A failed ideology — why SA must abandon the ANC’s economic model

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From sidelining small businesses to eroding property rights, the ANC’s state-led development model has choked growth – and remains entrenched well beyond the party ...

From sidelining small businesses to eroding property rights, the ANC’s state-led development model has choked growth – and remains entrenched well beyond the party itself.

William Gumede is an associate professor at the School of Governance, University of the Witwatersrand, and author of the bestselling South Africa in BRICS, and Restless Nation: Making Sense of Troubled Times (both Tafelberg).

The ANC’s African liberation-movement economic development model casts the state as the primary engine of development, employment creation and social welfare provision. Under this approach, many party leaders dismiss the idea of anchoring economic policy in growth – the strategy pursued by China, Japan and Singapore – as a World Bank neoliberal concept.

The same mindset views foreign investment with suspicion, fearing it will allow foreign “capital” to dominate local markets. Yet vast inflows of overseas capital – bringing new technology, capital and skills – are precisely what have fuelled fast-growing emerging economies such as China, Vietnam and India.

Similarly, promoting small and medium enterprises (SMEs) is rarely treated as a serious route to mass employment, instead attracting scepticism as yet another Western market-driven orthodoxy.

Many ANC leaders also see SMEs as low-level “survivalist” micro-enterprises, which during apartheid came to be associated with “blacks only”. For example, the ANC’s black economic empowerment (BEE) strategy has prioritised creating “big” black industrialists to rival the Oppenheimers and the Ruperts.

Promoting SMEs may be stated as an official BEE objective, but in reality it is only a passing concern for many ANC leaders. Across post-Second World War developed and emerging markets, SMEs have created the most jobs and reduced poverty and inequality on a mass scale. The ANC government’s neglect of small businesses is a key reason South Africa has failed to make meaningful inroads into unemployment, poverty and inequality.

Under the ANC’s…

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