SA Government values mice as cheese factory managers more than productive knowledge

Almost 50 years ago, in 1970, Alvin Toffler in Future Shock wrote: Knowledge will become a more important driver of growth than capital or labour.

The two parties that then dominated the South African landscape did not hear the message: they had ideological ear wax and blinkers.

Inside the country the National Party wasted an opportunity to revamp and refocus Bantu education. In the words of Verwoerd, Western education was “of no avail for training which has as aim absorption in the European community while he cannot and will not be absorbed there. There is no place for him in the European community above certain forms of labour. However, within his own community all doors are open… For that reason, it must be replaced by Bantu Education. In the Native territories where the services of educated Bantu are much needed, Bantu education can complete its full circle, by which the child is… developed to his fullest extent in accordance with aptitude and ability…”  

The harvest: the Soweto 1976 riots. 

In exile and underground the ANC under the SACP influence believed labour was all important and capital from hell and that labour time was all that gave value to a product or service – a belief still voiced in 2016 by their leader.  (That statement was never repudiated by Ramaphosa or any leader in the ANC.)

The 80’s introduced “liberation before education”, the burning of schools and the intimidation of teachers and after 1994, the ANC government ensured SA’s education system became one of the worst performers in the world at the highest cost (% of GDP).  

The harvest:  a suffocating labour regime that leaves SA businesses hamstrung (considering productivity levels) and that promotes low-employment business practices.

Whilst race remains an important indicator to measure inequality, trying to always explain situations from a racial perspective often implies ignoring solutions with better potential than betting on race.  The ANC is not alone in operating with racial blinkers. Musi Maimane’s statement that race remains “the only consistent measure we have at this point for measuring inequality”, is simply wrong.

So is Ramaphosa when he offered protection for Maimane for that remark.

And so is Chris Bateman’s editorial to a recent Bloomberg report on Johann Rupert’s comments during the Chairman’s Conversation when he wrote: “What he (Rupert)  misses in his strong argument that Eskom and other SOEs are the real monopolies, is that White Monopoly Capital, like all effective propaganda, is built on the fundamental truth that our Gini-coefficient runs on racial lines – due to the architecture of apartheid.

There are non-racial measure tapes available… and some measure more accurately than race.  After a few examples where the ANC government chose cadres rather than knowledge, the focus will fall on one non-racial explanation for income and wealth inequality.

Dedication to water wastage and spillage of untreated sewage into the rivers

Post 1994 there were high hopes that a growing pool of knowledge and expertise would launch SA on a growth path from a middle-income country to higher echelons.  Alas. 

Compare the Department of Water & Sanitation of 2018 with the Department of Water Affairs of 1994:  an expert pool of knowledge and engineering experience paved way for a cadre of less qualified personnel.  Many with master and doctorate degrees in engineering were overlooked or side-lined in the name of affirmative action. The majority of the current incumbents in engineering and technical positions are no longer professional engineers, rather technicians, rendering the department incapable of properly monitoring its task of ensuring compliance with environmental and safety standards for the discharge of sewage treatment plants

Based on data from National Treasury 2011: Local Governments Budget and Expenditure Review

It has not even the capacity to publish annually the Green Drop (a misnomer, should be Brown Drop) and Blue Drop reports.

At local government level the situation is similar:  National Treasury in 2011 already lamented the demise of professional civil engineering capacity at local government level where the number of engineers had declined from 20 / 100 000 in 1994 to 3 / 100000 in 2011.  One can only wonder what the latest figure is.

The harvest: polluted rivers, sewage in streets, water restrictions and shortages because of poor maintenance, rather than just droughts…

Eskom: if Hitachi is sued for poor design and workmanship, what about their ANC partner?

Eskom has a similar narrative… Everybody is focusing on the Gupta-capture and the fact that Eskom since 2000 is better skilled in running up debt than in ensuring efficient power supply.  The role of elbowing out productive knowledge resulted also in:

  • Serious flaws both in design and construction of the Medupi and Kusile coal power stations prevent these power stations that eventually cost more than three times the original budgeted amount, from generating at the initial design capacity.  Pravin Gordhan mentioned Mitsubishi Hitachi Power Systems Africa as the culprit for sub-standard work.  That is the firm that coughed up US $ 19 millions in settlement in the US to prevent being slammed with sanctions and penalties for bribing the ANC’s investment arm Chancellor House. Gordhan reckons Hitachi should be sued. What about adding the ANC that had benefitted from this as co-accused?
  • Eskom is incapable of proper maintenance at power stations, thus causing more shut downs, more load-shedding, less productivity and contributing handsomely to impoverishing the country and its population.  
Eskom in ashes…

With a police force like this, who needs criminals?

A third example is the Police force, ranked in the WEF Global Competitiveness Index as one of the 20 worst reliable police forces in the world, resulting in the cost of crime for business being the 5th highest in the world.

Government ignored pleas to stem the tide of the brain drain

In 2008 the ANC Government was cautioned by Ricardo Haussmann as chair of the International Advisory Panel of the Accelerated and Shared Growth Initiative (ASGISA) that economic growth was constrained by skills shortages. He recommended Government should do everything possible to stem the flight of white skills and warned: adjust BEE to make it compatible with growth.

The International Panel said BEE had clear potential to harm both investment and empowerment.

Ten years later, South Africa’s three most prominent political leaders are still more obsessed by race than by knowledge and skills:

  • Ramaphosa operates with an Orwellian distinction between “Our people” who are more “ours” than the other “our people”.  (The first group being rightful owners to whom property rights should be restored even by expropriation without compensation from the “our people”who committed original sin);
  • Julius Malema’s trademark is the side-lining and humiliation of the whites;
  • Maimane, DA leader, reckons race is the lodestar.

