Pravin Gordhan’s Clarion Call
SA Finance Minister, Pravin Gordhan, hardly a full two months in the job, stood at the Parliament on Thursday to deliver the toughest budget of the post-Apartheid era. His budget speech had one over-arching objective, and faced many challenges. The strategic imperative was to ward off the looming prospect of the country’s sovereign credit rating down-grade to the junk status. And just moments prior to his speech, Brazil had been downgraded to junk-rating. The Minister made a serious and sobering reference to this fresh development in the global capital market. Ironically, his primary target was the majority of his fellow Cabinet Ministers, the President and his party’s fellow members of the Parliament (MPs) who have proved obstinate over the past seven years – all in the face of irrefutable facts about the loss of investor confidence and evident fall in GDP growth, from the high of 4.2% in 2009 to the current estimated level of 0.5% per annum. The “statist approach” to economic policy, led by the core leadership of the SA Communist Party in the Cabinet, since the inception of the Zuma Administration in 2009 managed to sideline the private sector, capture the institutions of the state and state-owned-enterprises (SOEs), all for their self-interest and political patronage. As a result the balance sheets of the SOEs were hollowed out, their financial sustainability became dependent on the National Treasury’s bail-out, and/or rising guarantees. Consequently, the contingent liabilities of the National Treasury kept rising alongside its public debt. Despite two credit-rating downgrades during 2012 to 2105 period, the Cabinet remained defiant, and oblivious to the socio-political consequences This defiance peaked in December 2015 when the then Minister of Finance, Nhlanhla Nene, was widely reported in the media as having refused to accede to the President and his core political supporters, and he was then unceremoniously sacked and replaced by an unknown back-bencher MP, Des Van Rooyen. This blatant mid-step by the President galvanized some elements of the ruling party together with a core of the private sector business leaders, led by the banking sector chief executives. Within three days, their intervention, market reaction and the huge public outcry compelled the President to replace Mr Van Rooyen with Mr Pravin Gordhan who had established his credibility as the Finance Minister in President Zuma’s first administration during 2009 to 2014. Moreover, Mr Gordhan has an impeccable anti-Apartheid credentials, and is known for his integrity and patriotism. As the head of SA Revenue Services (SARS), from 1999 to 2009, he enjoys much credit for his turn-around of the organisation into an efficient and globally competitive revenue collection office. Against this backdrop, the Minister was resolute in rallying the country’s full capabilities to avert a junk-status downgrade. To this end, he had engaged a select group of financial sector and other CEOs to seek advice – something which had not happened for the past decade. He had also managed to form a sub-committee of sympathetic ministers, under the chairmanship of the Deputy President Ramaphosa, to manage the step-change in Cabinet approach and implementation. At the time of finalizing his Speech, although he had not managed to secure full support for his complete package of policy measures, he had received enough political backing to announce a change of course in government policy going forward. So, he re-affirmed the centrality of the National Development Plan (NDP) – a much neglected private-sector friendly policy framework adopted nearly five years ago. The ‘statist core within the Cabinet” had managed to relegate the NDP to oblivion. More expressly, the Minister re-established the pivotal role of the private sector for...
