In a 1998 African National Congress discussion document, The State, Property Relations and Social Transformation, the democratic South African state’s character is defined as developmental. The document argued that “development is about improving the quality of life; it is about equity and justice…[and] entails growing the economy”. Implicit in the ANC’s development strategies lies a more transformative approach.
The two, i.e., development and transformation, are not mutually exclusive, but are important components in ensuring that optimal economic performance, job creation and poverty reduction are achieved.
New York University-based Professor, Vivek Chibber, attributes the secret to South Korean success in building an effective developmental state to several interlinked factors. These include a different accumulation model, focused on investment to create an enabling environment with incentives for capital and industry in, for example, massive state-building projects.
Iraj Abedian as well as other economists note how countries can easily attract capital from flexible, fast-moving global capital markets, provided the economic and political conditions encourage such investments. He notes that “businesses are, instead, sitting on large amounts of capital, but they are holding back on investing in major new projects until the political-economic landscape is less murky”. What is important to note here is that the state and industry need to cultivate their co-dependent relationship. The state cannot operate as a secluded island, completely detached from business. Equally, business cannot efficiently achieve its bottom line without a mutually-beneficial relationship with the state.
In the dark and gloomy period around the axing of Finance Minister Nhlanhla Nene in December last year, the challenge of attaining development in a small open economy came out in bold relief. What this experience has shown is that governments cannot act in a manner that confuses private owners of capital, especially if such action is interpreted as being inimical to the developmental objectives that a nation has set for itself. This ranges from issues of sustainability of fiscal balances to perceptions of ‘state capture’ and other forms of corruption. Because South Africa relies on the inflow of foreign savings for much of its investments and addressing current account balances, the views of those who advise the investors, particularly the Rating Agencies, are fundamental to the country’s economic prospects. In this regard, the recent pronouncements of Moody’s have been welcomed, as it retained the country’s investment grade, two notches above ‘junk status’, though with a negative outlook. In a sense, because of self-inflicted knocks, South Africa now lives on a knife-edge, with further reviews by the other Rating Agencies coming in the next few weeks.
When all is said and done, what is required is decisive action to realise the objectives set out in the National Development Plan. There is no short-cut.
Among those objectives is the fundamental question of improving our education system, so that we produce the skills required for a modern economy. Prof Tshilidzi Marwala argues that “technical education should be encouraged and [there needs to be an] understanding that technical education is the driver of increasing developmental capacity”.As part of this is the need to promote linkages between Colleges and Industry. As highlighted by Deputy Minister of Higher Education and Training, Mduduzi Manana in January this year, technical, vocational education and training (TVET) colleges should act as a pillar to address the country’s acute skills shortages. In this regard, “the partnership between the employers and the colleges is integral to advance artisan development in order to meet the [objective of training] 30 000 …artisans [per annum] by 2030 as required by the NDP”. But, as many have observed, the challenge in South Africa is not so much about policy: rather it pertains to implementation.
In essence, a developmental state is inherently a “strong state”, one that is able to exercise strong and visionary leadership and take decisive action to mobilise society behind a common vision. A developmental state plays an active role in guiding economic development and uses the resources of the country to meet the needs of the people. It ensures that economic growth and social development go hand-in-hand. At the same time, a developmental state has to ensure social stability within the confines of the constitution, a responsibility that demands popular legitimacy on its part.
Prof Vivek Chibber put it well in his delivery at the Mapungubwe Lecture: “For 25 years from the eighties into the nineties many of us in the West and in the global South looked to South Africa as a potential beacon, as potential for a new example, a shining light of what a post-colonial developmental path could be. My hope is (and I think the instrument, the power is still there in this country) …that, if it embraces … labour-led developmentalism, that hope could turn out to be true once again”.
Whether South Africa fulfills that hope of its own people and the global community depends on all sectors of the population, acting in concert to realise the national interest.