By Hlumelo Biko
For several years after 1994, the hopes and dreams of every black South African family were sustained by the idea that democracy would usher in a new frontier of political and economic freedoms.
As black freedom fighters became political elites, they quickly assumed roles as the vanguards of a successful influence campaign to enforce the national embrace of capitalism as the economic model of the future.
By definition, a market is only truly free when it is based on the willing buyer-willing seller principle. South Africans have learnt the hard way that capitalism is a free market system in name only.
Because the system initiated in 1994 began with 60,000 white farmers owning 86 percent of all farmland and 130 white businesses owning all of the mining resources in the country, while practically all 38.1 million blacks lived below the poverty line, the capitalist system was inherently unsustainable from day one.
Predictably, capitalism has resulted in 40 percent of all children in 2023 living in abject poverty. Just under a third of all South African children are experiencing stunted growth. More than 10 million adult South Africans suffer hunger as a daily reality.
South African households are R2.4 trillion in debt. South Africa’s middle class, a segment of 4.1 million adults earning between R8,000 and R30,000 per month, spend 79 percent of their income on debt instalments.
This is not freedom. South Africa is a low-income country trapped in a Western style economic oligopoly.
South African public intellectuals often preach that we either cling onto capitalism despite its obviously insidious outcomes, or we face the far worse consequences of communism. This straw man argument against a reorganisation of South African society away from capitalism, conflates ownership with management.
By adopting a third alternative economic model, which has been tested successfully in Scandinavia, the UAE, and China, South Africa can, in five steps, prepare the ground for a prosperous socio-economic restructure.
First, we have to restructure the governance, funding and executive management of our state-owned enterprises (SOEs) such that they are more responsive to provincial, municipal and local realities.
Second, to boost competitiveness we have to encourage our SOEs to form culturally aligned joint ventures with foreign-owned firms that bring much needed intellectual property.
Third, we have to staff local government with the best talent the country has to offer, giving them control over local co-operative-owned enterprises focused on utilising economies of scale for low-cost poverty reducing supply chains able to speed up the delivery of high-quality public services.
Fourth, we have to tailor growth capital models to support the growth of entrepreneurial firms currently operating in the informal sector. Each of these steps have been tried and tested in China using a professional meritocracy in the state system, as well as the leveraging of high-level private sector management capabilities.
The fifth step is to create a professionally run public investment platform that can own strategic assets and direct capital to where it is most needed. Two global examples of this strategy are informative. First, through the Government Pension Fund Global, the Norwegian state owns a large number of Norway’s business enterprises controlling roughly 35 percent of the total values on the Oslo Stock Exchange. A second example is the UAE Development Fund that has invested roughly $9 billion in social development programmes that have successfully transformed the UAE.
For the foreseeable future our country has to budget $13.15 billion a year to pay welfare grants. The South African state is losing legitimacy, private sector owners of mines, blocks of oil and gas, as well as farmland owners, are fleeing the country based on their fear that long term investment is too risky.
South Africa can create a Sovereign Fund to transform the Minerals and Energy Industry, while successfully executing the long-delayed land reform.
The South African Sovereign Wealth Fund can make a mandatory offer of $7 billion in cash to buy all the listed mining company shares. This would entail buying all SA mines at 50 cents on the dollar (total listed share value of South Africa’s mining sector is $11.18 billion) while offering 100 cents on the dollar to indigenous shareholders.
According to economist Duma Gqubule, the value of untapped mineral resources in South Africa is US$4.7 trillion. In the hands of the South African Sovereign Wealth Fund, the value of these mineral resources is worth one million rand per South African citizen. Nationalisation would instantly change South Africa’s per capita income.
Building a national industrial strategy based on job creating mineral beneficiation, would significantly reposition South Africa for a long-term period of accelerated shared growth.
The same principle applies in agriculture. The most recent land audit reveals that Whites own 26,663,144 ha or 72 percent of the total 37,031,283ha farms and agricultural holdings by individual landowners.
The total South African agricultural exports are $13.2 billion. Making an offer to all farm owners to value their farms on one time last year’s revenue ($13.2 billion), the South African Sovereign Wealth Fund can fundamentally restructure South Africa’s agricultural industry.
Through commercial management contracts, these large productive farms can then be put under professional local and international agricultural management, working in conjunction with local worker owned smallholdings.
These partnerships can be designed to beat the benchmark earnings generated by their previous owners and to provide desperately needed food security.
Ubuntu requires us to take the drastic actions necessary to arrest poverty and suffering, stealing the future away from the majority of South Africans. Adopting Free Market Socialism is not only the just thing to do, but also the fastest way to unlock South Africa’s lazy balance sheet.
Minerals, energy and land are long term investments requiring patient capital. Buying out investors who are crippled by short term anxieties, helps acquire a permanent income stream that can secure the long-term welfare of all citizens is the smart thing to do.
* Hlumelo Biko is the vice-president of Safril Investments. He writes in his capacity as the Co-founder of Ruling Party, a strategic political advisory firm.
** The views expressed in this article are the writer’s and do not necessarily reflect the views of IOL or Independent Media