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Book extract: Rich State, Poor State. Why Some States Succeed and Others

Book cover. Supplied image.

Book cover. Supplied image.

Published Oct 8, 2023


Johannesburg - Why do some states thrive, grow their economies and uplift their people, while others, facing similar challenges, slide into low growth, social dysfunction and failure?

After decades of work on the ground in Africa, Latin America, Asia, Europe and the Middle East, best-selling author Greg Mills seeks to provide answers in Rich State, Poor State.

On each continent he traverses, Mills interrogates the how and why. How did Botswana go from being one of the least-developed and poorest nations at independence to enjoying the highest rate of per capita growth of any country in the world? Why has South Africa failed to attain similar heights?

How did the Baltic states achieve reforms that have positioned them among the best-performing economies in Europe? How did Vietnam overcome a traumatic past in favour of a rapid and positive development transformation? Why is Mexico the only large developing economy that competes with China in manufacturing?

Drawing from interviews with current and former presidents, prime ministers and key government officials across the globe, as well as research from leading institutions to enrich his fieldwork, Mills contrasts the successes and the failures, and in so doing, seeks to determine a path for the next generation of leaders.

Insightful and inspiring, Rich State, Poor State shows that with better choices, the right policies and the will to implement them, it is entirely possible to travel the road from poverty to prosperity.

About the author

Dr Greg Mills heads the Johannesburg Brenthurst Foundation, established in 2005 by the Oppenheimer family to strengthen African economic performance. Before this, he was the national director of the SA Institute of International Affairs. He has directed numerous reform projects in Africa and sat on the Danish Africa Commission and the African Development Bank’s high-level panel on fragile states. On the advisory board of the Royal United Services Institute, he is the author of the best-selling books Why Africa Is Poor and Africa’s Third Liberation, and together with President Olusegun Obasanjo, Making Africa Work: A Handbook for Economic Success. His writings have won him the Recht Malan Prize. His latest books, Expensive Poverty was published in 2021 and The Ledger: Accounting for Failure in Afghanistan in 2022.

Extract 7 – South Africa

‘What do you think of Nelson Mandela?’

I was sitting in a minivan in Ukraine with Ugandan opposition leader Bobi Wine when he turned to me and asked this question. He had been watching an old television clip from 1990 in which Mandela had been questioned on his continued friendship with Libya’s Colonel Muammar Gaddafi and Cuba’s Fidel Castro.

He had defended his loyalty to these authoritarians by saying that they and Yasser Arafat ‘support our struggle to the hilt’ and he had no hesitation about ‘hailing their commitment’ to human rights. ‘Our attitude toward any country is determined by the attitude of that country to our struggle,’ Mandela had said. ‘One of the mistakes which some political analysts make is to think that their enemies should be our enemies.’

Bobi’s question was the sort to which some South Africans, at least in my case, battle to give an honest and unambiguous answer. Having given my usual reply that Mandela was a great negotiator and reconciler, had an innate sense of timing, was exactly what South Africa needed at the time, and set us on the right democratic path by leaving after one term, Bobi’s next question surprised me.

‘Why did he feel the need to excuse their lack of democracy because of what they had provided in the past?’ Bobi asked.

It is a good question, one that goes to the heart of the constraints in South African politics in general and its foreign policy in particular. It explains much about the expectations shaped by the past, one that weighs heavily on the country. But this path is a choice by its political leadership, who prefer to externalise South Africa’s problems and solutions, and blame much on apartheid.

In a way, the country is a hostage of its painful history because its leaders want it to be. The leadership is unable to see right from wrong. It’s all about the struggle.

Spend your life looking in the rear-view mirror if that’s the direction in which you want to head.

Past ideological and fraternal allegiances and formative relationships will have an impact, but they should not entirely define a country’s history and options.

