Address by the Minister in The Presidency, Ms Khumbudzo Ntshavheni, at the Black Business Council Summit, Raddison OR Tambo Hotel, on Thursday, 29 June 2023
The President of the Black Business Council, Mr Elias Monage;
The collective leadership of the Black Business Council;
My colleagues, the Ministers and Deputy Ministers present;
Members of the business community;
Ladies and gentlemen.
Allow me to express my gratitude to the leadership of the Black Business Council for convening this annual Summit that get us to converse about important issues that are at the core of pursuing our constitutional imperative of a better life for all. I am deeply honoured to open this year’s conversations by addressing the matter of the political economy of South Africa and where we are heading.
The political economy of South Africa is a complex tapestry interwoven with historical injustices, aspirations for equality, and confronted by ongoing challenges present by both the global and domestic environments. Addressing income inequality, promoting economic transformation, managing natural resources sustainably, and fostering international partnerships are essential components of South Africa’s path towards inclusive and prosperous development.
Given that there is a panel discussion on this very issue, maybe I must start by framing my position. In important in this framing, is by providing a definition of political economy. It refers to the relationship between individuals, governments and public policy, and how they influence one another OR what the International Monetary Fund describes to be how politics affects the economy and the economy affects politics.
Therefore, the question on what is the political economy of South Africa and where is the country headed to, is basically the question about the politics behind the economy of this country. I can simply State that ours is a pursuit of a developmental state to achieve what the objective of a better life for all as set out in our Constitution. The interplay between politics and the economy often manifests in the form of policy decisions, trade relations, and international partnerships a country enters into.
What is the context of South Africa’s political economy
The end of apartheid in the 1990s and the resultant transformation ushered in an era of hope, where political liberation became intertwined with economic aspirations. However, the legacy of apartheid still casts a long shadow over South Africa’s political economy. Decades of institutionalised discrimination created vast disparities in wealth and opportunities, with the majority of the population remaining marginalised and excluded.
One of the primary challenges facing South Africa’s political economy is the issue of income inequality. While progress has been made, the gap
between the rich and the poor remains alarmingly wide. The concentration of wealth in the hands of a few exacerbates social tensions and undermines the nation’s inclusive growth.
The World Bank has, in 2022, reported that South Africa remains the most unequal country in the world with race playing a key role in society where 10% of the population owns more than 80% of the country’s wealth.
Almost 30 years after the end of Apartheid, race remains a key factor in South Africa’s inequality due to its impact on education and labour market.
A recently published survey has reported that top management in the private sector still shows a disproportionate representation with white people occupying 62,9% of all positions.
Addressing the imbalances has been at the forefront of South Africa’s political economy. A critical aspect of it is thus the pursuit of economic transformation and empowerment. Broad-Based Black Economic Empowerment (B-BBEE) initiatives were introduced to redress the imbalances of the past, ensuring increased participation of historically disadvantaged individuals in the economy. While these policies aim to create a more representative and inclusive business landscape, their
effectiveness and impact continue to be subjects of debate. I must be upfront that from a government perspective, calls for the scrapping of Broad-Based Black Economic Empowerment (B-BBEE) without an alternative economic transformation and empowerment policy, are completely pre-mature and have no basis in economic data.
In addition, we have witnessed the resurgence of an active and blatant push back against transformation which is spurred by an open
demonstration of racism. Transformation policies have been successfully challenged in our courts, and businesses that sought to implement transformative programmes, such as Dischem in 2022, successfully intimidated whilst society stood aside like non-affected parties. An unequal society is detrimental to the interest of all, be it government, private sector, non-governmental sector, and citizens (both black and white) as demonstrated by the events of July 2021.
Education or access thereof also contributes to the deepening inequality in South Africa – with a 30% influence on inequality gap. However, education also holds a key to addressing disparities in society by providing equal opportunities for all. Investing in quality education, particularly for historically disadvantaged communities, equips individuals with the knowledge and skills needed to participate meaningfully in the economy, reducing income inequality and promoting social mobility.
