Solidarity Movement

Written by Werner Fourie, Economic Researcher

Introduction

“Ideas let children flourish or flounder.” – Flip Buys

Over the past few decades, the decay of state institutions, infrastructure and the deterioration of public administration in South Africa have led to the country’s progressive decline. This decline not only resulted in the country’s economic stagnation but also led to an increase in various social issues such as crime, poverty and unemployment. South Africa currently has one of the highest crime and unemployment rates in the world, almost 50% of the population receive a grant or subsidy, and in the last decade the country struggled to achieve a growth rate of 1% per year in its Gross Domestic Product (GDP).

Although this decline can be attributed to several factors, the one clear cause is the destructive policies and obsession with power of the African National Congress (ANC), South Africa’s national ruling party. Since 1994, the ANC has implemented a unique strategy to expand its power and make the country largely socialist. It did this mainly by giving loyal persons control of all “leverages of power” by implementing new laws, regulations and “transformation” codes of conduct, further eroding constitutional safeguards,  and stigmatising white people and the country’s liberal opposition.

Today, South Africa is grappling with more radical ideas such as expropriation without compensation (EWC) and the nationalisation of healthcare (NHI), among others. The purpose of this article is to shed light on the ideological framework of the ANC and how policies such as these have negative consequences for South Africa’s economy.

The ANC’s ideological framework and strategy

The ANC’s ideological framework becomes apparent in the layout of a strategic plan called the National Democratic Revolution (NDR). The aim of this plan is to systematically transform South Africa into a socialist society where property is taken from mainly white citizens and placed under the control of the ANC for redistribution to “previously disadvantaged” people. The ultimate goal is not so much to create a better future for these individuals but rather to build a dependency state to maintain power and benefit a small, elite group.

The Institute for Race Relations (IRR)[1] writes that the NDR consists of a “political” phase followed by a “socio-economic” one. In the “political” phase, the ANC’s main focus was to strengthen its grip on power by undermining the country’s Constitution. This was deemed necessary to reduce resistance to the socio-economic policy shifts planned to dominate in the second phase, according to their strategy.

During the first phase, the ANC strengthened its power by:

• including socio-economic rights to education, healthcare, housing and social welfare in the 1996 Constitution to empower the state and increase dependence on it;
• weakening Parliament’s ability to hold the executive authority accountable; and
• adopting a comprehensive policy of “cadre deployment” to bring the public service, armed forces and state-owned enterprises under ANC control. Cadre deployment was also further expanded to other essential institutions, including the judiciary, the media, universities, business organisations, civil society and various constitutional structures intended to strengthen South Africa’s democracy (among others the Public Protector and the Independent Electoral Commission).

The socio-economic policies implemented during phase one include, among others, the following:

• Black Economic Empowerment (BEE) focused on racial quotas in the workplace and distribution of ownership of businesses;
• expansion of social welfare on a large scale through monthly cash allowances for children, together with free RDP houses, free basic education for the poor and various other aspects of the social wage;
• a slow and complex process of land restoration and redistribution was implemented to emphasise the importance of redress and undermine property rights; and
• all water and mineral resources have been vested in the custodianship of the state, thereby ending private ownership of these resources without compensation being paid.

By 2012, the ANC had significantly weakened many of the Constitution’s checks and balances, paving the way for the second phase of the NDR. From 2014, the ANC began to emphasise the need for “radical economic transformation” aimed at changing the “structure” of the economy along with its ownership and control. It was during this period that the ANC increasingly started to advocate radical changes such as amending the Constitution to allow for expropriation without compensation (EWC), new equality regulations with regard to employment, stricter Black Economic Empowerment, indigenisation and the establishment of the NHI.

These drastic changes are intended to further empower the ANC and bring South Africa much closer to a socialised economy. At this rate, the private sector will also increasingly be compelled to withdraw form providing “public goods” such as education, healthcare and transport, which will be solely provided by the state. If the past few decades are any indication, it is not difficult to foresee that increased state control will have disastrous consequences for South Africa.

Economic impact of expropriation without compensation and National Health Insurance

Two radical policies that increasingly have resurfaced in recent years are EWC and the NHI. EWC largely involves the expropriation of agricultural land from white farmers (without any compensation) and transferring it to “previously disadvantaged” individuals. The mistake often made is that the broader implications of such policies are not taken into consideration.  

The people currently farming in South Africa possess the necessary knowledge, experience and networks to operate their farms successfully and provide food security to the country. These farmers understand both the local and international markets and stay abreast of the latest developments in the agricultural industry. If these farmers were to be dispossessed of their land, a new “farmer” would need to find his feet before he would be able to function at the same level as the previous farmer. This will result in farms not being operated optimally, which will lead to higher input costs, smaller harvests and more expensive products – inflation will certainly increase, which will have various other negative consequences for the country’s economy. Unemployment will also rise because as farms become less profitable and competitive and do not realise the necessary returns. Even if the new “farmers” were trained, there will be other repercussions. Policies such as EWC send the message to local and international investors that their property is not secure. This will mean that investors will withdraw their capital and take it abroad. When capital leaves, opportunities leave with it, which also means that skilled South Africans will most likely leave the country.

In addition, a policy such as the NHI primarily threatens the quality of healthcare available in South Africa. This is because competition for returns and the need for innovative problem-solving are removed from the industry; in any industry there are limited resources to satisfy the demand for goods and services, and when there is a profit motive, resources are usually used optimally. The consequences of this policy for South Africa’s economy will include, first of all, poor medical service delivery resulting in a less productive workforce. This will particularly manifest in lost work hours due to longer recovery times, as well as considerably delayed processes and longer doctor appointments. Furthermore, it can even be foreseen that people may die due to a lack of quality healthcare services. In short, output will be reduced, which will lead to lower economic growth.

Then, another significant impact of the policy will be the opportunity cost of tax money that could have been spent elsewhere. This outflow from South Africans’ pockets will lead to less saving, investment and spending, which consequently will result in less economic activity in the broader context of South Africa. Tax money might not only be utilised less effectively, but quite possibly not utilised at all due to corruption, which will further contribute to social issues.  Finally, the NHI will also lead to the standardisation of doctors’ salaries and practices. As a result, doctors unwilling to work under these conditions will leave the country. Poor medical services will also cause other South Africans to seek opportunities elsewhere, which will result in a weaker workforce that will further slow economic growth.

Summary

The decay of state institutions and infrastructure in South Africa, which has led to economic stagnation and an increase in social issues such as crime, poverty and unemployment, can largely be attributed to the destructive policies and obsession with power of the ANC. The ANC implemented a strategy to make the country more socialist and expand its power, resulting in the implementation of new laws, regulations and “transformation” codes of conduct. Recently, two radical policies, namely expropriation without compensation (EWC) and the nationalisation of healthcare (NHI), have resurfaced. However, these policies have potential negative consequences for South Africa, which will further contribute to the country’s decline.