Excuses are needed, given the most notable flaw in the post-apartheid government: the inability to get stuff done. There was a moment in the 1990s and early 2000s when a confluence of highly trained academics and activists worked productively in government, reflected in the higher-than-average economic growth rate of 3.73 per cent, peaking at 5.6 per cent in 2006.

Thereafter, growth collapsed amid the compounding effects of the global financial crisis and the accession to power of Jacob Zuma over Thabo Mbeki, from which South Africa has never recovered.

The problem is amplified by how South Africa’s leaders use their political capital and their time.

Much of the country’s international relations is about summits or friendly meetings with dubious autocratic states that once helped the exiled ANC, it appears. At home, a lot of effort is put into managing the internal politics of the ANC, with the president famously spending one day a week at Luthuli House. And yet the solution does not lie in what Mavuso describes as ‘the theatre of investment conferences and podiums’. It lies in the gearing of the country to problem-solving, and to planning and implementation. The dysfunction of an overly bloated bureaucracy makes this all the more difficult.

The World Bank estimated the national cost of loadshedding to be in the order of $200 million per day, translating into $76 billion since loadshedding started in 2015, with $40 billion alone in 2022.

These costs include lost efficiencies, not least to communications; the failure to get off coal and into renewables (where there is funding available); the cost of emergency power generation, especially the high cost of emergency diesel generation; and lost income.

The answer to how the country got here lies in a statement by André de Ruyter shortly before he was forced out as the CEO of Eskom. ‘The one good thing about the sun and wind is that it cannot be stolen, first of all. It also cannot be exported to China, beneficiated there, and then be sold back to us.’ 108 An alleged attempt on De Ruyter’s life in December 2022 followed, showing the ‘intense battle taking place in SA’, said minister of public enterprises Pravin Gordhan. This is a battle, said the minister, being fought between ‘those who want SA to work and thrive, and those who want to corruptly enrich themselves’. He failed to mention, however, that those who want it to fail in this way are within the ranks of the ruling party.

The principal problem with South Africa remains the politics behind the choices, and the vested interests that have come to dominate critical choices. For instance, what the government calls ‘sabotage’ causing the energy crisis that has bedevilled the economy is in fact a report card of cadre deployment and carelessness. This explains in part, too, why it took three years to get legislation changed to allow for private power producers to enter the grid or, to take another example, to allow concessioning on the container ports in Durban and Coega at Ngqura in the Eastern Cape.

Business provides government with something it doesn’t have, but government remains reluctant to acknowledge and employ this asset, perhaps because it reminds it of its own inadequacies, or perhaps because business represents a commercial and political rival. Yet again, in this regard, South Africans are at odds with their government. The Brenthurst poll of South African voters found that three-quarters wanted the private sector to help provide key services in energy, water and rail, while fewer than 15 per cent opposed this.

As government continues to fail to live up to its expectations, there is a risk of raising the rhetoric of a populist dimension that has always been there in the extremes of post-apartheid promises.

The question for those in the private and public sectors fearing a populist path and its inevitably calamitous socio-economic and authoritarian outcome, is how to build an off-ramp from the current path to a higher-growth economy that will absorb the growing pool of unemployed. This path will have to recognise the entrepreneur and the citizen, and not the state, as the core of business.

This is difficult for South Africa to do, not for reasons of efficiency but of political power – and of leadership.

Technocratic responses will not work, because the problem is not the absence of knowledge or good ideas. These abound, as one would expect from a society with the human capital riches that drive academia and the business community. Without voters asserting their rights, governments can rule and profit and never be held accountable.

Politics and economic choices matter. As William Easterly notes, the ‘technical problems of the poor (and the absence of technical solutions for those problems) are a symptom of poverty, not a cause of poverty’. The evidence across Africa shows how well improvements in individual freedoms have worked historically for development, and how governance goes hand in hand with liberty, equality, values and rights. Democratic competition is a powerful force for positive change in getting the basic ideas and principles right.

