Business

SA’s economic paralysis is a leadership crisis

2019-09-19 00:25

The reaction to Finance Minister Tito Mboweni clearly shows now the factional fighting in the ANC is hindering our progress as a country, writes Chris Maxon

What truly pulls people forward, especially in the more difficult times, is the exciting possibility that what they are doing can make a profound difference to the future of their families, friends, colleagues, customers and communities.

They want to know that what they do matters. – James M Kouzes and Barry Z Posner

The release of Tito Mboweni’s discussion document, Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for SA, for public comment and the resultant criticism has again exposed that we live in interesting times.

South Africa’s growth is weak, projected at 0.6% this year. Mixed investment growth has weakened.

Fiscal stimulus has yielded little; government finances are constrained and the formal unemployment rate is close to 30%.

The economy remains income driven by the services sector.

On the continent, Africa’s growth in the last decade and a half represents a dramatic improvement.

For 36 countries in Africa south of the Sahara (SSA) with readily available data, not including South Africa, the average annual GDP per capita growth rate in 2000–2012 reached 3.2%, the highest in five decades, and an important departure from previous decades of negative per capita growth.

The growth rates of the nine fastest growing countries in SSA represented 31% of SSA’s total GDP and 48% of SSA’s total population in 2000–2012, according to the World Bank’s 2015 report.

Most of the countries had negative per capita GDP growth rates in the 1980s and five were still contracting in the 1990s, but their average annual growth rate in the 2000s reached 6%.

In South Africa, the pain of the current economic crisis is being felt, mainly, by the poor and, particularly, the youth.

This in itself compels us to take drastic steps.

Little in life can provide the sense of euphoria that comes from knowing that you helped those you serve achieve something better.

Years ago, a local leader, when considering the fruits born from the economic development programme she helped design, reflected: “When I look back at that time in my life, it was perhaps the most meaningful work I’ve ever done. There were so many of us who came together, fitting like pieces in some mosaic puzzle. Had any one piece been missing, it would have never worked.”

Unbeknown to her at the time, this local leader followed one of the basic principles as described by leadership writers James M Kouzes and Barry Z Posner in The Leadership Challenge.

Having engaged with Mboweni’s policy document, I realised there was something critically absent – “leadership”.

Economic development is highly dependent on good leadership and plays a key role as it involves providing opportunities for growth and development.

Good leadership, therefore, becomes visible, for instance, through well developed infrastructure and the ability to provide basic amenities, especially to the most vulnerable.

Author Michael Schuman, in The Miracle: The Epic Story of Asia’s Quest for Wealth, writes that Asia’s phenomenal growth is attributed to inspiring leaders who were the backbone of the early stages of each Asian economy.

China, the second largest economy in the world, transformed itself from a centrally planned closed economy in the 1970s to a manufacturing and exporting giant over the years.

Deng Xiaoping, China’s leader from 1978-1989, catalysed the country’s economic transformation.

The rise of the Asian Tigers owes much to the commitment of their leadership to drive this agenda.

In South Africa, however, intra-alliance ructions and personalised attacks only serve to show a governing party in disarray.

Factional fighting, each with its own economic vision, does not offer a common vision for citizens to rally around.

The rise of Cyril Ramaphosa to the position of president was received with euphoria and hope that it would bring cohesion to an already fractured ANC, and, most importantly, tackle corruption both in and outside party circles.

While economic developers broadly share a passion for improving the human condition, the role we choose to play is usually driven by our specific passions.

For example, some of us have a special place in our heart for company CEOs who carry the weight of the world on their shoulders as they work to make their operations successful.

Others may feel in tune with entrepreneurs who risk their life’s savings to realise a dream enterprise.

And some may feel a call to help the underserved and less fortunate.

You can’t mobilise people to willingly travel to places they don’t want to go

While passionate leadership is important, it is only effective if it is shared.

To this end, I may agree that the finance minister should have shared the document, internally, and as widely as possible.

Determining what’s important for the country is imperative for turning passion into a shared vision.

“You can’t mobilise people to willingly travel to places they don’t want to go,” note Kouzes and Posner, pointing to the need for a common purpose.

Another key element not addressed by the paper is the need to build sound institutions.

We must think of institutions as the “rules of the game”.

These rules help make behaviour more predictable. They can act to constrain crony behaviour, and smooth out human interaction.

Nobel laureate Douglas North describes institutions as: “Humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints [sanctions, taboos, customs, traditions and codes of conduct], and formal rules [constitutions, laws, property rights]. Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange.”

Harvard University’s Ricardo Hausmann recently suggested that if you want to predict the prosperity of a country, just look at its institutions.

Together, the legal and administrative organisations that underpin every society form what economists call an “enabling environment” for the creation of wealth.

When they fail, trust is eroded and economies become damaged.

Collaboration between the public and private sectors is particularly important when it comes to boosting productivity.

But in the absence of strong institutions the alliance can become dysfunctional, with both sectors colluding in the pursuit of profit at the expense of the consumer.

But, institutions change over time based on human experience.

At the Institute for Work, Faith and Economics there are three pillars which we think capture the mission: creativity, purpose and freedom.

These pillars are, not coincidentally, also the cornerstones of economic growth and prosperity.

We live in a new era fraught with gridlock and an inability to reach compromises.

Our politics have devolved into ideological versus pragmatic warfare where we butt heads over different but equally dogmatic philosophies.

It seems the paper has, inadvertently, exposed that we are entering a period of dogmatic ideological conflict.

‘Ideology’ is not a bad word. It refers to nothing more than one’s set of political principles and core doctrinal beliefs that exist independent of considerations of utility.

It’s nonsensical to try to assess political leaders or policies based solely on competence and without regard to ideology.

Read: Tito Mboweni’s deadline ‘not binding on ANC

It’s possible to become unyielding in one’s ideological beliefs – to be dogmatic – but it’s just as possible to become so pragmatic that one operates without any core principles.

So, when organisations such as Cosatu call for the withdrawal of the paper in the absence of their own suggestions, it is yet more evidence that we need determined and resolute leadership.

In a global economy, it is becoming increasingly more important to understand the wants and needs of those served, that is, the internal and external stakeholders.

Having awareness of this need means leaders must be able to shape the culture of their organisations to address changing stakeholder needs.

Leadership is an age-old problem in political philosophy as well as in the more modern science of strategy.

Development leaders are keenly aware of their nation’s principal challenges and are conscious of the fact that development challenges must be viewed in holistic terms.

It will be reassuring to see leadership at the top of the economic recovery agenda – but there is still much work to do to translate this prioritisation into performance.

“To state the obvious, one’s mettle is tested in difficult times,” argues Tom Peters, an American writer on business management practices.

“But I want to avoid like the plague that motivational speaker’s nostrum: ‘This is a time of great opportunity – get on your feet!’”

For the country to move forward and recover from the economic paralysis, we must critically address the leadership paradox.

The centre must hold!

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October 13 2019