Read MoreGlobal Mega Trends and Africa
One of the critical challenges of strategic policy making is to strike a balance between the short term issues facing the society and the long term challenges and opportunities. The former typically preoccupies the politicians who have to survive the rough and tumble of day to day politics. The electoral cycle further reinforces this tendency. The latter forces, however, are more subtle and yet as relevant for the society’s long term prosperity. But more often than not they are largely neglected in policy and public discourse. In part it is because the long term structural trends are much less visible, often appear speculative and their impacts surface over a period way beyond the terms of office of those in power! These so called mega trends ultimately shape the political economy structure within which power assumes meaning and evolves over time. Currently, there are three major global mega trends at play, namely, the demographic factor, the environmental issues, and the changing nature of work place. Jointly, these trends are bound to reshape the national socio-political structures the world over and exert substantial influence on the international geo-political configuration. The medium to long term success of countries would much depend on the degree to which their public policies are alive to the impact of such forces. The demographic mega trend is possibly most subtle and potentially disruptive insofar as it exerts influence on many fronts including the inter-generational dynamics within the societies, and the issues of diversity management across nations. Political and business organizations are affected by this mega trend in many diverse ways. The power base of the political organizations and the market structure of business corporations are profoundly shaped by this mega trend. The spatial configuration of the global population also affects the international geo-politics. The environmental mega trend is most visible, and increasingly recognized as a force that requires much higher degrees of international coordination than countries are used to thus far. The threats emanating from this mega trend transcend the defence capabilities of all the nations, weak and strong alike! Not only the submerging of some island states in the Pacific Ocean, but also recent weather-induced events in New York, USA, in Australia, in China, in Philippine and in Europe are but examples of the damage that environmental forces can exact on any country. More subtle and no less destructive effects of the environmental mega trend may be seen in prolonged draughts and sustained flooding of various regions- which in turn affect land fertility and crop production worldwide. Possibly the least talked-about mega trend is the changing nature of the workplace and its potential consequences for social welfare. The fact is that the digital technologies have gradually but irreversibly changed the nature of the workplace. Over time the workplace has become much more skills and systems intensive. Whilst the labour-intensity of business operations has declined steadily, the production process has become a great deal more automated and spatially segregated. Historically labour-intensive activities such as farming and mining operations have been particularly affected by these trends. Mechanized fruit picking and sorting, as well as crop spraying via drones are becoming common place in many commercial farms across the world. Likewise in the mining sector technologies exist that can obviate the use of unskilled labour almost altogether. The effects of technological and digital changes in the services sector are equally profound. The spatial fragmentation of the workplace and the production processes is under way. In effect, the workplace is evolving rapidly with material impact on social welfare. In particular, if the education systems, or more...
Read MoreThe World’s Emerging Political Economy Risks
As the world economy is recovering from the prolonged recessionary consequences of the 2008 “great recession” new geopolitical risks have surfaced rapidly, and somewhat unexpectedly. The military developments in Syria-Iraq in the form of the rise of ISIS militia, the instability and social issues growing in Nigeria, the widening reach of Al’Shabab in East Africa, the continued instability in Ukraine, and ongoing tension in the Middle East, together with territorial disputes between China and some other countries of the South East Asia region are the key and high profile sources of risk and instability in the world economy. Alongside these visible risks are the subterranean activities of cyber attacks, and other threats based on digital technology across the world. This has thrown the world economy into a new era of rising uncertainty and potential instability. Once again the world resources are spent proportionally more on military and defence expenditure rather than on other socio-economic needs. This means limited global resources are being spent more on less productive, counter-productive and/or destructive ends. As this process takes roots, global productivity falls. The upshot of it all is a material decline in the world potential GDP. At the same time, the rise in military and defence expenditure leads to a worsening of the quality of public services as public resources for such socio-economic programmes typically contract. At the end of the day, the poor suffer because the poor are more reliant on public services. In the face of an already high disparity of wealth and income within the world economy, and within most societies, the new trends are likely to worsen the relative position of the poor within the society. There are clear and predictable socio-political consequences for this trend. For Africa, in particular, these new global developments have far-reaching consequences. It is critical that Africa’s growth and development remain on sustainable path. Yet the rising level of insurgency and military actions on the continent is bound to divert the resources from socio-economic ends towards military hardware. In this manner, the continent’s resources and surpluses are channeled to the armament manufacturing countries in the east and in the west. In the process, the inaction by the African Union structures is highly problematic. The ineptitude of the AU with regard to safety and security remains the most obvious fault-line of the organization. A similar fault-line is evident at the UN structures. The existing global safety and security infrastructure is woefully inadequate and inappropriate for today’s world circumstances. Much has changed since 1945, and yet the UN system has remained largely intact. More importantly, the nature of international threats has evolved considerably. The emergence of global terrorist groups spanning different territories and regions of the world has made the old style inter-state hostilities less of a threat. The regional and global multilateral organisations, therefore, need to respond to the changing circumstances. For such responses to be effective, national leaders ought to reconsider some of the age-old notions of “self-interest” and “national interest”. In such re-definitions, new realities of limits to national actions towards safety and security need to be recognized. At the same time the very notions of ‘safety and security” need serious re-definition. Optimum and cost-effective measures of safety and security in today’s world call for a considerable re-think of the trade-offs between national and regional/international structures. As the nature of global risks changes, effective responses require creative and new measures of regional and global coordination. Unless the new risks are effectively mitigated, the world economy will remain vulnerable to underperformance. This is not good news for...