Turkeys, however, don’t vote for Christmas. The ANC has been incapable of turning off the tap of rent-seeking and protectionism. Even 55 per cent of its own members no longer believe in the messages of the organisation. 111 It cannot function without such practices. It remains a prisoner of its past, in this way dooming South Africa to a low-growth and high-unemployment future. The overall choice today is whether the answers to South Africa’s challenges emerge from the ruling alliance, or from competitive economic and political entrepreneurs that put people and not the state at the centre of development.

How and when did things go so badly wrong? The ANC seems intent on following a path common to liberation movements, to ruin the country to protect itself and its members’ interests. This is ultimately self-defeating, of course, but entails so much damage en route.

And yet, South Africa has within its own borders an example of what success looks like. The Western Cape, home to more than seven million people, enjoys a real per capita income of R90 127, more than one-fifth higher than the national average. 112 Its matric results are 5 per cent higher than the national average, 113 increasing employability. Some 15 per cent of households in the province rely on grants as their main source of income and 28 per cent of the population is unemployed, compared to the next highest province, KwaZulu-Natal, at 25 per cent and 33 per cent, or the national average of 24 per cent and 34 per cent respectively. 114 According to the General Household Survey 2021, relative to the other eight provinces, the Western Cape is ranked first for the percentage of households with access to piped or tap water (99.4 per cent), first for the percentage of households with access to improved sanitation (94.8 per cent), and first for the percentage of households whose primary source of income is from salaries (versus pensions, remittances, grants, and so on).

The success, says Premier Alan Winde, ‘starts with good governance. We focused on it for years. Audit outcomes are one of the measures. Then governance becomes a habit so we can focus on service delivery. Of course, values, leadership, vision and organisational culture are all important too.

But governance, no stealing, doing your job is the first key starting point.’ 115 Still there is a conspiracy of silence among academics and most media about this given that the success is largely due to the party in government in the Western Cape, the opposition Democratic Alliance. Admitting the reasons for failure – in South Africa’s case, the ANC and its record of governance – is a first step towards recovery, as is the acceptance of the comparative (if imperfect) successes of the DA in the Western Cape. To do otherwise is an exercise in delusion or, at least, wokeness.

Government is the business of agonising choices, but until now, the ANC’s leadership has been unable or unwilling to make these.

A party that began its life fighting for equal rights is now geared to maintaining elite access to rents. Every decision is taken with a view to keeping the party’s members on board. And what keeps them on board? Access to rents – along with the delights of the ministerial handbook affording perks. To conceal this greed, a charade of ideological ‘purity’ is maintained. So, the ANC projects itself as avowedly social democratic but is actually oligarchic. It projects itself as being on the side of the people but is actually on the side of its rent-seeking elite. And the more avaricious its leaders become, the harder they try to project themselves as fighters for a new ‘more equal’ world order. Policy, including special measures and states of disaster, are there to expedite ‘legal’ contractual rents and preferences extracted via legislative and regulatory instruments. The problem is now that the economy is faltering, and the circle for elite favours will diminish over time. But this did not stop the Zimbabwe African National Union – Patriotic Front in Zimbabwe, and it is unlikely to stop the ANC, although South Africa differs in one crucial respect: it is more urbanised. Urban voters with access to information and a hunger for change have begun to reject the ANC in favour of opposition parties.

The ANC might not be able to get away with repression and rigged elections to save itself, but it might try.

Evil conspiracies by criminal masterminds à la James Bond would be far easier to fight than the all- too-frequent combination of incompetence, ignorance and leaders simply not caring about the consequences of their actions. If you’re fighting Blofeld or Drax you know you will triumph when you understand ‘the plan’. It is difficult to fight back – and win – when there is no evil plan, but rather a morass of venal intentions. Changing this requires less piecemeal reform than a political revolution.

South Africa is half-empty in terms of economic liberation, and half-full in terms of the liberation of political choice. It remains for government to back its people and give them half a chance. Only the voters can make them do so.

Rich State, Poor State is published by Penguin Random House and retails at R350.00.

The Saturday Star