There are several economic recovery plans on the table. But for a strong, sustained recovery and broad prosperity – both entirely within our reach – we need to drill deeper, to the principles that underpin the way we operate as a society. Get these right and the plan writes itself, the economy takes care of itself.
The Democratic Alliance believes that the rule of law, a social market economy, and a capable state are the three essential preconditions for our society to derive optimal, sustained benefit from the resources – natural, human, capital – available to us. They lead to an open, opportunity-driven society where the state protects and delivers to all.
Across the span of human history, most successful economies are built on this foundation. The South African economy, on the other hand, was regressing even before Covid-19, with these principles progressively undermined by a government committed to a closed, patronage-driven society in a system set up to enrich a small group and entrench its power at the expense of the rest. I use the term “progressively” here to mean “increasingly”, but ironically the system operates under the guise of a “progressive, pro-poor” agenda, when in fact it results in quite the opposite.
I must elaborate on these foundational principles since their value cannot be overstated.
A commitment to the rule of law means adherence to the SA Constitution as the supreme law of the land: to the principle that all are equal before the law; to the separation of powers – executive, legislative and judicial; and to independent institutions able to check and balance power. Under these conditions, a culture of accountability will flourish. An economy thrives under this shared social contract because it provides the certainty and stability that radically lowers the risk and cost of doing business.
In a social market economy, businesses and consumers, rather than government, decide on what to purchase, where to invest, and how much to produce. Decision-making is decentralized to those who are taking the risks. They have a right and a duty to own both the rewards and the responsibilities of success or failure. They have the incentives and detailed knowledge to take optimal decisions. They are the players in the great economic game, and they get to decide on all the moves. Investment, creativity, innovation, and initiative flourish under this shared social contract because decision-making is strongly aligned to incentives, with reward following risk.
However, the state has a major role to play. It enables the game and sets and enforces the rules. Government’s role is to promote social justice by enhancing equality of opportunity and providing strong safety nets and trampolines for the most vulnerable. Government is responsible for creating an enabling environment in which business can thrive, essentially by delivering and/or protecting public goods – infrastructure, security, basic services, quality education, universal healthcare, and the natural world on which our economy is built and on which our lives depend. Government also has an important role to play in improving access to markets by championing openness and competition. Markets function optimally in these circumstances. This optimizes tax revenue and generates a virtuous circle where more social investment leads to a stronger economy which in turn enables more social investment.
Hence the essential requirement for a capable state – one able to perform its role. Markets do not function optimally when they are entirely free. They need the state to play its role just as soccer players need a referee, a ball and a soccer pitch. The essential precondition for a capable state is the separation of party and state. Whereas political parties are primarily accountable to their supporters, the state and its representatives are accountable to all and must operate and employ public resources in the interest of all in society. Separation of party and state means that public appointments are made according to ability to serve the public interest, rather than ability to serve the party interest. The ANC’s steadfast commitment to cadre deployment whereby public appointments are based on party political loyalty, is the seed – planted back in 1997 – of our current economic malaise, generating an incapable, corruptible, patronage-driven state unable to deliver on its mandate.
This, along with the ANC’s commitment to the outdated ideology of centralized state control of the economy, is at the heart of our economic decline. Not even a capable state has access to the information needed to direct an economy efficiently. The incentives of public employees can never be perfectly aligned to efficient decision-making because they do not directly suffer the failures nor reap the benefits. An arrangement in which the state sees its role as that of a job-creator is not sustainable, because it leads to a pyramid-scheme-style economy where resources are constantly drained from the productive private sector to the unproductive public sector.
According to these three foundational principles, the DA’s recovery plan is to deploy a “get out the way” approach to the economy. The energy market must be opened to full competition, to enable reliable, affordable electricity. Digital spectrum must be auctioned to bring down the costs of telecommunications. Labour regulations must be relaxed for small businesses, to give them the flexibility and confidence they need to start, grow, and thrive. The regulatory regime must be stable, and sensible, to attract investment but protect public goods. All non-essential state enterprises must be closed or sold off.
We need to be realistic about what works. A wealth tax, for example, will just drive more skills and capital out the country. Better to boost tax revenues by opening the economy and then spend the tax revenues honestly, focusing on the poorest communities. Populist, investment-killing policies such as EWC, NHI, BEE, asset prescription, SARB nationalization, and the Mining Charter must be decisively rejected.
There are no short cuts here. A DA national government would focus on getting the basics right: fixing our water, education, health and policing systems by appointing on merit, starting with capable leadership, and deploying growing tax revenues. We would seek to stabilize national debt in the medium term by curbing the public sector wage bill – nothing could do more to protect and grow our welfare system. We would bring back the Scorpions – independent and capacitated to act without fear or favour against corruption. We would strive for entrepreneurs to feel emboldened to do what they do best: take calculated risks to generate real value for society and create sustainable jobs.
We would seek to enhance the federal character of our democracy, by devolving decision-making power to the lowest effective level of capable government, according to the principle that decisions should be made as close as possible to the people they affect.
In this open, opportunity-driven society where power is decentralized to the people, the enormous potential and ability and goodwill in this country will be automatically harnessed for the common good. To achieve this, the DA does not need 51% of the national vote. Rather, we need to get the ANC below 50% and then form workable coalitions with other parties that share our core values. When South African voters recognise and demand at the ballot box these three essential organizing principles for a prosperous society: the rule of law, a social market economy, a capable state, the plan writes itself and the economy rights itself.