Read MoreSouth Africa’s Evolving Democracy: Beyond Elections May 2014
SA national elections on May 7th 2014 marked the 20th anniversary of the country’s constitutional democracy. Whilst the ANC maintained its control over the national government with a 62% majority, it had much to worry when examining the details of voting patterns across the 9 provinces and the major metropolitan centres. Nationally, the ANC lost just over 3% of the votes compared with the previous elections five years ago. The party also maintained control of 8 of the 9 provinces, albeit with a declining majority in every single one of them. More revealing was the fact that the ANC’s majority in the Gauteng Province was reduced to 53% of the votes. This was the shocking revelation for the ANC. The significance of Gauteng is three folds. Firstly, it is SA’s most populated province, it contributes over 1/3 of the country’s GDP and as the country’s only metropolis region, it has by all measures the most informed and diverse population. ANC’s loss of considerable support in Gauteng almost overshadows the party’s continued success nationally. Overall, ANC is shown to have lost much support amongst the middle class in the country. A number of factors have led to this outcome. Most detrimental has been ANC’s own organizational in-fighting and precipitous moral decay. Continuous allegations and revelations of corruptions and misuse of public resources have tarnished the image of the party, and its top leadership. The party leaders at local, provincial and national levels appear oblivious to the damage that their misconduct and abuse of public resources are bound to raise the ire of the citizens. Given the rapid rate of urbanization, and accessibility to real time information amongst the citizens, gone are the days that the political leaders and their administrative stooges, could obfuscate their abuses of power or extraction of public resources. Yet, the ANC leaders over the past five years appeared determined to swim against the tide! Both on the right and on the left of the political spectrum, the ANC found itself under pressure. The emergence of Economic Freedom Fighters (EFF), led by the ANC’s previous youth league leader, Julius Malema, was a game-changing phenomenon during the 2014 elections. The EFF is the political voice of nearly 4 million youths in the country. The bitter reality is that ANC’s education policy failures since 1994 have left the youths unemployed, unemployable, marginalized and radicalized. This lethal cocktail compounds the structural and widespread poverty left behind by Aparthied twenty years ago. Although EFF managed to garner only 6% of the votes in the 2014 elections, this understates the party’s inherent appeal and widespread political support. If properly resourced and appropriately structured, the EFF could well increase its actual voter support by a factor of 3 to 4 in the next election cycle. For as long as unemployment rate of over 25% persists, the EFF has a fertile ground for consolidating its power base. From the viewpoint of economic policy, the ANC has made considerable errors of judgment over the past few years. Nearly five years have been squandered in dabbling in contradictory and counter-productive policy positions within the government. Under the rubric of “developmental state’, the government policy has become a great deal more interventionist, at times contradictory, and by extension operationally ineffective. Ministerial involvements in corporate operations, supply chain management, and organizational issues have risen sharply. State-owned enterprises have lost much of their technocratic capabilities and have been reduced to proxy political agencies for supporting crony capitalism and political agendas. Enterprises such as Eskom, the Industrial Development Corporation (IDC), and The Development Bank of Southern...
Read MoreIntergenerational Equity and the Political Economy of South Africa
To watch the full keynote address video by Dr. Abedian go to the following link: http://youtu.be/oC5lseYIgxk Intergenerational equity is a complex issue in public policy. The complexities may be compounded when one views it through the lenses of political economy, philosophy, applied ethics as well as in public policy. More often than not, the notion is invoked in discourses around environmental sustainability and or in politics of public debt. The concept, however, is much deeper and wider in scope. There is a range of sub-issues that are embedded in the term “intergenerational equity”. This is so because society is the intermediary among past, present and future generations. All social processes, be they political, economic, technological, ethical, or environmental have a systemic and dynamic impact upon the overlapping generations’ welfare. In the meantime, human beings are predominantly “present-oriented”. In effect, they discount the future heavily the more distant it is or is perceived to be. In effect, the present is more important than the near future and the near future is more important than the distant future. Furthermore, human activities and enterprises are, more often than not, subject to uncertainty and imperfect information. These simple but factual realities do have profound and far-reaching consequences for the success and failure of nations. Moreover, our use of the natural resources, our approaches to the ecosystem, and the political economy institutions, the social and ethical framework we promote and the ease with which we commit resources to social and human integrity are all affected by our implicit or explicit regard for the principle of intergenerational equity. These issues have preoccupied philosophers since time immemorial and entered classical economic thought. However, the modernist pursuit of economics as a value-free “technical” science, particularly within the framework of neoclassical economics, effectively marginalized the intergenerational topics. The