Ugly face of radical economic transformation

GLOBALLY economies are in transition, and in need of transformation, but the solution proposed by a top SA government adviser represents the ugly face of ‘radical economic transformation’ (RET).

An advisor appointed by Minister Malusi Gigaba, South Africa’s new minister of finance, economics professor Chris Malikane, at a Black First Land First (BLF) event triggered much controversy – most of it missing the real point, we believe.

Most of the controversy centred on the perception that he made a call for people to “take up arms” to achieve RET. However, in full context, what he said was that, unless a two-thirds majority in parliament is achieved to change SA’s constitution to make RET of a particular kind possible, taking up arms becomes the only viable option.

The real rub

The real rub, however, lies in the model for RET Malikane has in mind – including nationalisation of banks, mines and expropriation of land to become state-owned without compensation.

“The state uses the rent collected to support expenditure for the wellbeing of the progressive forces and for the use of the land in line with the national economic plan,” he wrote in a recent article.

Malikane admitted that the  “… country will plunge [into crisis] and become like Venezuela and Zimbabwe.”

He admitted that the  “… country will plunge [into crisis] and become like Venezuela and Zimbabwe.”

He, however, failed to spell out what that crisis would look like, and what the ‘pain’ would entail.

A recent article in The Wall Journal relates how Venezuela, once Latin America’s richest country, can no longer feed its people, hobbled by farm nationalisation and price and currency controls.

FOOD CRISIS: Empty supermarket shelves in Venezuela, which is enduring a shortage of basic foodstuffs

Like happened in Zimbabwe, Venezuela was turned from food- exporter into importer by Marxist orthodoxy.

At 720% it has the world’s highest inflation rate, and since 2013 has shrunk by 27%.

“Hordes of people, many with children in tow, rummage through garbage, an uncommon sight a year ago. People in the countryside pick farms clean at night, stealing everything from fruits hanging on trees to pumpkins on the ground, adding to the misery of farmers, hurt by shortages of seed and fertilizer. Looters target food stores. Families padlock their refrigerators,” read a paragraph in the article.

For more than a month now, Venezuelans protested against the increasingly authoritarian government of president Nicolás Maduro, and by Friday last week more than 35 people had been reported killed in the unrest.

Three in four Venezuelans said in a survey they had lost weight last year; however, the real human tragedy plays out in the level of malnourished children, which one physician and child malnutrition expert described as “an epidemic.”

A Study of study of 800 children under the age of 5 found that nearly 11% suffered from severe acute, potentially fatal malnutrition, compared with 8.7% in October last year.

Impact on agriculture

The impact of farm nationalisation on agricultural productivity and food security is illustrated by what happen to a once thriving hoc farming industry. A farm established in 1970, has gone from 200 female pigs, each producing a dozen piglets, to 50 full-grown pigs now weighing 175 pounds instead of 240 pounds.

The farmer now earns 93 cents per kilogram of meat, needing $1.17 to make a profit. Since 2012, 82% of Venezuela’s pig producers have closed, and production falling 71%, according to industry representatives in what is described as “Venezeula’s high speed crash.”

Need for consensus on process

At last week’s National Foundations Dialogue in SA, organised by a number of civic foundations, including those of three ex-presidents and one ex-deputy president, former president FW de Klerk said: “Surprisingly enough, I agree with President Zuma that we need radical economic transformation,” adding that “We don’t need the economic transformation being spoken of by Prof Chris Malikane.”

The CEO of the Steel and Engineering Industries Federation of Southern Africa, Kaizer Nyatsumba, in an opinion piece for Business Day, wrote about RET: “While some among our compatriots may not readily acknowledge it, the fact remains that it is vitally important that all South Africans feel that they have a real and meaningful stake in the country’s welfare.

Our stability is seriously imperilled by the continuation of such gross levels of economic inequality

“The country’s future stability depends on just such a state. Our stability is seriously imperilled by the continuation of such gross levels of economic inequality. The insurance for our future lies in ensuring that everybody can truly feel that they have a stake in the economy.”

He added that “… addressing SA’s blatant economic inequalities cannot — and should not — wait until the required levels of economic growth have taken place. Were we to take that view, then these inequalities will be with us and our children for years to come.

“Instead, everything possible should be done now, as much as possible, to address these challenges even as work is done to grow the economy. To stand a chance of success, that work must involve a real and meaningful partnership between the government, business and labour …”

“Companies with foresight should embrace and actively implement transformation now, and not wait for ‘radical economic transformation’ to force them to do so or to push them out of business.”

Xolani Qubeka, secretary general of the Black Business Council, in yet another article on the subject, laments the lack of progress the past 20 years to make a meaningful improvement to the quality of the life of the majority of the citizens, bolstering a ”poorly structured (apartheid) economy.”

He argues that, white “industry captains are not alone in their unwarranted need to protect their gains, they are in the good company of some of the earlier BEE beneficiaries, who continue to deny that they are beneficiaries of BEE or even affirmative action.”

Politicians risk destroying what has worked in business, all in the name of radical transformation

Newly appointed Altron CEO Mteto Nyati, in an interview with TechCentral, spoke out against RET, warning that in the short-term politicians will use it to convince people that it will benefit them, while in the long term, it “will have destroyed this economy.”

He warned that politicians risk destroying what has worked in business, all in the name of radical transformation. This is a mistake that will cost the country dearly.


In a previous article we wrote about the implication of the global development of a ‘jobless society.’

In an excellent dissertation in the Daily Maverick of the raging, complicated and fractured public debate about RET, Richard Poplak also alludes to the fact of the development of a “post-work world.”

“We are locked in a global civil war, one that is by no means specific to place or people. Nationalisation by itself isn’t going to save nothing from no one, and (state)  ‘owning the means of production’ is equally meaningless in a post-work world – after all, no classical theory of ‘durable technological progress’ ever figured on the digital revolution eliminating labour almost completely.

We are in dire need of new ideas on all factional- and perceived own interest fronts. There is much to be said for Poplak’s suggestion:

“… how about we don’t hand everything over to the state, but demand from the state what I’ll call a   functioning post-work social contract – a basic living income for every working age South African. If this is done in conjunction with the release of state land and the development of an NHS style healthcare system, we’ve won, and we’ve entered the new stream far ahead of schedule, and without violence.

    “This will demand the involvement of, and massive sacrifices from the financial establishment, WMC and the Guptas. Various permutations of the idea are being piloted in Finland, Canada, Kenya.”

This article originally appeared in The Intelligence Bulletin, by the IB team

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