On another front, South Africa’s rich natural resources, including minerals, play a pivotal role in its economic landscape. The mining sector, in particular, has historically been a cornerstone of the nation’s economy.
However, the reliance on finite resources poses challenges such as environmental degradation, resource depletion, and vulnerability to global commodity price fluctuations. Diversification and sustainable resource management are key considerations for South Africa’s future economic resilience.
The country’s ability to diversify the economy is also affected by its ability to facilitate domestic investments as well as attract foreign direct investments. Therefore, South Africa’s political stability, sound governance, and commitment to the rule of law are crucial in attracting foreign investment and fostering economic growth. The pursuit of balanced international trade agreements and collaborations ensured South Africa’s integration into the global economy while protecting its
domestic industries. There is a raging debate of whether protecting the existing domestic industries without diversifying the ownership of the economy is a strategic move as it does not address the country’s goal of inclusive growth. As government firms both at policy and programmatic level its localisation drive, it will be important to check the goals of inclusive growth.
What is the future political economy of South Africa
Assessing the future political economy of South Africa requires careful consideration of various factors and dynamics at play. While I can offer some insights based on existing policies, current trends and knowledge, it's important to note that future developments can be influenced by a multitude of unpredictable factors. With that in mind, here is my view on the direction for South Africa's political economy.
1. Inclusive Growth and Economic Reforms:
South Africa will continue its pursuit of inclusive growth, addressing income inequality, and empowering marginalized communities. This may involve implementing and refining policies that promote job creation, skills development, and entrepreneurship, with a particular focus on youth, women, people with disabilities and historically disadvantaged individuals in general.
2. Economic Diversification:
As the nation seeks to reduce its reliance on finite resources and adapt to changing global trends, economic diversification will gain importance. Encouraging sectors such as renewable energy, technology, tourism, services and green economy to increase their contribution to long-term sustainability and resilience. However, mining and agriculture will remain significant players in South Africa’s economy given our endowment in natural resources and the climate
3. Infrastructure Development:
Investing in infrastructure, such as transportation, energy, and telecommunications, is vital for economic growth and development. South Africa will focus on enhancing infrastructure networks to support industrialization, trade facilitation, and regional integration, while also addressing historical disparities in access to services.
4. Anti-Corruption and Governance:
Tackling corruption and strengthening governance structures will remain crucial for South Africa's political economy. Continued efforts to combat corruption, enhance transparency, and improve accountability are essential for attracting domestic and foreign investment, fostering trust, and ensuring efficient resource allocation.
5. Social Welfare and Poverty Alleviation:
Reducing poverty and improving social welfare programs will likely remain on the political agenda. This could involve expanding social safety nets, improving access to quality education and healthcare, and implementing targeted interventions to uplift vulnerable populations. A robust education system that aligns with industry needs and equips students with relevant skills can bridge the gap of high youth unemployment and a mismatch between the skills demanded by the labor market and those possessed by job seekers. The education and training system will emphasize technical and vocational training, entrepreneurship, and digital literacy, education to enhance employability and drive economic growth.
6. Foreign Relations and Trade:
South Africa's political economy will be influenced by its trade relationships and regional integration efforts. Strengthening ties with African nations, deepening partnerships with emerging economies, and pursuing mutually beneficial trade agreements will feature prominently in South Africa's economic strategy.
7. Technological Advancements:
Embracing digitalization and technological advancements can significantly impact South Africa's future political economy. Encouraging innovation, fostering digital literacy, and promoting the growth of the technology sector can lead to increased productivity, job creation, and economic competitiveness.It's important to recognize that whereas this assessment is based on current and planned policy interventions, South Africa's future political economy will be shaped by a multitude of internal and external factors.
The country’s ability to effectively navigate challenges, implement reforms, and leverage its strengths will play a vital role in shaping its economic trajectory in the coming years. Central to these, is the imperative of innovative policies that will promote redistribution, empower marginalised communities, and foster sustainable economic development.