contemporary emergence of institutional economics coupled with environmental concerns and globalization, has repositioned intergenerational issues at the centre stage of the global political economy discourse. For the discipline of Economics, this offers an interesting, but challenging, vista. In reality, ethical values are implicit and exogenous in virtually all models. Economics is yet to fully internalize this fact. For South Africa, at this juncture in its social democratic evolution, intergenerational equity has an added significance. Nearly twenty years into the foundational years of its new democratic dispensation, compelling evidence and complicated syndromes of disregard for intergenerational equity are emerging. From the utter failure of the public basic education system, the widespread collusive and extractive conduct amongst the business corporations, to the near collapse of the public sector administrative and management capabilities, particularly at the local government levels, glaring and worrisome signs are in evidence that social welfare across generations is being disregarded, or even compromised. In the remainder of this chapter, the concept of intergenerational equity will be explored in more detail in Section 2, followed in Section 3, by an analysis of the patterns and trends in resource allocation across generations in South Africa. The analysis of non-pecuniary investments in future generations will be examined in Section 4. Section 5 will look into the challenges of intergenerational equity rebalancing. The final Section will end with some conclusions. 2 – Intergenerational Equity: Definition, Application & Significance Intergenerational equity is a principle of distributive justice which concerns the relationship among past, present, and future generations. We could conceptualize the basic contours of an equitable relationship among generations in many ways. From a social contract perspective, it is instructive to imagine that all generations are partners in an implicit social contract defining rights, duties, and obligations among generations. The contractarian approach, however, ignores...
Read MoreToday’s Global Uncertainties, Tomorrow’s New World Order
Honourable and distinguished guests, honoured members of the National Spiritual Assembly of the Baha’i’s of Swaziland, eminent members of the Auxiliary Board of the Continental Counsellors for Africa, ladies and gentlemen, dear friends, I am most grateful, indeed honoured, for being invited to share some thoughts on the subject of the prevailing global uncertainties and their possible and ultimate outcome’ on this auspicious occasion. As we gather here to celebrate the birth of Baha’u’llah, the founder of the Baha’i Faith, it is befitting to pay homage to His message of love and unity, peace and prosperity for the entire human race. His mission is to establish a worldwide community, whose hallmark is ‘unity in diversity’. Back in the second half of the 19th Century, Baha’u’llah foretold the inevitability of the emergence of a global society, driven by the quest for the world peace, inspired by the divine vision of a united humanity imbued by spirituality, sustained by the eternal covenant, and founded upon justice and fairness. At the first glance, the vision that Baha’u’llah offered could hardly be more in contrast with the prevailing socio-economic and political circumstance in which we find ourselves, in every land on the planet. The prevailing uncertainties, the grinding poverty of so many of our fellow human beings in the midst of the opulence and the plenty that the “other half” displays, the public and increasingly aggressive and demeaning manner in which societal issues are debated and often not resolved, the growing worldwide emergence of the extent of tyranny against children, youths, and the women, and the pervasive spread of corruption in the use of public and private resources across the international economic and financial system, all these are deeply unsettling and indeed emotionally depressing. I am sure you have followed on the recent report about the prevalence of slavery, estimated at around 30 million in 2013! It is almost unthinkable that in this day and age, a global ‘slavery map’ highlights the fact that over 5 million slaves live on our continent of Africa, and even a larger number lives in the Indio-China sub-continent[1]. Equally disturbing is the reality that no region of the world is free of slaves! Modern slaves include women, children and men. This of course is but one of the manifestation of our prevailing moral crisis of humanity. There are many other social, emotional, and political manifestations. The upshot of them all is a rising level of despair for a considerable proportion of our fellow human beings. The world is indeed in the throes of one of the most profound transitions in history. Not only do technological and economic changes have world-embracing effects, but also the prevailing socio-political dynamics has no historical precedence. This is not to say that in the past the world has not had periods of deep and game-changing transitions. For example the advent of industrialization in the 17th and 18th century culminated in the dawn of a new world order in which the West emerged as a dominant economic, military and colonial power. The ancient civilizations of India, Africa, China, Ottomans and Persians were subjugated for a few centuries to come. Yet in comparison with the contemporary transformative forces, the industrial revolution had limited reach and its impact was slow. The many forces of contemporary transformation in human and social life may be broadly divided into two categories. One group tends to integrate socio-political, economic, and cultural life across regions and continents. Such integrative forces tend to narrow the gaps across communities and nations, build bridges within and across cultures, and...
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