Let’s assess race as marker for household income inequality

EOSA analysed demographic data for 230 urban areas in Gauteng, the Free State, Western Cape and Eastern Cape (2011 StatsSA data). The data shows the erstwhile white urban areas by 2011 had a black population percentage ranging between 16% and 54%. In the erstwhile townships, the white population percentage ranged from nil to 1.5%   

A significant correlation between the percentage of the white population and average annual household income for these urban areas (r = 0.739) emerged. 

It confirms race as an important indicator to assess household inequality, but it also reveals there is no close fit:  the dots (each a separate urban area) are not clustered close to the regression line.

Does this correlation prove Maimane correct on race as the “only consistent measure” for inequality?  If so, Maimane should have no difficulty explaining in (only) racial terms:

Can race explain the following differences?

  • The inequality in average per annum household income between Centurion with R541 570, Clarens with R344 215 and Bultfontein with R153 849 whilst their white populations form an identical share of their total populations (dark blue blocks).
  • Why Queenstown could register an average household income of R187 431 compared to Welkom’sR185 318 whilst having a substantially smaller white population share thanWelkom (Purple blocks). 
  • The differences in average household income between Kroonstad’s R221 023 and Oviston’s R45 008 considering that their white populations were respectively 39.1% and 38% (green blocks)
  • How Bertha’sShaft with 0.2% white population can register an average household income on par with Koppies with 47% white population (yellow blocks)
  • The household income inequality between Hani Park, Thabong (R19 455) and Ezibeleni’s R78 792 that both had no white residents (orange blocks).

 Race (indicated by the percentage of the white population in an urban area) explains only 54.6% of the variance in average household income.

Tertiary qualifications a more precise indicator of household inequality

EOSA considers Haussmann’s insistence on productive knowledge & economic complexity as extremely important factors driving the economy.  Since data on these indicators at local (town or city) level is almost non-existent in the SA context, EOSA is testing some proxies. One factor that contributes (but is not equal) to productive knowledge, is the percentage of the population (20 years plus) with tertiary qualifications.

Running correlations between the percentage of the population 20years plus with a tertiary qualification and average household income for the 230 urban areas renders an interesting picture.

The dot pattern around the regression line shows a much closer fit.  An extremely significant correlation of r =0.93 confirms inequality in average household income in urban areas can be better understood by looking at tertiary qualifications than at race.

Tertiary qualifications explain 86.4% of the variance in average household income.

With average household income in Clarens & Sasolburg almost on par but the former with a significantly higher percentage of the population boasting a tertiary qualification, the nature of the qualifications (and therefore higher remunerated employment) is responsible for Sasolburg performing to the left of the regression line with Clarens to the right.  Likewise, Sasolburg and Fouriesburg have similar percentages of tertiary qualified populations, but Sasolburg’s average household income was more than double that of Fouriesburg.

Correlation does not prove causality – neither for race nor for tertiary qualifications. Nevertheless, the statistically clear differences in the variance explained prove the percentage of the population with a tertiary qualification is a more accurate measure of household income inequality than race.  

And that already in 2011.

Retaining the skills base and building over a generation a transformation based on productive knowledge, did not fit the night-march mentality to riches. (Do I hear something about BMWs and sipping cocktails at Taboo?) Therefore, strong affirmative action frameworks and BEE policies were pursued willingly, ignoring the impact thereof on:

  • inefficient service delivery;
  • growing unemployment;
  • lower economic growth;
  • higher corruption;
  • load-shedding;
  • river pollution;
  • rampant crime…

The capacity of the Civil Service, municipalities and State-owned enterprises at management level was largely devastated or compromised with cadre deployment trumping merit, causing Gwede Mantashe remarking: “What do you expect when you make a mouse the manager in a cheese factory?

The hesitancy to consider a moratorium or revision of these policies along the lines proposed by the ASGISA Panel of Experts, indicate the ANC is much more comfortable embracing the mouse-in-the-cheese-factorystyle of management in SAA, Prasa, SABC, Transnet, an inefficient Eskom & Portnet, as well as the civil service, than treasuring productive knowledge.

So-called unforeseen consequence that could have been bridged by better implementation?  The societal-wide institutional deterioration and even collapse are not mere outcomes of individual shortcomings and incapacity: it is indicative of a systemic fault-line rooted in the ANC belief in revolutionary ideology as original truth and historically pre-destined to become triumphant.

No wonder the wording of the Freedom Charter – “There shall be work…  There shall be houses…” reminds of Genesis1: “Let there be light”.

Job opportunities, houses and evenlight, however, require more than eschatological slogans. Whilst Genesis recorded an outcome – “there was light”- the jobs promised in the Freedom Charter are nowhere, and a large percentage of the houses are – due to shabby construction outcomes by boosting upcoming contractors – of poor quality. The unemployed increased from 3.8 million in 1994 to just under 10 million in 2017.

For an economy to get growing, one has to start with the available productive knowledge base, not with the skills one hopes mouse-in-the-cheese-factory managers may develop over time. If the productive knowledge pool is too small to commence with, recruiting capacities from wherever in the world is required, since that will result in quicker yields than trying the capacity building route.

That requires exchanging the existing set of policies and approaches that impact negatively on the existing pool of productive knowledge for a non-racial approach, as well as making real work combatting inefficient policing and education.

In the next blog on household inequality,  the focus will fall on what the enterprise numbers and composition of localities (cities and towns) reveal.

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