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Exploding some myths about South Africa

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Here are a few myths about SA that need exploding:

  1. That our massive spending on education will result in increased productivity and growth.
  2. That “white minority capital” – an old liberation struggle term recycled by the Guptas to deflect attention from their corrupt dealings – holds sway over the economy and will not let go.
  3. BEE is working well.
  4. SA is going the way of Zimbabwe.

None of these are true. There are those in SA who revel in every bit of bad news about the country in which we live. South Africans living abroad tend to stoke anti-SA sentiment, perhaps to reassure themselves that their decision to leave was the right one.

There are things that are terribly wrong about SA, and we should debate these vigorously. But let’s not pretend that SA is hopelessly broken. It isn’t.

A recent article by Professor Ricardo Hausmann, former minister of national planning for Venezuela and now director Center for International Development at Harvard University’s Kennedy School of Government, provides a fascinating insight into where SA is getting it right – and where it is getting it wrong.

The chart below tells the story of SA over the decades: there are, for the first time in decades, more people leaving the country than arriving. The story is the same with capital: more money is leaving the country than is flowing in.

As we reported last week, there is a huge increase in South Africans applying for second passports. What is interesting about the latest stats is that most of these are black (or rather non-white) South Africans. They are moneyed and educated. And they’re looking for opportunities to live and work abroad.

Emigrants now exceed the number of immigrants – representing a net loss of skills

This is something we should worry about. This is the equivalent of a company firing people. Why are people leaving? They are looking for a bolt hole in case SA goes pear-shaped, they want international experience, or they want to spread their financial risk by internationalising their skills and assets.

What happens when a country chases skills away

Hausmann points out what happens when a country loses its skills. Know-how, he says, can be gotten rid of, or fired.

“This happened in Venezuela in 2003 when President Hugo Chávez fired people who had collectively accumulated 300 000 years of experience from the oil industry.  The result? The industry’s output has halved, and the national oil company is drowning in debt. The cement industry also saw its accumulated know-how decimated, and, as a result, it now produces a fifth of what it did before it was nationalised.

“Firing people is how firms lose know-how; emigration is how countries lose it. Know-how can be scared off, and that is something that has been happening in South Africa. Know-how can also be impeded from entering a country if its immigration policies are restrictive. Again, this is happening in South Africa, with its tight immigration and labour policies, which make it difficult for those with skills to come into the country.”

In the 1970s, SA had a net gain of people moving here from industrialised countries compared to those who were emigrating to industrialised countries. SA was a net importer of know-how. This has now become a net loss, with more skilled South Africans moving to industrialised countries than those coming to this country. This shows that, whereas in the past South Africa was acquiring know-how from the developed world, South Africa is now a net exporter of know-how.

Is our education system seriously going to replace the skills lost to emigration?

This is another myth that needs exploding. Hausmann again offers a sobering reality check: over the 50 years to 2010, the number of hours spent in school across the globe trebled, but the pay-off has been surprisingly disappointing. Despite greater access to education in countries such as Ghana and SA, other countries with similar access are doing much better.

Rich countries are rich not just because of education, and, conversely, that investing in education alone won’t make you rich.

What separates rich from poor societies

What separates rich and poor societies is that in poor societies everyone knows more or less how to do the same things: to farm, hunt, fish, build, trade with neighbours. In rich countries lots of people know nothing about any of these things, but collectively they know a great many different things.

This is the key: diversity of know-how is what makes countries rich. Hausmann points to the example of aircraft maker Boeing, which makes just 15% of the parts that go into the planes. The rest are made by companies around the world. Boeing’s value derives from its ability to develop and organise thousands of different activities and assemble these into planes that fly.

Where SA is getting it wrong

Pursuing policies based on wrong assumptions is a recipe for failure. If we convince ourselves that the problem is white minority capital, then we need to investigate if this is true. And if the solution is radical economic transformation through BEE policies, then we need to interrogate whether this is a valid solution.

Hausmann again: “BEE is necessary to tackle the inequities of the past, but it has been implemented in a way that is biased towards making the top of society blacker, rather than helping the bottom of society get better. Too many BEE incentives were about shares, about board positions, and about senior management, with very little emphasis on generating entry level jobs.”

SA’s greatest strength is its capacity to resist those who will make it fail

Hausmann concludes that SA’s system of checks and balances is still robust, and its institutions – the judiciary, the press, opposition parties, the Public Protector, the National Treasury, and a range of others inside and outside government – remain strong. Countries stand or fall by the strength of their institutions, and this is one of South Africa’s greatest strengths compared to many of its peers. These are like an immune system to fight the disease of corruption and poor governance.

South Africa is also moving into a period of greater political competition. The country is moving away from a dominant-party system to a much more competitive multi-party environment. This, too, will strengthen South African’s immune system.