are not up to the task? This is a paradox of implementation. To it, we can add a paradox of reform: the very people and institutions that create instability in organisations and politicise them inappropriately are often the people and the institutions charged with reforming them. Taken together, this is South Africa’s paradox of government.

Failure to acknowledge these paradoxes, which is prevalent in economic planning, is potentially disastrous, especially when there are calls to spend even more money through dysfunctional organisations.

Let us consider the case of energy. All the economic plans agree that Eskom needs to be fixed, though some emphasise the integrity of the power grid and others the company itself. Either way, the reform of Eskom is part of the solution. Current proposals are to break the company up. Will this solve the energy crisis in SA? At the same time, Eskom must continue to generate electricity here and now. Who must decide what takes priority?

There is a new CEO and senior management. It is experienced, qualified and not obviously linked to any political party. It is also largely white and Afrikaans-speaking. It has also discovered an unspeakable mess in the company.

The company is effectively bankrupt. Many of Eskom’s power stations are close to 50 years old and have been unevenly and poorly maintained over the last 10 years. Many are on the verge of collapse. In the short term, they need to be taken offline for skilled repair and maintenance. In the medium term, they need to be retired. This will result in load shedding.

At the same time, the company is riddled with factionalism and political intrigue. It was allowed, during the 2000s, to grow to over 150,000 staff, many without a clear role. Senior staff aided and abetted the fraud and corruption of the State Capture years. It has been saddled with unaffordable coal contracts. According to Eskom CEO, Andre de Ruyter, the immediate challenge for the company is to stabilise electricity supply.

Eskom’s management is accountable to the Eskom board, which is appointed by the shareholder – government as represented by the Department of Public Enterprises. The president has also established an Eskom Sustainability Task Team. High on their agenda is the break-up of Eskom into three separate entities; one responsible for generation, another for transmission and a third for distribution. Ultimately, unbundling may be what is needed to bring stability to electricity supply in South Africa.

For the moment, though, stabilisation and unbundling are different mandates. Which should take precedence in the current situation and who should decide? Now that there is a capable leadership in place at Eskom, they should be given the space to prioritise.

We define six planning principles for the current crisis:

  1. Mandates must be simple and unambiguous, where the jurisdiction and authority of all parties is clearly defined.
  2. Plans need to be better designed with the organisations that must implement them in mind.
  3. Plans need to be modest. In the current situation where departments and agencies across government are extremely weak and, in some cases, exist in name only, it is unrealistic to expect too much from them.
  4. Plans will have to be geographically adjusted. Those departments and agencies better able to work programmatically tend to be located in the large urban centres and/or are situated at the national level.
  5. In those areas where government capacity is lacking, alternative arrangements need to be made; including drawing on the skills of the private sector and/or well-established NGOs. We already live with uneven results.
  6. Civil society organisations need to become active and vigilant at the level of departments and agencies and companies, holding them to account but also giving support to progressive, professional networks trying to work programmatically.

South Africa’s future lies in a new political economy of government: concentrating on the factories that turn policy into practice: government departments, municipalities and companies. DM

Ivor Chipkin is the Director of the Government and Public Policy Thinktank (GAPP). Bongani Khumalo is the former Chairperson of the FFC. This is an extract of a forthcoming report on the Governance of Economic Planning. Chipkin is also the host with Toby Shapshack of a new podcast on politics, technology and government in South Africa, Africa and the Global South – Filling the GAPP.

 

This article was published in the Daily Maverick here

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